In Release No. 34-80206, the SEC disapproved the proposed BZX rule change to list a spot bitcoin commodity-trust ETP, citing BZX’s inability to enter into a surveillance-sharing agreement with a regulated market for bitcoin. In Release No. 34-99306, the SEC approved spot bitcoin exchange-traded products, finding the proposals consistent with the Exchange Act in light of the Court of Appeals’ decision in Grayscale Investments, LLC v. SEC.
Key Takeaways
- The first spot Bitcoin ETF filing was submitted by Cameron and Tyler Winklevoss on July 1, 2013, under proposed ticker COIN, beginning a regulatory standoff that lasted over a decade.
- The SEC denied at least seven spot Bitcoin ETP applications between 2017 and 2022 using a single dispositive standard: surveillance-sharing agreements with regulated markets of significant size.
- ProShares’ Bitcoin Strategy ETF (BITO) launched on October 19, 2021, as the first US bitcoin-linked ETP, built on CME-regulated futures rather than spot bitcoin, sidestepping the surveillance-sharing barrier.
- The DC Circuit ruled in Grayscale Investments, LLC v SEC on August 29, 2023, that the SEC’s denial was arbitrary and capricious because the agency could not adequately explain its disparate treatment of futures and spot products.
- On January 10, 2024, the SEC approved 11 spot Bitcoin ETPs simultaneously via Release 34-99306, including products from BlackRock, Fidelity, ARK 21Shares, Grayscale, and Bitwise.
- Spot ether ETPs were approved on May 23, 2024, under Release 34-100224 using the same analytical framework as the January 2024 Bitcoin order, extending the precedent to a second crypto asset.
The Winklevoss Filing and the First Spot Bitcoin ETF Denial (2013-2017)
In Release No. 34-80206, the SEC disapproved the proposed BZX rule change to list a spot bitcoin commodity-trust ETP. The order marked the first major denial of a spot bitcoin exchange-traded product application before the agency. The Commission stated that an exchange listing a commodity-trust ETP must satisfy two requirements that were dispositive: surveillance-sharing agreements with significant markets for the underlying commodity, and those markets must be regulated.
Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated. Therefore, the Commission is disapproving this proposed rule change because BZX has not entered into, and would currently be unable to enter into, the type of surveillance-sharing agreement that has historically been a requirement for the Commission’s approval of listing rules for commodity-trust ETPs.
The SEC’s Surveillance-Sharing Era (2018-2019)
In Release No. 34-83723, the SEC disapproved the re-filed BZX proposal for a spot bitcoin commodity-trust ETP. The Commission emphasized that its disapproval did not rest on an evaluation of whether bitcoin or blockchain technology had utility as an innovation or investment, but rather on the burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that the proposal was consistent with the requirement that exchange rules be designed to prevent fraudulent and manipulative acts and practices.
Hester M. Peirce dissented from the disapproval order, arguing that the Commission’s mission does not extend to acting as the gatekeeper of innovation, and that the order focused on the characteristics of the bitcoin market rather than the proposed exchange-traded product.
By concluding that the underlying market is too risky, the Commission substitutes its own judgment for that of investors and limits investor choice.
The Bitwise Bitcoin ETF Trust application followed the same path. The SEC issued similar disapproval orders against Bitwise (Release 34-86596) and against the VanEck-SolidX Bitcoin Trust later that year. Each disapproval reused the surveillance-sharing rationale established in the original Winklevoss order, an arc of refusals visible across the wider crypto exchange market data record.
ProShares BITO and the Futures Workaround (October 2021)
In Release No. 34-93223, the SEC approved listing rules for a bitcoin futures ETP, finding that the Exchange had met its burden under the Exchange Act because the Fund would hold cash-settled bitcoin futures contracts traded on the Chicago Mercantile Exchange, a regulated futures exchange.
The Commission specifically noted that it had previously found CME to be a regulated market of significant size with respect to bitcoin futures, and on that basis approved the proposed rule change. BITO began trading on NYSE Arca on October 19, 2021.
The BITO approval was the structural pivot point: by approving a bitcoin-linked ETP whose surveillance baseline was CME-regulated futures rather than spot exchanges, the SEC created an exception to its own surveillance-sharing standard that a futures-based product could meet but a spot product could not.
Why it matters: The October 2021 BITO approval implicitly conceded that the CME bitcoin futures market was sufficient regulatory infrastructure for an exchange-traded product. Two years later, Grayscale’s lawyers would argue, successfully, that the same CME futures market could support a spot product, since spot bitcoin and bitcoin futures move in essentially identical correlation. The SEC had created the precedent it would later lose against.
The structural distinction also affected investor outcomes. Futures-based ETPs incur “roll” costs as expiring contracts are replaced with later-dated ones, creating tracking error against spot bitcoin prices over multi-month holding periods. Spot products avoid roll costs but require qualified custody arrangements for the underlying asset itself.
