On July 26, the Securities and Exchange Commission disapproved a Bats BZX Exchange proposed rule change that would have permitted the listing and trading of shares of the Winklevoss Bitcoin Trust (Trust) on BZX. This is the SEC’s second disapproval of the proposed rule change as it has previously disapproved the exchange’s original proposal in March 2017. Notably, Commissioner Hester Peirce dissented from the SEC’s most recent disapproval.

As proposed, the investment objective of the Trust would be for the shares to track the price of bitcoin on the Gemini Exchange. The Trust would hold only bitcoins as an asset, and the bitcoins would be in the custody of, and secured by, the Trust’s custodian.

The SEC disapproved the proposed rule change because BZX did not demonstrate that the rule proposal is consistent with the requirements of the Securities Exchange Act of 1934. Specifically, exchange rules must be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest. The SEC indicated, however, that its disapproval was not an assessment of the utility or value of bitcoin or blockchain as an investment.

The SEC order disapproving the rule proposal is available here.

The dissent of Commissioner Peirce is available here.