SEC Commissioner Hester Peirce dissents from SEC decision against Winklevoss Bitcoin ETF

  • July 26, 2018 11:14 pm ET

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Earlier today we reported that the Winklevoss twins were snubbed by the SEC in their effort to create the first Bitcoin ETF.

Now, there’s a little popcorn to be had, as SEC Commissioner Hester Peirce took to Twitter to announce a formal dissent against the Commissions order disapproving the rule change that would’ve allowed the Twins to win.

Commissioner Peirce’s choice of alliteration, “ripe, respectable, and regulated,” stands in pretty stark contrast to Rep. Brad Sherman’s (D-CA) favorite trio of crypto-related terms, “trafficking, terrorism, and tax evasion.”

Read on for highlights from the dissent.


First off, here’s the TL/DR…

I respectfully dissent from the Commission’s order disapproving a proposed rule change, as amended, to list and trade shares of the Winklevoss Bitcoin Trust on Bats BZX Exchange, Inc. (“BZX”).

Following that, Commissioner Peirce summarizes her three areas of concern with the decision to disapprove of the rule change:

  1. The proposed rule change DOES satisfy the requirements of Exchange Act section 6(b)(5)
  2. The disapproval order inhibits institutionalization
  3. The disapproval order stifles innovation

Let’s take a quick look at her comments on each area.

Contrary to the Commission’s determination, I believe that the proposed rule change satisfies the statutory standard and that we should permit BZX to list and trade this bitcoin-based exchange-traded product (“ETP”)

This is in reference to the Securities Exchange Act of 1934, section 6(b)(5), which states that the rules of a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices [and] to protect investors and the public interest.”

Peirce argues that the commision is focusing on the underlying Bitcoin spot market (which seemingly doesn’t meet the criteria) but should instead be focusing on BZX specifically, and their ability “to surveil trading of and to deter manipulation in the ETP shares listed and traded on BZX.”

I am concerned that the Commission’s approach undermines investor protection by precluding greater institutionalization of the bitcoin market. More institutional participation would ameliorate many of the Commission’s concerns with the bitcoin market that underlie its disapproval order.

This is an interesting cart/horse type argument, basically saying that by not promoting the institutionalization of the bitcoin market, the SEC is preventing it from solving the very concerns they point to in their disapproval order.

More generally, the Commission’s interpretation and application of the statutory standard sends a strong signal that innovation is unwelcome in our markets, a signal that may have effects far beyond the fate of bitcoin ETPs

And here’s a “chilling effect” type argument, that narrowly interpreting the statutory standard to preclude this proposed rule change would negatively impact innovators from participating in the markets.

In conclusion, Commissioner Peirce argues:

Many investors have expressed an interest in gaining exposure to bitcoin, and a subset of these investors would prefer to gain exposure without owning bitcoin directly. An ETP based on bitcoin would offer investors indirect exposure to bitcoin through a product that trades on a regulated securities market and in a manner that eliminates some of the frictions and worries of buying and holding bitcoin directly.

You can read Commissioner Peirce’s complete dissent at

Via • h/t @HesterPeirce

SEC Commissioner Hester Peirce dissents from SEC decision against Winklevoss Bitcoin ETF
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