Better Markets CEO urges SEC to reject Bitcoin ETF applications

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Dennis Kelleher, CEO of Better Markets, urged the SEC not to approve a Bitcoin ETF, saying that it contradicts the SEC’s principles in an 11-page letter dated January 5, sent to SEC Secretary Vanessa Countryman.

“We submit this supplemental comment letter (which Better Markets very rarely does) because it would be a grave if not historic mistake almost certainly leading to massive investor harm if the SEC approves the pending rule changes,” the letter reads.

Kelleher argued that the Bitcoin ETF as a new product could put investors at risk of fraud, a common worry linked to the crypto industry.

“The approval of these spot Bitcoin ETPs would not only expose investors to a market thoroughly contaminated with fraud and manipulation,” he said in the letter.

According to Better Markets’ press release, Kelleher emphasized that approving spot Bitcoin ETPs would be a “historic mistake.”

He highlights the extensive and ongoing fraud and manipulation in the Bitcoin market, asserting that approving spot ETFs would expose millions of American investors and retirees to the very harms that the SEC exists to prevent.

“It would also undoubtedly lead the crypto industry to claim or imply that their products are now approved by the United States government,” Kelleher said.

“The crypto industry will almost certainly flood Americans with marketing propaganda suggesting that the SEC’s action legitimized crypto, giving false comfort to retail investors.”

Kelleher warned against the SEC’s involvement if the crypto industry introduces spot ETFs and promotes a valueless product as a genuine asset, akin to a gambling token.

“The SEC must not facilitate the financial carnage that will follow if the crypto industry is allowed to repackage, add a veneer of legitimacy to, and widely disseminate a financial product that is little more than a socially worthless gambling chip,” he said.

He emphasized that rejecting the proposed rule changes is mandated by the law. He stressed that according to the SEC statute, the exchange rules must be formulated to prevent fraudulent and manipulative actions, safeguard investors and uphold the public interest.

“The potential for fraud and manipulation in the spot bitcoin market is so great that an exchange cannot permit the listing and trading of a spot bitcoin ETF and still comply with those requirements,” Kelleher said.

Kelleher said that the surveillance-sharing agreements proposed by the Bitcoin ETF applicants to the SEC are superficial and cannot identify or address the extensive fraud and manipulation.

According to Cointelegraph, over 324,000 crypto users were affected by phishing scams in 2023, leading to approximately $295 million in lost digital assets due to wallet theft.

Rejecting spot Bitcoin ETF ‘criminal move,’ analyst says

Crypto figures disregarded the Better Market’s letter, including Bloomberg ETF analyst James Seyffart, who criticized it on social media.

He opposed the letter and stressed that rejecting the spot Bitcoin ETF would be a wrong decision, saying, “Would be an absolutely criminal move for this to happen considering the time effort and energy from all these issuers AND from the SEC staff over the last few months.”

Meanwhile, Fox Business journalist Eleanor Terrett reiterated Kelleher’s remarks on cryptocurrencies, highlighting his statement that “Crypto is a Fraud on the Public” during an interview in May 2023.

“[The crypto industry has] “no legitimate or socially useful purpose” and has a “fundamentally predatory business model,” Terrett said in a social media post.

Eleven applicants for spot Bitcoin ETFs submitted 19b-4 amendment forms before the close of business on January 5. These forms represent one of the final stages in the SEC approval process.

However, completion of S-1 documents is necessary for U.S. exchanges to start listing shares of investment securities directly tied to cryptocurrency. Some experts speculate that final approval for the spot Bitcoin ETFs may arrive before January 10.