{"id":461682,"date":"2022-06-12T18:17:00","date_gmt":"2022-06-12T15:17:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/the-cftcs-action-against-gemini-is-bad-news-for-bitcoin-etfs\/"},"modified":"2022-06-12T18:17:00","modified_gmt":"2022-06-12T15:17:00","slug":"the-cftcs-action-against-gemini-is-bad-news-for-bitcoin-etfs","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/the-cftcs-action-against-gemini-is-bad-news-for-bitcoin-etfs\/","title":{"rendered":"# The CFTC\u2019s action against Gemini is bad news for Bitcoin ETFs"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a37c600bd830\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a37c600bd830\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/the-cftcs-action-against-gemini-is-bad-news-for-bitcoin-etfs\/#%E2%80%9D_The_CFTCs_action_against_Gemini_is_bad_news_for_Bitcoin_ETFs_%E2%80%9C\" >&#8221; The CFTC\u2019s action against Gemini is bad news for Bitcoin ETFs &#8220;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/the-cftcs-action-against-gemini-is-bad-news-for-bitcoin-etfs\/#What_is_the_relationship_between_this_action_and_Bitcoin_ETFs\" >What is the relationship between this action and Bitcoin ETFs?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/the-cftcs-action-against-gemini-is-bad-news-for-bitcoin-etfs\/#Is_crypto_really_for_criminals\" >Is crypto really for criminals?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/the-cftcs-action-against-gemini-is-bad-news-for-bitcoin-etfs\/#So_should_there_be_a_spot-market_Bitcoin_ETF\" >So, should there be a spot-market Bitcoin ETF?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_The_CFTCs_action_against_Gemini_is_bad_news_for_Bitcoin_ETFs_%E2%80%9C\"><\/span>&#8221; The CFTC\u2019s action against Gemini is bad news for Bitcoin ETFs &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p><img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDYvZDI5MGIzZDMtODM0Yi00NTliLTkxNmItNDBlZTZmNDBiZWY4LmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-2a0745c6>On June 2, 2022, the United States Commodity Futures Trading Commission (CFTC) initiated an action against Gemini, the crypto exchange founded by billionaire twins Tyler and Cameron Winklevoss. Among other things, the complaint alleges that Gemini made a number of false and misleading statements to the CFTC in connection with the potential self-certification of a Bitcoin futures contract, the prices for which were to be settled daily by an auction (the \u201cGemini Bitcoin Auction\u201d). In the<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.documentcloud.org\/documents\/22050246-gemini-winklevoss-complaint\"> complaint<\/a>, the CFTC specifically articulated the position that these statements were designed to mislead the commission as to whether the proposed Bitcoin futures contract would be susceptible to manipulation.<\/p>\n<p>While the Winklevoss brothers were not named in the suit, the complaint alleges that \u201cGemini officers, employees and agents [\u2026] knew or reasonably should have known that the statements and information conveyed or omitted [\u2026] were false or misleading.\u201d These are serious accusations, considering that CFTC\u2019s third and twelfth core principles <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.cftc.gov\/sites\/default\/files\/groups\/public\/@otherif\/documents\/ifdocs\/orgfbotapdxffcftccrp160615.pdf\">require<\/a> markets involved in derivative trading, including those seeking to offer Bitcoin futures contracts, to have policies and practices ensuring that \u201ccontracts [are] not readily subject to manipulation\u201d and that they offer reasonable \u201cprotection of market participants.\u201d<\/p>\n<p>Gemini offered a formal<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.reuters.com\/legal\/transactional\/us-cftc-sues-crypto-exchange-gemini-over-misleading-statements-2017-2022-06-02\/\"> statement<\/a> in response to the CFTC\u2019s action:<\/p>\n<blockquote><p>\u201cWe have an eight-year track record of asking for permission, not forgiveness, and always doing the right thing. We look forward to definitively proving this in court.\u201d<\/p><\/blockquote>\n<p>The response from the founding twins, however, was somewhat less professional. Cameron Winklevoss <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/cameron\/status\/1532433460929122304?ref_src=twsrc%5Etfw\">tweeted<\/a>: <\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">I might respond to this nonsense when I have some free time. But I dunno, maybe not, we&#8217;ll see. I&#8217;m pretty busy at the moment. For now, any extra time I have I will use to see Top Gun Maverick. I heard it\u2019s awesome!<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/t.co\/DJwZXQT3EB\">https:\/\/t.co\/DJwZXQT3EB<\/a><\/p>\n<p>\u2014 Cameron Winklevoss (@cameron) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/cameron\/status\/1532433460929122304?ref_src=twsrc%5Etfw\">June 2, 2022<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>It\u2019s too bad that Gemini\u2019s founders are not taking the suit more seriously. The ramifications of this potentially true fraud may not be limited to any penalties assessed against Gemini by the courts, but also significantly impact the entire industry.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>What has been standing in the way of a pure-Bitcoin ETF?<\/em><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_is_the_relationship_between_this_action_and_Bitcoin_ETFs\"><\/span>What is the relationship between this action and Bitcoin ETFs?