Bitwise Asset Management has filed an amended application for a spot Bitcoin exchange-traded fund (ETF), beefing it up with 40 pages of new text responding to the United States Securities and Exchange Commission’s (SEC) objections to the product. It still might not be enough to satisfy regulatory requirements, though, a company executive warned.

Bitwise is among the six financial firms whose spot BTC ETF applications are on hold after the SEC delayed its consideration. That move came after a court overturned the agency’s rejection of a Grayscale Investments application to convert its over-the-counter Grayscale Bitcoin Trust into a listed BTC ETF.

Bitwise chief investment officer Matt Hougan explained in a thread on X (formerly Twitter) that, should the SEC appeal the Grayscale ruling, “we return to the status quo.” In that case, he wrote:

“We’re back to needing to prove that the CME bitcoin futures market leads price discovery over the spot market such that it can serve as a ‘regulated market of significant size’ for the purpose of surveillance.”

The Chicago-based CME Group operates derivatives exchanges including a BTC futures and options market.

In its amended application, Bitwise engaged with what the SEC called “the ‘mixed’ or ‘inconclusive’ academic record” on the lead-lag relationship between BTC futures and spot markets. After looking at academic works cited in 11 previous SEC disapproval orders for spot BTC exchange-traded products, Bitwise said, “The data show convincingly that the CME is the leading source of price discovery.”

Furthermore, Hougan summarized that the amended application demonstrated that “every well-designed academic study supports the finding that the CME is ‘significant,’” countering several arguments put forward by the SEC in previous disapproval decisions.

The conclusions reached in the amended Bitwise application are significant for meeting SEC requirements. The agency has determined that a listing exchange must have a surveillance-sharing agreement with a regulated market, such as the CME BTC futures market, that is “of significant size.” That requirement comes into force if an exchange “cannot establish that other means to prevent fraudulent and manipulative acts and practices are sufficient.” The SEC has found that to be the case for previous applicants.

Hougan warned, “Surveillance sharing agreements with spot exchanges are positive, but may not satisfy the technical regulatory requirements.”

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