SEC Issues Formal Notice for Cboe’s VanEck Bitcoin Trust Proposal

The U.S. Securities and Exchange Commission issued Release No. 34-91326 on March 15, 2021, giving formal notice of Cboe BZX Exchange’s proposal to list and trade shares of the VanEck Bitcoin Trust. The action did not approve the product. It placed the exchange’s rule-change request into the SEC’s public process and asked interested parties to comment on whether the proposal complied with the Securities Exchange Act.

That distinction mattered. Cboe had filed the proposed rule change on March 1, 2021, while VanEck’s registration statement for the trust remained ineffective. The SEC notice explicitly said the shares could not trade until that registration statement became effective. March 15 therefore marked a regulatory checkpoint, not the arrival of a U.S. bitcoin exchange-traded product.

What Cboe proposed

The filing described a trust designed to hold bitcoin through a third-party regulated custodian rather than obtain exposure through futures. Each share would represent a fractional beneficial interest in the trust’s net assets. The stated objective was for the shares to reflect the MVIS CryptoCompare Bitcoin Benchmark Rate, less operating expenses.

According to the proposal, that benchmark drew from Bitstamp, Coinbase, Gemini, itBit and Kraken. Its calculation examined twenty consecutive three-minute periods leading to 4:00 p.m. Eastern time, removed the highest and lowest contributed prices, and averaged the remaining volume-weighted median observations. These were proposed mechanics, not a guarantee that exchange shares would always equal net asset value. The notice warned that secondary-market prices could trade at a premium or discount.

Creations and redemptions were to occur in kind through authorized participants in blocks of 50,000 shares. That structure was central to Cboe’s case: the exchange argued that in-kind processing, a multi-venue benchmark and arbitrage would make manipulation more difficult and help keep share prices aligned with the bitcoin held by the trust.

The unresolved regulatory test

The central issue was market surveillance. The notice summarized the SEC’s established expectation that an exchange seeking to list commodity-based trust shares show a comprehensive surveillance-sharing agreement with a regulated market of significant size, or demonstrate other means sufficient to prevent fraud and manipulation.

Cboe and CME were both members of the Intermarket Surveillance Group. Cboe’s argument was that CME bitcoin futures had grown enough to qualify as a significant market and that manipulation of the proposed shares would require activity detectable through that regulated futures venue. On March 15, 2021, that was the exchange’s contention—not an SEC finding.

The SEC notice said the Commission would approve or disapprove the proposal, or institute proceedings to determine whether it should be disapproved, within 45 days of Federal Register publication, subject to a possible extension to 90 days at that stage. The notice was dated March 15, but the Federal Register publication occurred on March 19. The formal measurement window therefore ran from the later publication date, a chronology that contemporaneous summaries sometimes compressed.

Why the notice mattered

A U.S.-listed product holding bitcoin directly would have offered brokerage-account exposure without requiring investors to manage private keys or open an account at a cryptocurrency exchange. It also would have placed custody, valuation, creation and redemption rules inside a familiar exchange-traded framework. Those potential benefits did not eliminate bitcoin’s volatility, custody risk, benchmark risk or the possibility of premiums and discounts.

The institutional context was already shifting. Canadian regulators had cleared the Purpose Bitcoin ETF in February 2021, giving North American investors a directly held bitcoin fund outside the United States. In the U.S., however, prior bitcoin exchange-traded product attempts had repeatedly encountered SEC concerns about manipulation and surveillance. Release No. 34-91326 made the VanEck proposal a concrete test of whether growth in regulated CME futures and changes in bitcoin market structure were enough to alter that analysis.

Later context

This reconstruction can record, without importing it into the March 15 assessment, that the SEC later extended and deepened its review and disapproved this specific proposal on November 12, 2021. Nothing in that later outcome changes what the March 15 notice represented: the opening of scrutiny, not approval.