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The lawsuit against Gemini is not about an exchange-traded fund (ETF), it is about representations made in connection with a particular Bitcoin futures contract. It is also not being brought by the U.S. Securities and Exchange Commission, which has been holding out on <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>roving a large and growing number of Bitcoin ETF proposals. It is, however, about potential manipulation in the crypto markets.<\/p>\n<p>The SEC\u2019s record of declining to approve any spot-market Bitcoin ETF has been consistent on two fronts: To date, no Bitcoin ETFs in the spot or physical markets (as opposed to Bitcoin Futures ETFs) have been approved, and so far, the consistently expressed concern of the SEC is that Bitcoin pricing is too subject to <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/perma.cc\/9597-JPKJ\">manipulation<\/a> to approve a Bitcoin ETF. Without approval by the SEC, securities exchanges cannot trade the proposed products, which do not fit well under traditional guidelines on what kinds of interests can be sold on a securities exchange.<\/p>\n<p>Admittedly, the SEC recently <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.sec.gov\/rules\/sro\/nasdaq\/2022\/34-94853.pdf\">approved<\/a> a limited number of Bitcoin Futures ETFs, including two under the same rule that those proposing Bitcoin ETFs in the spot markets are relying on. In part, the SEC relied on the CFTC\u2019s determination that Bitcoin Futures ETFs <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.cftc.gov\/LearnAndProtect\/AdvisoriesAndArticles\/BitcoinFuturesETF.html\">could<\/a> be listed on CFTC-regulated exchanges. As part of the CFTC\u2019s process, that agency <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.cftc.gov\/sites\/default\/files\/idc\/groups\/public\/@newsroom\/documents\/file\/bitcoin_factsheet120117.pdf\">requires<\/a> self-certification that the new product complies with CFTC regulations and is \u201cnot readily susceptible to manipulation.\u201d In very <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a> terms, the SEC has concluded that these Bitcoin Futures ETFs are protected against manipulation enough to justify allowing their trade on securities exchanges.<\/p>\n<p>The current action against Gemini arises out of conduct that allegedly occurred in 2017 and 2018, when the CFTC was evaluating the Gemini Bitcoin Auction (just after the SEC <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/perma.cc\/ZMN7-8K59\">denied<\/a> a request from the Winklevoss brothers seeking SEC approval for a Bitcoin ETF). The very fact that a major U.S. crypto exchange that positions itself as having a record of regulatory compliance appears to have been lying in its communication with regulators further bolsters the SEC view that crypto markets are rife with fraud and subject to manipulation, and therefore, that we are not ready for Bitcoin ETFs.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>VanEck\u2019s Bitcoin spot ETF shunt solidifies SEC\u2019s outlook on crypto<\/em><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Is_crypto_really_for_criminals\"><\/span>Is crypto really for criminals?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The reality, however, may be quite different, as suggested by both the<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.sec.gov\/news\/press-release\/2022-78\"> rising<\/a> volume of enforcement activity in the crypto space (indicating the existence of substantial oversight), and also technical analysis of criminal activity in the space (conducted by independent firms and showing marked declines in the rate of criminal activity). Consider, for example, the 2022 Chainalysis <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/perma.cc\/R99T-WXLK\">report<\/a> on crypto crime. This report documents a clear decrease in fraud and abuse as a percentage of all crypto activity. <\/p>\n<p>Nonetheless, headlines <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/perma.cc\/PX5J-YW44\">continue<\/a> to report that the dollar value of crypto fraud has risen significantly. It is perhaps understandable that <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">news<\/a> sources will frame stories in terms that are likely to gather the widest audience, and it is clear that $14 billion being stolen by scammers is a splashier headline than noting that crypto crime as a percentage of illicit transactions dropped to a remarkable low of 0.15% in 2021. <\/p>\n<p>What is somewhat surprising, however, is the extent to which the \u201ccrypto is for criminals\u201d narrative continues to be emphasized by some regulators, particularly in the SEC. SEC chair Gary Gensler has compared the crypto ecosystem to the \u201cWild West,\u201d <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.sec.gov\/news\/public-statement\/gensler-aspen-security-forum-2021-08-03\">complaining<\/a> that crypto \u201cis rife with fraud, scams and abuse.\u201d In mid-May 2022 Gensler was still sounding the alarm, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.sec.gov\/news\/speech\/gensler-remarks-nasaa-spring-meeting-051722\">suggesting<\/a> that there is \u201ca need to bring greater investor protection to these crypto markets.\u201d This was on the heels of a decision by the SEC to nearly<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.sec.gov\/news\/press-release\/2022-78\"> double<\/a> the size of the Crypto Assets and Cyber Unit within its Department of Enforcement.