SEC Opens the Door to Spot Bitcoin ETFs, Ushering Crypto onto Wall Street

On Jan. 10, 2024, after more than a decade of saying no, the Securities and Exchange Commission quietly said yes.

In a single 22-page order released late that afternoon, the agency approved rule changes allowing 11 funds that hold bitcoin directly to list on major U.S. exchanges. Less than 24 hours later, those “spot bitcoin” exchange-traded products began trading in New York, racking up nearly $4.6 billion in first-day volume and pulling the world’s largest cryptocurrency squarely onto Wall Street’s main stage.

What looked like a sudden embrace was, in fact, a reluctant pivot driven by the courts. A federal appeals panel had ruled months earlier that the SEC’s rejection of a similar fund from Grayscale Investments was “arbitrary and capricious.” Faced with that rebuke, the agency moved to bring bitcoin inside the tightly regulated exchange-traded fund business—and in the process handed a powerful new franchise to giants like BlackRock Inc. and Fidelity Investments.

The shift marks a turning point in the United States’ uneasy relationship with digital assets. The new products give financial advisers, hedge funds and ordinary investors a way to gain bitcoin exposure through standard brokerage and retirement accounts, without dealing with crypto exchanges or digital wallets. They also concentrate a growing share of bitcoin’s supply in a handful of regulated vehicles, raising fresh questions about market power, systemic risk and the future of crypto regulation.

A decade of denials undone

The SEC’s decision capped more than 10 years of failed attempts to launch a U.S. spot bitcoin fund.

The first high-profile effort came in 2013 from Cameron and Tyler Winklevoss, whose proposed bitcoin trust became a test case for how regulators would treat an asset born outside the traditional financial system. In 2017 and again in 2018, the SEC rejected efforts to list the Winklevoss vehicle, warning that bitcoin trading on largely unregulated exchanges was vulnerable to fraud and manipulation and that exchanges had not shown they could adequately surveil the underlying market.

Between 2018 and March 2023, the commission formally denied more than 20 exchange rule filings for spot bitcoin products, by its own tally. At the same time, it took a different approach to bitcoin futures. In October 2021, the SEC allowed the ProShares Bitcoin Strategy ETF, which holds cash-settled futures contracts traded on the Chicago Mercantile Exchange, to launch as the first U.S. bitcoin-related ETF.

The agency argued that the CME’s futures market, overseen by the Commodity Futures Trading Commission, provided a regulated venue of “significant size” that could be monitored for manipulation. It said no equivalent existed for the spot market, where bitcoin itself trades.

That distinction came under direct attack in 2022, when Grayscale Investments asked a federal court to review the SEC’s decision to block its plan to convert the long-running Grayscale Bitcoin Trust (GBTC) into an exchange-traded product holding spot bitcoin. Grayscale argued the denial made little sense because the SEC had already allowed futures-based products that relied on the same underlying bitcoin markets and shared similar surveillance protections.

In August 2023, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit agreed. Writing for the court, Judge Neomi Rao said the SEC “failed to adequately explain its reasoning” for treating GBTC differently from bitcoin futures ETFs, even though “the underlying assets—bitcoin and bitcoin futures—are closely correlated.” The panel vacated the SEC’s denial and sent the matter back to the agency.

That ruling significantly narrowed the SEC’s room to maneuver. It could attempt to find new, legally durable reasons to continue rejecting spot products. Or it could bring them into the same regulatory framework that governs commodity-based funds investing in gold, silver and oil.

An approval hedged with warnings

On Jan. 10, 2024, the SEC chose the latter path.

Acting under Section 19(b) of the Securities Exchange Act of 1934, the agency approved rule changes by NYSE Arca, Nasdaq and Cboe BZX Exchange to list and trade 11 new spot bitcoin funds. The order—Release No. 34‑99306—concluded that the exchanges’ proposals were consistent with the law’s requirement that rules be designed to prevent fraud and manipulation and protect investors.

A key part of the SEC’s rationale was a series of surveillance-sharing agreements between the exchanges and the CME. The commission cited data showing a tight correlation between prices in the CME’s regulated bitcoin futures market and those in spot markets, and said monitoring futures trading could help detect manipulation that would also affect spot prices.

At the same time, the agency went out of its way to say the move should not be read as an endorsement of cryptocurrency more broadly.

“We are merit neutral when it comes to the underlying investment,” SEC Chair Gary Gensler said in a statement released that day. “While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin.”

Gensler called bitcoin “a speculative, volatile asset” and said it “is also used for illicit activity,” including ransomware, money laundering, sanctions evasion and terrorist financing. He stressed that the decision was “cabined to ETPs holding one non-security commodity, bitcoin,” and “should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities.”

The commission also noted that it continued to view many other digital tokens as unregistered securities and to view several crypto trading platforms as out of compliance with federal law.

A record-setting debut

Caution from the regulator did little to dampen investor interest.

