“The Commission (Chairman and Commissioners) delegates some tasks to its staff. When the staff acts in such cases, it acts on behalf of the Commission. The Commission may review the staff’s action, as will now happen here,” said Hester Peirce (pictured to the right with Jay Clayton on the left).
When they will vote is unclear, but unlike court judgments or parliamentary discussions, the SEC’s vote will probably not be public.
It is probable the vote will end up three against, one in favor of approving the ETFs. That’s because the base decision for rejecting the ETFs is similar to a previous decision to reject by the commission.
SEC is of the view that sufficient measures are not in place to detect price manipulators and that regulated bitcoin futures are not of a significant size.
The latter might now become a more contested matter because CME’s bitcoin futures overtook Coinbase’s bitcoin spot trading volumes recently.
Coinbase itself is regulated, as is Gemini, Bitstamp, Japan’s bitFlyer, most of the South Korean exchanges like Bithumb, and of course the CME and CBOE futures.
SEC, however, does not consider Coinbase and other exchanges to be regulated as they are not supervised by SEC or CFTC. In SEC’s view, only CME and CBOE are regulated.
That’s current SEC make-up. It is expected to change soon enough once Democrats give the green light to the Republican nominee for the SEC commissioner position. A Democrat too is to join. The Republican and the Democratic nominees will probably join at the same time.
Once they do, how SEC will decide might be a closer call. We looked at both nominees earlier this month and concluded that it may come down to just one vote.
The commissioners’ vote probably won’t be for some months, but it looks like Peirce is overturning all bitcoin related delegated decisions, so the commissioners may have to vote on all the bitcoin ETFs.
They may speed up some of the votes before a properly seated commission, but it looks like at least one bitcoin ETF will be decided by a vote of 5 commissioners, including the two new ones.
It is that vote which might be the only one that matters and it is that vote which might give us a better indication of how SEC will proceed in the future as far as this space is concerned and as far as capital formation more widely is concerned.
Generally there appears to be a consensus of sorts that the previously and to some extent the still Democrat leaning SEC has gone too far in restraining capital formation.
That might change, but it wouldn’t be easy because in our view Trump has made a mistake in appointing former bankers’ lawyer, Jay Clayton, as a commissioner and as chair.
Clayton serves as chair at the pleasure of the President, but it would be difficult to remove him completely from the commission.
So one Democrat would have to “defect” and stand with the millennials. The potential new nominee, Allison Herren Lee, could do so, but whether she will remains to be seen.
In addition, Congress is now moving in. A lot of lobbying is apparently going on there because Silicon Valley does not seem to be happy at all and might now hold Musk’s plans to take Tesla private as a clear example of the damage SEC is doing to the economy in failing to adapt to a digital age.
Finally, Trump might be thinking he can score some easy, even bipartisan, political points by looking at all these SEC investment prohibitions and their stifling, in many cases nonsensical, regulations.