Another day, another refusal by the Securities and Exchange Commission (SEC) to allow the launch of a spot bitcoin ETF in the United States.

The latest rejected proposal came from ARK Invest, who joined forces for the second time in an effort to launch the ARK 21Shares Bitcoin ETF. The original application was filed last year on May 13, a month after Ark’s first attempt to float the product on BZX was rejected.

The justification for the SEC’s decision is the same as last time: Ark failed to demonstrate that its exchange rules are adequate to protect the investing public from “fraudulent and manipulative activities and practices.

An exchange that hosts bitcoin-based ETFs can meet its obligations under Section 6(b)(5) of the Exchange Act by demonstrating that the exchange has a comprehensive joint surveillance agreement with a regulated market of significant size associated with the underlying or benchmark bitcoin assets.

ETFs will also give institutions the green light to effectively buy bitcoin when they cannot by internal statute. This has made crypto bulls eager for such a product to appear in the U.S. market, but so far nothing has come of it.

ProShares launches first bitcoin shorting ETF

In contrast, the SEC has willingly authorized the launch of several bitcoin futures ETFs starting in October 2021. The ProShares Bitcoin Strategy ETF, which was the first to hit the market, had one of the most active opening days in NYSE history.

Unlike spot ETFs, futures ETFs are backed by bitcoin futures contracts – promises to buy bitcoin at a set price at a later date. Unlike the bitcoin spot market, the bitcoin futures market is a regulated market in which ETFs can have a co-supervision agreement, like the CME bitcoin futures market.

In its own application for a similar product, Grayscale argued that it could have a joint surveillance agreement with the same market when launching a bitcoin spot fund. The SEC did not recognize CME Bitcoin Futures as adequately “linked to spot Bitcoin.”