Former SEC Chair Levitt Says Regulator Ill-Equipped for Bitcoin as ProShares Files for Dual ETF

The Ruling

September 28, 2017, delivered a stark assessment from one of the most respected voices in American financial regulation. Arthur Levitt, who served as chairman of the U.S. Securities and Exchange Commission from 1993 to 2001, told Reuters in New York that he believed the agency he once led was fundamentally ill-equipped to deal with bitcoin. The digital currency, which had surged from below $1,000 at the start of the year to above $4,100 by late September, posed regulatory challenges that the SEC’s existing framework was not designed to address.

Levitt’s candid admission carried weight precisely because of his credentials. As the longest-serving SEC chairman in history, his tenure spanned the dot-com boom and its aftermath, giving him deep experience with emerging asset classes that outpace regulatory infrastructure. His concern was not about whether bitcoin deserved regulation — he implied it did — but whether the SEC possessed the technical expertise and statutory authority to provide it effectively.

International Precedents

Levitt’s remarks landed on a day when the global regulatory landscape was shifting rapidly. In South Korea, the Financial Services Commission banned all forms of initial coin offerings, following China’s comprehensive September 4 prohibition on token sales and subsequent shutdown of domestic bitcoin exchanges. The European Central Bank’s Vice President added to the chorus of institutional skepticism, comparing bitcoin to the tulip bulbs that fueled the 17th-century Dutch speculative bubble and dismissing it as a mere instrument of speculation rather than a legitimate currency.

The pattern was unmistakable: regulators across three continents were simultaneously grappling with how to classify, oversee, and potentially restrain a technology that defied traditional financial categories. Each jurisdiction arrived at different conclusions — China chose prohibition, South Korea targeted fundraising, the ECB offered public criticism, and the United States continued its case-by-case approach — but all shared a common thread of institutional unease.

Enforcement Reality

Against this backdrop, the SEC’s practical challenges were on full display. On the same day Levitt spoke, two significant ETF-related developments exposed the gap between Wall Street’s enthusiasm for crypto products and the regulatory machinery needed to approve them.

ProShares, a major ETF provider with approximately $29 billion in assets under management, filed with the SEC for two new products: the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF. Both funds planned to track bitcoin futures contracts traded on the Chicago Board Options Exchange and list on NYSE Arca. ProShares, known for its specialized long and short funds, appeared to be positioning itself at the frontier of crypto-based exchange-traded products.

Simultaneously, VanEck — the ninth-largest ETF company — withdrew its own bitcoin ETF application after SEC staff told the firm during a September 20 call that the commission would not review registration statements for funds whose underlying instruments were not yet available. Since the CBOE’s bitcoin futures product had not yet launched — it was still pending review by the Commodity Futures Trading Commission with a target of the fourth quarter or early 2018 — VanEck had no choice but to pull its filing.

The contradictory signals were striking. One major ETF provider filed new applications while another withdrew existing ones, all because the underlying futures market that would give the SEC a familiar regulatory entry point did not yet exist. Bitcoin traded around $4,175 that day, according to CoinMarketCap data, with a total market capitalization near $68 billion — a scale that demanded institutional-grade products but sat in a regulatory no-man’s-land.

Market Shockwaves

The U.S. Commodity Futures Trading Commission also made its presence felt on September 28, filing civil fraud charges against a New York man and his company over an alleged bitcoin investment scheme. The enforcement action served as a reminder that while regulators struggled to build proactive frameworks, they retained the ability to pursue bad actors through existing anti-fraud statutes.

Meanwhile, the institutional dance around bitcoin grew more complex. JPMorgan Chase, whose CEO Jamie Dimon had famously called bitcoin a fraud, was simultaneously routing customer orders for bitcoin-related instruments through its brokerage operations. The contradiction between public posturing and private market participation underscored the tension that Wall Street faced as client demand for crypto exposure clashed with executive skepticism.

Bitcoin’s price held relatively firm near $4,100 despite the flood of regulatory news, suggesting that markets had begun to differentiate between enforcement actions targeting fraud and structural regulatory development that could ultimately benefit the asset class. Ethereum traded at approximately $282, with the broader crypto market capitalization exceeding $130 billion.

Closing Thoughts

September 28, 2017, crystallized the central tension of cryptocurrency regulation: the technology moved faster than the institutions tasked with overseeing it. Levitt’s honest assessment that the SEC lacked the tools for bitcoin oversight, combined with the ProShares filing and VanEck withdrawal, revealed a regulatory apparatus caught between demand and capability. The CFTC’s fraud charges showed that enforcement was possible even without a comprehensive framework, but the industry’s long-term path to legitimacy clearly required the kind of institutional infrastructure — futures markets, regulated exchanges, clear classification — that was still months away from materializing.

Disclaimer

This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency investments carry significant risk. Always conduct your own research before making investment decisions.