SEC's "fake official announcement" of spot Bitcoin ETF approval—what will the "real announcement" tomorrow bring?
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SEC's "fake official announcement" of spot Bitcoin ETF approval—what will the "real announcement" tomorrow bring?
Awaiting the final decision tomorrow.
Navigating Web3 tides with focused insightsBy Mary Liu, TechFlow
The long-awaited ETF approval turned into a major fiasco. At 4:11 PM Eastern Time on Tuesday, the U.S. Securities and Exchange Commission (SEC) official X account posted: "Today, the SEC has approved bitcoin ETFs to list on all registered national securities exchanges. Approved bitcoin ETFs will be subject to ongoing regulatory and compliance measures to ensure continued investor protection."
The post also included a quote from SEC Chair Gary Gensler: "Today's approval enhances market transparency and provides investors with effective access to digital asset investments within a regulated framework."
The surprise announcement came entirely out of the blue, as most analysts had expected any approval news to be released the following day. It was soon confirmed that the SEC’s X account had been hacked, and the post regarding spot bitcoin ETFs was fake.
The SEC stated, "We will work with law enforcement and government partners to investigate this incident and determine next steps related to unauthorized access and any misconduct."
Following the false announcement, bitcoin briefly plunged nearly $2,500, dropping as low as $45,529 per coin, triggering over $40 million in liquidations across the crypto market within an hour.
Cameron Winklevoss, co-founder of cryptocurrency exchange Gemini, commented: The SEC has finally shown the world what it does best: "manipulate markets and harm American investors."
The incident also drew attention from U.S. lawmakers. Tennessee Republican Senator Bill Hagerty posted on X that the SEC must be held accountable for making "such a market-impacting error."
Wyoming Republican Senator Cynthia Lummis said: "Fraudulent announcements, such as those posted on the SEC's social media, can manipulate markets. We need transparency about what happened."
Awaiting Tomorrow's Final Decision
Industry observers believe the launch of the first U.S. spot bitcoin ETF is now inevitable. However, approval cannot be 100% guaranteed, especially given lingering biases against the so-called "wild west" of crypto.
Bloomberg analyst Eric Balchunas revealed that sources indicated the SEC would officially announce its approval decision between 4:00 PM and 5:00 PM Eastern Time on January 10.
The SEC faces a Wednesday deadline to either approve or reject at least one of 11 such fund applications. In recent weeks, amid growing expectations of regulatory approval, bitcoin’s price surged above $47,000, reaching its highest level in nearly two years.
The approval process involves two steps: First, the SEC approves the 19b-4 filings submitted by exchanges, which outline rule changes allowing the new category of funds to trade. Then, the registration statements from asset management firms must be declared effective before funds can begin trading.
Here are four possible scenarios for tomorrow:
Approve All 11 Applications Simultaneously
The Wednesday deadline technically applies only to the first applicant: the joint venture between Cathie Wood’s ARK Investment Management and crypto asset manager 21Shares. However, cryptocurrency investors and ETF analysts widely expect the SEC to approve all 11 applications at once, to prevent any single firm from gaining dominance.
First-mover advantage has long been a dominant force in the ETF industry. For example, the first bitcoin futures-based ETF—ProShares Bitcoin Strategy ETF—recorded over $1 billion in trading volume on its debut in October 2021, far exceeding competing products launched days later. It remains the largest bitcoin futures ETF, managing $2 billion in assets.
If all funds are approved simultaneously, a fierce market battle is expected, particularly around fees. Some asset managers are already adopting cost-cutting strategies modeled after traditional finance, while others are ramping up marketing efforts.
The agency has previously delayed decisions on ARK’s application three times.
Reject All 11 Applications Simultaneously
Although unlikely at this stage, the SEC could still reject all 11 spot bitcoin ETF applications. In the past, the agency has repeatedly blocked such funds, citing concerns about fraud and market manipulation.
However, if the SEC rejects this round of applications, it would need to provide a completely different rationale. In August, a federal appeals court ruled that the SEC must reevaluate Grayscale Investments’ application to convert its trust into a spot bitcoin ETF. One appellate judge stated that, given the prior approval of bitcoin futures ETFs, the SEC’s rejection of Grayscale’s proposal was "arbitrary and capricious."
A Split Decision
The SEC could approve some applications while rejecting others, and possibly defer decisions on the remainder.
Over the past few months, asset managers and exchanges have updated their filings to incorporate feedback from SEC staff. In theory, the SEC could reject applications that failed to follow the agency’s guidance while approving those that did.
Alternatively, if the SEC believes the latest revisions to the applications are still insufficient, it might reject ARK’s filing and delay decisions on the others until the next deadline.
The SEC could also require ARK to temporarily withdraw its application and reject other applications on new grounds.
Approve Exchange Filings While Delaying Asset Managers’ S-1/S-3 Filings
Given that there is no precedent for the SEC simultaneously approving nearly a dozen ETFs holding the same underlying asset, it remains uncertain whether the agency will choose to approve the exchanges’ 19b-4 filings first or declare the asset managers’ S-1 or S-3 registration statements effective initially.
The SEC’s Division of Trading and Markets reviews the 19b-4 filings submitted by exchanges, while the Division of Corporation Finance handles the S-1 and S-3 filings from asset managers.
The Wednesday deadline pertains specifically to the 19b-4 filing submitted by Cboe on behalf of ARK and 21Shares, meaning the two divisions may operate on different timelines. If registration statements are not declared effective, the funds could be left in limbo.
ETF analysts expect the two divisions to coordinate closely to ensure approvals occur roughly at the same time.
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