On Jan. 11, the 11 spot bitcoin products began trading on NYSE Arca, Nasdaq and Cboe BZX. They included the ARK 21Shares Bitcoin ETF (ARKB), Bitwise Bitcoin ETF (BITB), BlackRock’s iShares Bitcoin Trust (IBIT), Fidelity Wise Origin Bitcoin Trust (FBTC), the converted Grayscale Bitcoin Trust (GBTC), VanEck Bitcoin Trust (HODL), WisdomTree Bitcoin Fund (BTCW), Invesco Galaxy Bitcoin ETF (BTCO), Valkyrie Bitcoin Fund (BRRR), Hashdex Bitcoin ETF (DEFI) and Franklin Bitcoin ETF (EZBC).

Combined, the new funds recorded about $4.5 billion to $4.6 billion in trading volume on their first day—an unusually strong start for a new asset class. GBTC, which had existed for years as an over-the-counter trust before its listing, accounted for roughly half that volume on day one.

Behind the scenes, a fierce fee war was already under way. Bitwise launched with a management fee of 0.20%, Ark 21Shares with 0.21%, and major issuers including BlackRock, Fidelity and VanEck at 0.25%, in some cases waiving fees on early assets. Grayscale, by contrast, set GBTC’s fee at 1.5%, reflecting its legacy structure and prompting immediate criticism from competitors and investors.

The price differential showed up in flows. New ETFs from BlackRock, Fidelity and others attracted steady net inflows during their first weeks, even as GBTC saw heavy redemptions. Within roughly seven weeks, IBIT had gathered $10 billion in assets—one of the fastest growth trajectories recorded for an exchange-traded fund. By late May 2024, it had surpassed GBTC as the world’s largest bitcoin fund.

Fidelity’s FBTC also climbed into the multibillion-dollar range, buoyed by the firm’s role as a major retirement plan provider and brokerage platform.

Grayscale, meanwhile, watched assets pour out. By early March, the firm had lost about one-third of the bitcoin backing GBTC, with outflows totaling more than $9 billion and a string of daily redemptions. Later in the year, as rivals continued to grow, Grayscale introduced a lower-cost “Mini” Bitcoin Trust funded by spinning off a portion of GBTC’s assets.

Bitcoin, financialized

The speed and scale of ETF adoption altered the structure of the bitcoin market in a matter of months.

By late 2024 and early 2025, U.S. spot bitcoin funds were estimated to hold more than 1.1 million bitcoin, or roughly 5% to 6% of the cryptocurrency’s circulating supply. Industry analyses suggested that spot bitcoin ETFs represented a significant share of net inflows across the entire U.S. ETF industry, with flow intensity exceeding that of gold funds when adjusted for inflation.

Institutional investors did not stay on the sidelines. Public filings for the first half of 2024 showed hedge funds, registered investment advisers and other professional managers collectively holding a sizable share of the new products. In one widely cited example, New York-based Millennium Management disclosed roughly $2 billion in combined positions across several spot bitcoin ETFs.

For many investors, the funds solved a basic operational problem: how to add bitcoin to portfolios without setting up accounts at crypto exchanges or learning to manage private keys. Financial advisers could allocate to bitcoin inside client accounts the same way they bought index funds. Retirement savers could hold the asset in tax-advantaged vehicles, subject to their plan rules.

That convenience came at a cost in control. A growing portion of bitcoin’s supply shifted into custodial accounts run for ETF sponsors, often by a small group of regulated service providers. Coinbase Global Inc., the largest U.S. crypto exchange, emerged as a leading custodian to several issuers.

Supporters argued that moving bitcoin exposure into regulated, transparent structures reduced the chances of FTX-style collapses and cut down on counterparty risk in opaque offshore venues. Some academics and former regulators, however, warned that concentrating so much of the asset in a few funds and custodians created new single points of failure.

A narrow decision with broad effects

From the start, the SEC sought to draw a bright line between bitcoin and the rest of the crypto universe. Yet the legal and market logic behind the January 2024 order did not stay confined to a single asset.

As surveillance-sharing agreements, price-correlation studies and commodity ETP precedents became central to the SEC’s framework for bitcoin, similar arguments appeared in applications for funds tied to ether, the second-largest cryptocurrency. By 2025, the commission had approved spot ether products as well, citing many of the same structural safeguards it relied on for bitcoin.

That gradual expansion underscored a broader reality of financial regulation: decisions framed as narrow can set powerful precedents. With Congress still debating how to categorize and police digital assets, court rulings and product approvals have taken on an outsized role in shaping the rules.

For now, bitcoin’s new life on U.S. exchanges has made it easier than ever for investors to treat the token much like gold—as a volatile, speculative store-of-value asset that can be bought and sold with a three-letter ticker. It has also tied the fate of a once-fringe technology more closely to the strategies of a handful of asset managers and to the risk appetites of mainstream portfolios.

Bitcoin may have been designed as money outside traditional finance. A year into the era of U.S. spot ETFs, a growing share of it now moves, and is stored, on Wall Street’s terms.