Markets
SEC Must Follow the Law and Reject Spot Bitcoin ETPs That Will Cause Massive Harm to Investors
WASHINGTON, DC—Dennis M. Kelleher, Co-Founder, Chairman and CEO, issued the following statement regarding the filing of Better Markets’ supplemental application Comment letter to the Securities and Exchange Commission (SEC) in response to several proposed rule changes filed by national securities exchanges seeking to list and trade shares in spot Bitcoin exchange-traded products (ETPs).
“Approving spot Bitcoin ETPs would be a historic mistake that would almost certainly result in massive harm to investors. The immense and unrelenting fraud and manipulation in the bitcoin market means that approving these products would expose millions of American investors and retirees to the very harms the SEC is dedicated to preventing. This would also undoubtedly lead to the crypto industry claiming or implying that its products are now approved by the United States government. The crypto industry will almost certainly flood Americans with marketing propaganda suggesting that the SEC’s action has legitimized crypto, thereby providing false comfort to retail investors. The SEC must not facilitate the financial carnage that would ensue if the crypto industry were allowed to repackage, add a veneer of legitimacy, and widely distribute a financial product that is little more than a gambling token socially worthless.
“Rejecting proposed rule changes is required by law. The law clearly provides that the rules of a stock exchange must be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest. The potential for fraud and manipulation in the bitcoin spot market is so great that an exchange cannot allow the listing and trading of a bitcoin spot ETP while still meeting these requirements. Additionally, the surveillance sharing agreements offered by exchanges are window dressing, incapable of detecting or adequately addressing widespread fraud and manipulation in the Bitcoin market.
“Accordingly, it would be a serious legal error and political travesty for the SEC to approve the proposed rule changes. This would expose countless hard-working Americans to the risks inherent in investing in Bitcoin. These risks have not only been evident over the past three years, but have also materialized repeatedly, resulting in billions of dollars in losses. The fact that the investment vehicle is an ETP will not protect investors; Rather, the so-called ETP-related protections will also provide false comfort to unsuspecting investors who fall for marketers’ claims that the SEC has endorsed, or even endorsed, the product. The value of their investment will be subject to the same risks of fraud and manipulation in the bitcoin market as investors holding bitcoin directly. The SEC should not subject investors to these risks.
You can find the full comment letter here.
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Better Markets is a nonprofit, nonpartisan, independent organization founded in the wake of the 2008 financial crisis to promote public interest in financial markets, support Wall Street financial reform, and ensure that our financial system benefits all Americans. Again. Better Markets works with its allies, including many in the financial sector, to promote pro-market, pro-business, and pro-growth policies that help build a stronger, safer financial system that protects and promotes jobs, Americans’ savings, retirement and more. To learn more, visit www.bettermarkets.org.