“Amidst the anticipation of Bitcoin ETFs, Gensler’s stance raises eyebrows, highlighting potential risks of a rug-pull that could shake the market’s confidence.”
Bloomberg ETF analysts have raised the possibility that SEC Chair Gary Gensler may reject pending spot Bitcoin ETF applications at the last minute. This move, if executed, has been described as “amazingly sadistic” by the analysts. There has been speculation that Gensler might be accumulating these applications only to collectively reject them, a move referred to as a “semi-comedic rug-pull.” While the likelihood of this happening is low, the analysts have not entirely ruled out the possibility. They have been cautious about raising the odds of approval above 90%. If such a rejection were to occur, it would likely result in a flurry of lawsuits.
Gensler’s past remarks on the SEC’s ETF policy have added fuel to the discussion. In a resurfaced video from 2019, Gensler described the SEC’s stance on spot Bitcoin ETFs as “inconsistent.” He pointed out the regulatory incongruity, noting that Bitcoin and Ethereum futures have been approved while Bitcoin ETFs are still awaiting approval, despite the similarity in laws governing both. The SEC has a history of rejecting spot Bitcoin ETF applications, which has continued under Gensler’s leadership. The SEC has cited investor protection concerns as the primary reason for these rejections.
In June 2022, the SEC faced legal action from Grayscale for rejecting its application to convert its existing Bitcoin trust into a spot ETF. The court ruled in favor of Grayscale, stating that the SEC’s decision was “arbitrary and capricious.” However, the SEC chose not to appeal this judgment. Currently, the SEC has only approved ETF applications for Bitcoin and Ether futures products, maintaining that spot products lack the necessary safeguards against market manipulation.
While the possibility of a last-minute rejection of spot Bitcoin ETF applications remains, it is important to note that this is speculation and not confirmed information. The ETF analysts are keeping a close eye on any developments regarding this matter.