<\/p>\n<p>Thus, when a sister agency like the CFTC initiates an enforcement action against a major player in the crypto space with very detailed allegations of false and misleading statements suggesting that manipulation has indeed been occurring in the Bitcoin space, this adds fuel to the fire that the SEC continually focuses upon. Moreover, the likely position of the SEC that the markets are not sufficiently mature for approval of a spot-market Bitcoin ETF is only strengthened when founders of a crypto company facing that action publicize their disdain on <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">social media<\/a>.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>In defense of crypto: Why digital currencies deserve a better reputation<\/em><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"So_should_there_be_a_spot-market_Bitcoin_ETF\"><\/span>So, should there be a spot-market Bitcoin ETF?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In October of 2021 and early in 2022, the SEC approved multiple futures-based Bitcoin ETFs. Although these products were already available on CFTC-regulated exchanges, this was still a change in the SEC\u2019s position that the entire crypto market was too susceptible to manipulation to allow exchange-traded products. The significance of the change in position is that the futures and spot markets are so closely linked now that there is no rational basis for concluding that only one of them is sufficiently free from the risk of fraud or manipulation to allow exchange-traded products. <\/p>\n<p>On April 6, 2022, the SEC <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.sec.gov\/rules\/sro\/nysearca\/2022\/34-94620.pdf\">approved<\/a> a futures-based ETF regulated under the same regulation under which spot-based ETFs would be regulated. It <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.sec.gov\/rules\/sro\/nasdaq\/2022\/34-94853.pdf\">approved<\/a> another such product in May 2022. While the agency explicitly declined to provide any \u201cevaluation of whether Bitcoin [\u2026] has utility or value as an innovation or an investment,\u201d it did conclude that both of these ETFs were sufficiently protected against manipulation to be traded on securities exchanges.<\/p>\n<p>Now that the SEC has decided Bitcoin Futures ETFs may be traded on regulated securities exchanges, there would seem to be no reason to conclude that American investors should be denied the opportunity to participate in Bitcoin ETFs as well. Such investment is widely permitted in other nations, including Canada and Australia. As for the CFTC\u2019s enforcement action on Gemini, it would be unfortunate if a cavalier response from the Winklevoss brothers \u2014 who have<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.sec.gov\/rules\/other\/2018\/34-83723.pdf\"> <\/a>previously been <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.sec.gov\/rules\/other\/2018\/34-83723.pdf\">turned down<\/a> for permission to offer a Bitcoin ETF by the SEC \u2014 sets back the progress on this front any further. <\/p>\n<p class=\"post-content__disclaimer\"><em>The opinions expressed are the author\u2019s alone and do not necessarily reflect the views of the University or its affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.<\/em><\/p>\n<p class=\"post-content__disclaimer\"><em>The views, thoughts and opinions expressed here are the author\u2019s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.<\/em><\/p>\n<div>\n<div style=\"background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;\"><strong>Carol Goforth<\/strong> is a Clayton N. Little professor of law at the University of Arkansas (Fayetteville) School of Law. <\/div>\n<\/div>\n<p><template data-name=\"subscription_form\" data-type=\"law_decoded\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more News articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/the-cftc-s-action-against-gemini-is-bad-news-for-bitcoin-etfs\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; The CFTC\u2019s action against Gemini is bad news for Bitcoin ETFs &#8220; On June 2, 2022, the United States Commodity Futures Trading Commission (CFTC) initiated an action against Gemini, the crypto exchange founded by billionaire twins Tyler and Cameron Winklevoss. Among other things, the complaint alleges that Gemini made a number of false and&#8230;<\/p>\n","protected":false},"author":1,"featured_media":461683,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDYvZDI5MGIzZDMtODM0Yi00NTliLTkxNmItNDBlZTZmNDBiZWY4LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74862,74972,75422,74863,74860,75849,74864,74898,70934,67874],"class_list":["post-461682","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-bitcoin-futures","tag-cftc","tag-cryptocurrencies","tag-cryptocurrency-exchange","tag-etf","tag-gemini","tag-sec","tag-regulation","tag-united-states"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/461682","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=461682"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/461682\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/461683"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=461682"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=461682"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=461682"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}