Former SEC Attorney John Reed Stark Says SEC Will Not Approve a Bitcoin Spot ETF

The Securities and Exchange Commission (SEC) is unlikely to relent in its opposition to exchange traded funds in Bitcoin spot markets, despite filings from high-profile Wall Street giants, according to former SEC attorney John Reed Stark. 

“My take is that the current SEC will not approve a bitcoin spot ETF application for a range of compelling reasons,” said Stark, who formerly headed the SEC’s Office of Internet Enforcement, in a Sunday post on Twitter. 

To support his argument, Stark referred to a comment letter to the SEC from the Washington-based nonprofit Better Markets that urged the agency to reject a proposed rule change that would make it easier to list shares from a Bitcoin ETF. 

Better Markets, which has frequently backed the SEC’s approach to regulating the crypto industry, echoed much of the agency’s previous stances against a spot ETF, arguing that Bitcoin markets were prone to market manipulation, are too concentrated, and “overly reliant on a select group of individuals and entities to maintain bitcoin’s network.”

Since 2013, the SEC has blocked applications for a Bitcoin ETF on these grounds, but has allowed ETFs in Bitcoin futures markets to operate. In June, BlackRock, the world’s largest asset manager, filed an application for a spot ETF, and it was quickly joined by other big Wall Street players. 

In his Twitter thread, Stark also made predictions around the future of SEC crypto regulation after the upcoming 2024 presidential election.

If a Republican candidate wins, Stark said that it was likely a GOP-led administration would take a friendlier stance on crypto, including making it easier to get approval for a spot ETF. He also predicted that many enforcement actions pursued by the SEC would “grind to a screeching halt” if a Republican-majority takes shape atop the agency. 

Stark has frequently riled up many on Crypto Twitter with his sometimes harsh criticism of the industry, and has publicly argued with its players.

In May, Stark engaged in a back and forth with Tether’s chief technology officer Paolo Ardoino over his criticism of the stablecoin issuer  over what he characterized as its opaque financial statements, and lamented the lack of regulations from the government. Though he acknowledged some of Ardoino’s defenses, he claimed that only beneficiaries for crypto are “grifters,” and “criminals” in the developed world.

A month later, Reed questioned the viability of the blockchain technology that undergirds cryptocurrencies, sparking a debate with crypto investor Mark Cuban, who defended the industry.