tl;dr
The SEC halted approval of Bitwise’s 10 Crypto Index ETF, marking the second recent reversal of a staff-level recommendation this month. The ETF, briefly approved to list on NYSE Arca, was paused under Rule 431, allowing the full Commission to review and indefinitely delay the listing without a set ...
The SEC halted another crypto index ETF approval on Tuesday, marking the second time this month that the commission has intervened to block a staff-level recommendation. This time, the move affects Bitwise’s 10 Crypto Index ETF, which had been approved earlier in the day by the SEC’s Division of Trading and Markets. The twin reversals have unsettled crypto ETF observers, especially those backing multi-asset funds, suggesting internal resistance to broader crypto products.
Nate Geraci, co-founder of The ETF Institute, described the situation on X as “bizarre,” calling for the funds to be allowed to convert or uplist immediately. The approval would have permitted NYSE Arca to list the fund as a “Trust Unit” under Rule 8.500-E, which governs asset-backed exchange-traded products such as commodities or cryptocurrencies. However, shortly after the order, the SEC’s Office of the Secretary announced that the full Commission would review the action under Rule 431, triggering an automatic stay.
Rule 431 enables the Commission to unilaterally review any staff decision, automatically suspending approval until the Commission decides to affirm, modify, or overturn it. There is no set timeline or obligation for public explanation. This creates a challenging scenario for ETF issuers who receive staff approval but face indefinite blockage by the Commission.
Earlier this month, Grayscale’s Digital Large Cap Fund (GDLC) encountered a similar fate. After staff approval to convert into a spot ETF, it was stayed days later under the same rule. The fund holds prominent assets like Bitcoin, Ethereum, and XRP, and Grayscale warned that the delay was causing investor harm and even hinted at possible legal action.
Bitwise’s index ETF aims to track a market-cap-weighted index comprising the ten largest crypto assets, excluding stablecoins and wrapped tokens. This would provide investors with diversified exposure to the broader digital asset market via a single exchange-traded product. Prior to its brief approval, public comments raised concerns about market manipulation risks and the reliability of crypto market pricing data. Some urged the SEC to reject the filing, citing ongoing vulnerabilities in crypto markets, including fraud risks and insufficient surveillance-sharing agreements to protect investors.