- John E. Deaton has commented on a recent move by the SEC to approve the first BTC futures ETF.
- The pro-XRP lawyer thinks a spot ETF should take precedence over a leveraged ETF, citing a lack of legitimate basis.
- Deaton’s concern has attracted massive support, with Crypto Twitter attributing the move to market manipulation by the government.
Ripple attorney John E. Deaton has questioned the recent move by the United States Securities and Exchange Commission (SEC) to approve the first Bitcoin futures ETF. The concern comes shortly after the regulator’s announcement, stating that the Volatility Shares offering is a pioneer in the US market, premiering for trading starting June 27.
Ripple lawyer comments on SEC’s leveraged ETF approval
Ripple proponent and lawyer John Deaton has called to question the SEC’s move to approve an application for the first Bitcoin futures ETF by Volatility Shares, whose 2x Bitcoin Strategy ETF (BITX) pioneers in the US market. The product gives users access to Bitcoin exposure; all they have to do is put up 50% of the value of the BTC.
For the layperson, an ETF is a traditional investment vehicle structured to monitor how an asset(s) performs in the market. The difference between a spot and futures/leveraged ETF is that real BTC backs the former while the latter is backed by derivatives, specifically Bitcoin futures contracts. Another difference is that the BTC futures contracts price could differ from the current market price depending on investor sentiment. Notably, there is no risk in spot-related ETFs.
Ripple’s John Deaton says spot ETH should take precedence over leveraged ETF
Ripple lawyer alludes that a spot Exchange Traded Fund (ETF) should be approved before a futures ETF unless there is a legitimate basis.
I’m not a finance guy and I’ve never claimed to be. Before I make assumptions. is there a legitimate basis to approve a leveraged ETF well before a spot ETF? @JoeCarlasare what are your thoughts, if any? https://t.co/PIrB189hqo— John E Deaton (@JohnEDeaton1) June 23, 2023
The rhetoric has provoked a conversation, with Twitter users saying that approving a futures ETF before a spot ETF means all spot filings will be granted access to operate. If so, it would yield a very bullish case considering spot ETFs are backed by real Bitcoin and legitimize BTC more than any other financial product.
This extrapolates to the market manipulation perspective, indicating that the approval is a classic regulatory arbitrage on the market surveillance by both the SEC and KYC compliance authorities. Notably, derivatives ETFs do not require comprehensive surveillance-sharing agreements, but spot ETFs do. It points to the financial regulator looking to leverage the spot ETF Bitcoin rebalancing mechanism for market manipulation.
The issue has always been ETFs that hold futures vs spot. A futures ETF doesn’t have to buy and sell BTC to rebalance holdings like a spot ETF would. The SEC seems to think a spot ETF’s BTC rebalancing mechanism could be gamed for BTC price manipulation.— Neil Hartner (@illneil) June 23, 2023
If the market manipulation theory is accurate, it would mean a deliberate plan similar to accredited investor laws to let users gamble and get wrecked rather than see them make a profit.
Notably, the Commodities Futures Trading Commission (CFTC) already has regulatory oversight over futures markets, presented as an index fund tracking the CME Bitcoin Futures Daily Roll Index.
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