I've seen a lot of confusion & misinformation about how the shutdown affects the SEC and its process for handling ETF proposals. I'll try to explain here.
Thread. 👇
For more details on how the deadline calculation works, check out this thread:
Because the deadline is statutory, the shutdown doesn't affect it at all. The law continues to apply whether the government is funded or not.
By law, that means if the SEC fails to make a decision by the February 27 deadline, the ETF will be automatically approved.
- the SEC might be shut down longer than the February 27 deadline
- which means the SEC might not decide by the deadline
- in which case the ETF will be approved!
Sorry, but that's *extremely* unlikely.
That includes the majority of staff members in the Division of Trading & Markets, which handles proposed rule changes (including ETFs).
The SEC gets to make that designation for itself, and I'm willing to bet it thinks preventing controversial financial products like bitcoin ETFs from being auto-approved due to blown deadlines is "necessary."
For example, on January 9, the SEC issued an order extending its January 10 deadline on a rule change proposed by Nasdaq PHLX (sec.gov/rules/sro/phlx…).
If the shutdown continues until February 27, that same crew should be around to issue an order approving or denying the ETF. The better question is whether anyone's around to write it.
Regardless, there's no reason to think it can't get done in time.
#1: the SEC decided to approve the ETF anyway & preferred to allow auto-approval than to issue an order of approval during a shutdown.
#2: the SEC couldn't keep its skeleton crew on board to issue a denial.
If #2 happens, it isn't likely to stay in effect for long. Automatic approval isn't a lifetime guarantee & can be undone easily. When the shutdown ends, the SEC can just force the ETF to be delisted.
I base that on the SEC's operations plan, which describes the functions that continue or stop during a shutdown (sec.gov/files/sec-plan…).
In other words, the SEC won't review or approve ETF proposals.
"The shutdown prevented us from completing our review, so we can't be sure that the requisite standards for approval have been met."
All I'm saying is that the shutdown doesn't improve the ETF's chances of approval at all. In fact, the opposite is probably true.
Unlike the SEC, the CFTC has no statutory deadline for making a decision on Bakkt, so it can delay as long as it wants. Don't expect anything on Bakkt until after the shutdown (maybe months after).
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