Bitcoin ETF Rejections (2017–2023)

For years, the U.S. Securities and Exchange Commission (SEC) rejected or delayed applications for a spot Bitcoin ETF. The main reasons were concerns about manipulation, custody, and market maturity. In January 2024, the SEC finally approved the first spot Bitcoin ETFs. The long refusal and eventual approval are an important part of Bitcoin’s regulatory history.

What Is a Spot Bitcoin ETF?

A spot Bitcoin ETF holds actual bitcoin (or claims backed by it) and tracks its price. This is different from futures-based ETFs, which use Bitcoin futures contracts. Spot ETFs give traditional investors and institutions a familiar way to get price exposure without self-custody or exchange accounts.

The Rejection Era (2017–2023)

Main SEC Concerns

The SEC repeatedly pointed to:

Manipulation: Bitcoin spot markets were seen as more exposed to manipulation (wash trading, spoofing, limited oversight) than regulated futures markets. The SEC doubted that a spot ETF could have “surveillance-sharing” or similar safeguards.
Custody: Not your keys, not your coins. The SEC questioned whether issuers could custody bitcoin safely and whether investors would be adequately protected.
Market maturity: Global spot markets were viewed as fragmented and less mature than established securities markets, making it harder to argue that manipulation could be detected and addressed.

Timeline of Rejections and Delays

2017–2018: The Winklevoss twins’ application for a spot Bitcoin ETF was rejected. Other applicants (ProShares, Direxion, GraniteShares, etc.) were also rejected. The SEC often cited the same manipulation and custody concerns.
2019–2021: More applications (e.g. VanEck, WisdomTree) were filed and repeatedly delayed; several were ultimately denied.
2021: The first futures-based Bitcoin ETF (ProShares Bitcoin Strategy ETF) was approved. The SEC treated the CME’s regulated futures market as a sufficiently controlled environment. Spot applications, by contrast, continued to be rejected or delayed.
2022–2023: Spot applications (including from BlackRock, Fidelity, and others) piled up. The SEC delayed decisions; court challenges and political pressure increased.

The Grayscale Lawsuit

Grayscale had run a Bitcoin trust (GBTC) for years and sought to convert it into a spot ETF. After the SEC denied the conversion, Grayscale sued. In August 2023, a federal court ruled that the SEC’s denial was arbitrary and capricious because it had approved futures-based Bitcoin ETFs but rejected Grayscale’s spot product without adequately explaining the different treatment. The court did not order approval, but it forced the SEC to re‑evaluate. This ruling strengthened the case for eventual spot ETF approval.

January 2024: Spot Bitcoin ETFs Approved

On January 10, 2024, the SEC approved 11 spot Bitcoin ETF applications (including from BlackRock, Fidelity, Grayscale, and others). Trading began shortly after. The approvals followed:

The Grayscale court loss and pressure to treat spot and futures products consistently
Improved custody and surveillance arrangements proposed by issuers
Long-standing demand from institutional and retail investors

The approval is a major milestone for Bitcoin’s integration with traditional finance: Bitcoin ETF is now a standard term, and billions of dollars have flowed into these products.

Why This Controversy Matters

Regulation vs innovation: The rejections showed that regulators can block or delay access to Bitcoin for a long time, even when demand exists. Approval showed that legal and political pressure, plus better-structured products, can change the outcome.
Custody and trust: ETF buyers do not hold bitcoin directly; they rely on the issuer and its custodians. The “not your keys, not your coins” principle still applies. ETFs are a convenience and compliance trade-off, not self-custody.
Neutrality of Bitcoin: The Bitcoin network kept operating regardless of ETF approvals or rejections. The controversy was about access in the traditional system, not about the protocol itself.