Grayscale’s GBTC Conversion Bid and the June 2022 Denial
In Release No. 34-95180, the SEC disapproved a NYSE Arca proposed rule change to list and trade a spot Bitcoin exchange-traded product, citing the Exchange’s failure to enter into a surveillance-sharing agreement with a regulated market of significant size related to bitcoin. The Commission stated that the Exchange had not entered into a surveillance-sharing agreement with a regulated market of significant size related to bitcoin, and that the Exchange had not met its burden under the Exchange Act.
The denial reused the rationale that had blocked the Winklevoss filings, Bitwise, and VanEck. By the time of the GBTC denial, the surveillance-sharing standard had been the operative test for more than five years.
The denial came at a moment when GBTC, a closed-end trust trading over-the-counter rather than as an ETP, was trading at a substantial discount to its net asset value. The discount reflected a structural problem: shares could not be redeemed back into bitcoin. Conversion to an ETP would have closed the discount; the denial preserved the gap.
The day after the disapproval, Grayscale Investments filed a petition for review with the DC Circuit.
Grayscale v. SEC: The DC Circuit Ruling That Forced Approval
In Grayscale v. SEC, the court granted Grayscale’s petition and vacated the Commission’s disapproval order. The court held that the denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products.
Grayscale’s proposed bitcoin ETP is materially similar, across the relevant regulatory factors, to the bitcoin futures ETPs the Commission has approved. The Commission has not adequately explained why it nevertheless approved the listing of bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP. In the absence of a coherent explanation, this, unlike the regulatory treatment of like products, is unlawful.
Key finding: The DC Circuit panel, opinion authored by Circuit Judge Neomi Rao, held that the SEC could not approve a futures-based bitcoin ETP and disapprove a spot product when both relied on the same Chicago Mercantile Exchange futures market for surveillance. The “like cases alike” doctrine of administrative law required either approval of both or denial of both, with a coherent rationale.
The ruling vacated the denial and remanded the matter. The agency had had two years to articulate a non-arbitrary explanation for the disparate treatment and had not, leaving only approval as a practical option.
The decision is reachable through the history of cryptocurrency milestones record as the legal turning point that ended the SEC’s six-year disapproval run on spot bitcoin products.
The January 10, 2024 Spot Bitcoin ETP Approval Order
In Release No. 34-99306, the SEC approved spot bitcoin exchange-traded products and explicitly cited the Court of Appeals’ decision in Grayscale Investments, LLC v. SEC (D.C. Cir. 2023) as a circumstance the Commission had to address.
The order acknowledged that the Court of Appeals’ decision held the Commission failed to adequately explain its reasoning in disapproving the listing and trading of Grayscale’s proposed bitcoin ETP, and that the Commission must treat like cases alike.
By the numbers: The eleven approved issuers were BlackRock (IBIT), Fidelity (FBTC), ARK 21Shares (ARKB), Bitwise (BITB), Invesco/Galaxy (BTCO), Grayscale (GBTC, converted from trust), Valkyrie (BRRR), VanEck (HODL), Franklin (EZBC), WisdomTree (BTCW), and Hashdex (DEFI). GBTC was uplisted to NYSE Arca on January 11, 2024. The other approved spot bitcoin ETPs began trading on Cboe BZX and Nasdaq on the same date.
In an accompanying statement, the SEC Chair wrote that the Commission acts within the scope of the law as set out by Congress and the courts, that circumstances had changed, and that based on the Grayscale decision and the circumstances discussed in the approval order, the most sustainable path forward was to approve the listing and trading of these spot bitcoin ETP shares.
Today, the Commission approved the listing and trading of a number of spot bitcoin exchange-traded product (ETP) shares. I have often said that the Commission acts within the scope of the law as set out by Congress and the courts. Circumstances, though, have changed.
For continuing post-approval Bitcoin ETF flow statistics, the issuer fund pages publish daily AUM, share creations, and net inflow figures, the most authoritative ongoing data source.
Issuer Comparison: IBIT, FBTC, ARKB, GBTC
BlackRock’s iShares Bitcoin Trust ETF (IBIT) charges a Sponsor’s fee of 0.25% of the Trust’s net assets accruing daily, with a 0.13% fee waiver for the first 12 months from listing or until the Trust reaches $5 billion in assets, whichever comes first, after which the Sponsor’s fee returns to 0.25%. Coinbase Custody Trust Company, LLC is the Bitcoin Custodian for IBIT.
The Fidelity Wise Origin Bitcoin Fund (FBTC) seeks to track the performance of bitcoin as measured by the Fidelity Bitcoin Reference Rate, with an expense ratio of 0.25%, and bitcoin held by the Fund is held in segregated cold storage by Fidelity Digital Asset Services, LLC, a New York State Department of Financial Services chartered limited purpose trust company.
The ARK 21Shares Bitcoin ETF (ARKB) seeks to track bitcoin as measured by the CME CF Bitcoin Reference Rate. New York Variant, with an expense ratio of 0.21%, with Coinbase Custody Trust Company as the bitcoin custodian.
