SEC advances decision process on Franklin Templeton’s Bitcoin ETF application

In a surprising turn of events, the U.S. SEC has advanced its decision-making process regarding Franklin Templeton’s Bitcoin ETF application, which was not due until Jan. 1, 2024.

The watchdog punted the previous Nov. 15 deadline to Jan. 1, 2024, to allow for a more comprehensive review of the proposal’s alignment with regulatory standards, particularly concerning investor protection and market integrity.

In essence, the SEC appears to have effectively extended the deadline a month prior to the original decision date. This move could indicate that the regulator is affording Franklin additional time to revise its filing before further deadlines. Notably, Franklin Templeton is the only applicant who has not updated its S-1 form or addressed the prevalent concerns regarding potential market manipulation. The asset manager joined the spot Bitcoin ETF race in September and intends to list the fund on CBOE.

The early move has caught the attention of market observers, given that Franklin Templeton, an asset manager overseeing $1.5 trillion, has yet to submit an updated S-1 form.

S-1 form

The lack of an updated S-1 form from Franklin Templeton has spurred speculation around its potential influence on the SEC’s final decision. Franklin is the only issuer in this round of applications that has not submitted revised documentation.

James Seyffart, an industry analyst, suggested that the move could be a strategic step by the SEC to pave the way for a series of approvals in early January. The hypothesis aligns with the potential approval of Hashdex’s application, which is also in the queue.

While the crypto market eagerly anticipates the SEC’s decisions, the regulatory body continues to prioritize thorough evaluation to ensure investor protection and market stability.

Market manipulation concerns

Central to the SEC’s proceedings are concerns over potential market manipulation and the ETF’s ability to safeguard against fraudulent activities.

The commission has highlighted the need for robust mechanisms to prevent manipulative practices in the Bitcoin market. The proposal’s consistency with Section 6(b)(5) of the Act, which mandates securities exchange rules to prevent fraudulent acts and protect investors, is under scrutiny.

The other ETF applicants — including BlackRock and Fidelity Investments — have already submitted updated S-1 forms with answers to many of these concerns.

Almost all of the applicants argue that the existence of a futures market and ISG memberships of the listing exchanges provide adequate monitoring of a Bitcoin market of sufficient size.

The main argument posited by exchanges and asset managers is that the SEC, having approved futures-based Bitcoin ETFs traded on the CME, should not reject a spot Bitcoin ETF as both futures and spot-based products depend on the same underlying markets for price determination.