Bitwise filed an amendment to its Bitcoin spot ETF application on Monday to include fresh arguments it says invalidate regulators' explanations for depriving American investors of the product.

The firm asserted that the CME Bitcoin futures market leads the spot market in Bitcoin’s price discovery, for example, and may thus serve as a "regulated market of significant size" for market surveillance purposes.

“We try to… demonstrate that every well-designed academic study supports the finding that the CME is ‘significant,’” said Matthew Hougan, CIO of Bitwise, on Twitter.

Bitwise is among nearly a dozen firms aiming to launch a Bitcoin spot ETF in the United States, although all of them have been consistently denied the ability to do so by the nation’s Securities and Exchange Commission (SEC).


The agency’s primary argument is that the CME Bitcoin Futures market isn’t large nor related enough to Bitcoin’s spot market to counteract a would-be manipulator trading on the exchange.

Bitwise claims, however, that Bitcoin’s price is dictated more by the futures market than the SEC believes. According to a previous Bitwise study cited by Hougan, trading volume within Bitcoin’s spot market may be mostly fake—meaning the relative size of its futures market is much larger.

In an email to Decrypt, Hougan clarified that fake volume today is far below what it was in 2019, that it is still significant.  “If I look at CoinMarketCap's Top Cryptocurrency Spot Exchange board, the companies listed are all real entities: Binance, Coinbase, Kraken,” he said. “In 2019, that leaderboard was filled with names that no one had heard of, like Coinbene.”

In 2021, another Bitwise study found that CME futures accounted for 52.97% to 68.03% of Bitcoin’s price discovery, proving its relevance sufficient for a surveillance-sharing agreement. While the SEC argued that this doesn’t explain why the CME is needed to address manipulation, Bitwise says the answer is self-evident.


“The sponsor’s answer can only be that 50% is the uniform academic standard across every price discovery paper the sponsor has reviewed, as well as all academic papers the commission has referenced,” Bitwise wrote in its filing.

“If the commission believes that the standard for satisfying the first prong should be higher than ‘leads’ (such as, ‘overwhelmingly leads’ or ‘nearly always leads’), then the commission should state that,” it added.

Hougan said that its quite common for futures markets to lead spot markets in price discovery in other major asset classes.

“Futures markets often offer leverage, which attracts traders looking to profit on information by offering an efficient way to deploy capital,” he said. “Also, futures markets tend to have a higher proportion of institutional traders vs. retail traders, who may have an informational edge.

The SEC lost its lawsuit with Grayscale in August after the latter accused the agency of arbitrarily refusing its Bitcoin spot ETF application while approving futures ETFs. While boosting investor confidence, Hougan said that solid arguments related to CME futures’ relationship with spot prices are needed if the SEC appeals the court ruling.

“In short, we return to the status quo,” wrote Hougan. “Unfortunately, existing filings do not include substantively new arguments or research addressing this question head-on—until now.”

Central to Grayscale’s argument was that Bitcoin’s future and spot market are extremely tightly correlated, meaning CME Bitcoin futures were necessarily connected to spot trading. 

Hougan clarified to Decrypt that Grayscale’s findings do not contradict Bitwise’s research about the futures market leading the spot market. “One market can lead another and the two can still be highly correlated (meaning they generally move in the same direction),” he explained.

Editor's note: This story has been updated to include comments from Bitwise CEO Matthew Hougan.


Daily Debrief Newsletter

Start every day with the top news stories right now, plus original features, a podcast, videos and more.