Grayscale Bitcoin Trust ETF (GBTC) was uplisted to NYSE Arca on January 11, 2024, with an annual fee of 1.50%, with Coinbase Custody Trust Company serving as the bitcoin custodian, having launched in 2013 as the first publicly traded bitcoin investment vehicle in the United States.
| Fund (Ticker) | Issuer | Expense Ratio | Bitcoin Custodian | Launched/Uplisted |
| IBIT | BlackRock | 0.25% (0.12% promo) | Coinbase Custody | Jan 11, 2024 |
| FBTC | Fidelity | 0.25% | Fidelity Digital Asset Services | Jan 11, 2024 |
| ARKB | ARK 21Shares | 0.21% | Coinbase Custody | Jan 11, 2024 |
| GBTC | Grayscale | 1.50% | Coinbase Custody | Uplisted Jan 11, 2024 (originally 2013) |
Sources: BlackRock iShares, Fidelity Investments, ARK Invest, Grayscale Investments
The takeaway: The fee delta between GBTC at 1.50% and the lowest-cost January 2024 entrants near 0.21% is roughly seven times. For a long-only buy-and-hold investor, the compounded fee differential over five to ten years is material; and explains why the post-conversion period saw documented outflows from GBTC into IBIT, FBTC, and ARKB rather than discretionary asset growth in GBTC itself.
The custody arrangement also varied across the launch cohort. Coinbase Custody Trust Company served as bitcoin custodian for the majority of approved issuers, while Fidelity used its NYDFS-chartered affiliate Fidelity Digital Asset Services. For an investor concerned about counterparty concentration, the crypto custody risk data bears on the trade-off: a single custodian holding bitcoin for nine of eleven approved funds is a structural concentration not present in equity ETF custody, where multiple unaffiliated custodians are routine. Custody rules for institutional trust companies vary materially between the US and EU regimes.
For investors comparing exchange-traded structures with other crypto investment vehicles, the broader stablecoin ETF category differs in underlying asset volatility and regulatory framework but uses similar Securities Act trust mechanics.
Spot Ether ETP Approval and the Multi-Asset Precedent
The SEC approved spot ether exchange-traded products consistent with the analytical framework set forth in the Spot Bitcoin ETP Approval Order issued on January 10, 2024, applying the same correlation methodology between the CME ether futures market and the spot ether market. The order was issued on May 23, 2024, as Release No. 34-100224.
The Commission’s analysis of the correlation between the CME ether futures market and the spot ether market followed the same methodology applied in the January 2024 Spot Bitcoin ETP Approval Order.
Continuing ether ETF approval data tracks post-approval flow patterns.
The framework also opened a structural question for SEC crypto enforcement data: whether the surveillance-sharing standard could continue to function as an enforcement tool against unregistered crypto offerings while operating as an approval pathway for ETPs whose underlying assets the agency had previously characterized in enforcement contexts as securities.
Frequently Asked Questions (FAQs)
An early US bitcoin-linked exchange-traded product was approved by the SEC under Release 34-93223, with the Fund holding cash-settled bitcoin futures contracts traded on the Chicago Mercantile Exchange rather than spot bitcoin. Spot Bitcoin ETPs were approved later under Release 34-99306.
The SEC’s repeated denial rationale was that exchanges proposing to list spot Bitcoin ETPs had not entered into surveillance-sharing agreements with regulated markets of significant size related to bitcoin. The Commission held that the significant markets for bitcoin were unregulated, making the dispositive surveillance-sharing requirement impossible to satisfy.
The DC Circuit ruling in Grayscale v SEC vacated the SEC’s denial of GBTC’s conversion to a spot ETP. The court held the denial was arbitrary and capricious because the Commission failed to explain its different treatment of similar products.
The SEC approved spot bitcoin exchange-traded products via Release 34-99306, with the Court of Appeals’ decision in Grayscale Investments, LLC v. SEC cited as a circumstance the Commission had to address. The eleven issuers were BlackRock, Fidelity, ARK 21Shares, Bitwise, Invesco/Galaxy, Grayscale, Valkyrie, VanEck, Franklin, WisdomTree, and Hashdex.
A futures Bitcoin ETF holds CME-regulated bitcoin futures contracts. A spot Bitcoin ETF holds actual bitcoin in regulated custody, with creation and redemption tied to net asset value. Futures-based products incur roll costs as expiring contracts are replaced, creating tracking error against spot bitcoin prices that spot products do not have.
The SEC approved spot ether exchange-traded products applying the same analytical framework as the prior Spot Bitcoin ETP Approval Order issued January 10, 2024. The order was issued as Release 34-100224.
Conclusion
Issuer-level structure spans expense ratios from 0.21% at the lowest-cost cohort entrant to 1.50% at GBTC, with Coinbase Custody Trust Company serving as bitcoin custodian for both. Cash-create/redeem mechanics rather than in-kind handling further differentiate the cohort.
