Sep 1, 2023

The U.S. Securities and Exchange Commission (SEC) delayed until October a decision on all spot bitcoin exchange-traded fund (ETF) applications, according to agency filings on Thursday.

Video transcript

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. Good morning. Welcome back to first mover. The SEC is delayed making a decision on spit spot, Bitcoin Exchange traded Fund applications filed by seven applicants including Black Rock and Wisdom Tree earlier this year. Joining us now to discuss is Coindesk global policy and regulation managing editor Nick Day. He's also the editor of coin desks, state of crypto newsletter. Good morning, Nick. Good morning. Happy Friday. Happy Friday. I've been saying exchange traded funds so many times my brain just paused there. All right. Talk to me about what the SEC said here. You know, I think everyone was expecting a delay, but what was the reason that was given? Yeah. No, absolutely. You know, I don't think anyone at all was surprised that uh the SCC is delayed. So, um these were just really standard, you know, the SCC is uh extending common periods and saying, all right, well, I'll send those feedback, right. Um These are the seven current applicants who filed earlier this year. The SC kicked off that review of those applications in July and the regulator has a total of 240 days to make a final decision in the past. It's always taken as many of those 240 days as it's uh you know, they've been able to. So I, I imagine everyone expects the same year that the SEC is going to just continue delaying any decision until it meets the mandatory deadline. I know some data came out this week after the gray scale win that said some analysts are expecting some ETF applications to be approved this year with the remainder being approved next year. Does this new information that they've paused on these seven applications? Um point to to different datas or different outcome that we can expect. I I think I personally would be surprised if we saw any spot Bitcoin ETF approved this year. Um Right now the uh applications after yesterday's delay face a new October uh mid October. So deadline um ranging from the 16th to 19th, depending on which application you're looking at. So um my guess is we'll see further delays on, you know, in that week, I would genuinely be surprised if the A SCC approved, you know, one or two spot Bitcoin ETF S and then delayed the rest. Uh I imagine that if it did so, um you, you know, have a whole lot of protestations from the applicants that are still delayed, you know, saying that the SCC is choosing, you know, winners and losers uh you know, giving the first, you know, movers an advantage. Uh So I would be a little surprised that being said, we might see some, you know, either their futures ETF S uh in October, I very possible that's what they're referring to. But I think the expectation is the SCC is not going to stand in the way of those products which are as of right now, more or less on track for an October mid October launch or over approval rather. All right, let's switch gears now to another win for the industry in New York court is classifying Ether and Bitcoin as commodities while dismissing a proposed class action lawsuit against Unis Ap. Uh talk to me about what happened there. Yeah. So this was, you know, as you said, a proposed class action lawsuit against UN Swap where the plaintiffs alleged that the Un UN swap, you know, front end and platform were basically uh enabling scammers to launch Tokens the judge in the case. Uh Judge Catherine Propria, who by the way is also overseeing cases like SE CV coin based, uh ruled that UN IWA was not the uh proper defendant in the case saying that it was just a platform that people were using. Um what was really interesting is that she went, you know, really, uh I don't say further because that has like, you know, a connotation that she went beyond the case. But um she went further than just denying the specific, you know, lawsuit. She said that, you know, this is a area where, you know, right now federal securities laws do not, uh, really stretch to meet, uh, you know, classifying, uh, things like uni swap as a securities, you know, platform or treating a lot of cryptocurrencies as securities and told the plaintiffs that they really need to be talking to Congress about updating the laws rather than, uh, you know, the courts for trying to put specific, you know, boundaries on this. You brought up that the judge is the same judge that's overseeing the S ECs EC versus coin based case. Uh What effect if any could the decision here have on that case? You know, obviously it's going to be, um, you know, the argument now will be uh a platform that is listing and trading cryptocurrencies isn't necessarily going to be liable for, you know, for scams. Now, here's the thing, the sec case against point based doesn't actually like that any of them are scam. I think it's just pure securities law violations. So, um, the other thing there is, uh, you know, is probably going to argue that uh these tokens are, you know, not necessarily securities or that the securities laws don't really fit the definition of those tokens that we've seen. Um I imagine that, you know, we'll also probably see more insight as the judge starts ruling on things like motions for summary judgment and that's how she approaches those questions even uh probably will give us a lot of insight into if she's going to continue her, you know, current viewpoint. Uh as the SEC tries to bring this case, you know, we talk so much about precedent setting in this industry in lieu of um any clear regulation out of the agencies. Is there any precedent that could be set here? Could we see anything, um you know, either being classified as a commodity or anything that's come out of this creep up in any of the other cases outside of SE CV coin base. So, yes and no. Um, on the one hand, yeah, we might absolutely see other judges say, you know, in this ruling in this court, judge, uh you know, fia ruled XYZ. On the other hand, we've already seen, you know, within the southern district itself, the disagreement between judges. Um, you know, for example, uh are we in September yet? Yeah. So a month and a half ago in July, uh Judge Ely Tores from the southern district ruled that, uh ripples uh sale was a programmatic sales of XRP on exchanges did not violate securities law and a different judge, uh Judge Jed Rakoff on the same court uh in an Sec versus Terraform labs case, uh very explicitly said he did not agree with that assessment with Judge Torrez's uh ruling and was, you know, rejecting that precedent. So, on the one hand, yeah, we can absolutely see judges, you know, say, ok, yeah, we agree with this. Uh, we could also see them not agree with it. Um, you know, it would become a lot more binding if this went up to the appeals court and the appeals court ruled one way or another. And, you know, said, ok, well, we believe this judge is correct or we believe this judge is not correct, but until then it's kind of only a precedent in the same sense that, you know, it's, it, it has to be an agreement basically. And what are the chances that this might get to an appeals court? Um Given that it's a group of private plaintiffs, um I would say probably not, super likely depends on, you know, really how well funded they are and how willing they are to try and push for this case to continue. Um If you know, at least one of those things is not true or not feasible, then this case is, I assume will probably be, uh well, that's why the end of it, you know, this is a ruling that's out there, but I would be surprised if we saw a follow up right now. All right, Nick, thanks so much for joining and unpacking that for us. And I too am surprised and shocked that it's already September. So here we are. I hope you have a great weekend and you, that was Coindesk global policy and regulation. Managing editor Nick Day. Don't forget to sign up for the state of crypto newsletter on coindesk dot com. All right. Before we go to break, I should note that gray scale and Coindesk share a parent company and digital currency group.

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