The SEC actually expects/requires companies filing crypto ETFs to have "surveillance-sharing agreements" or some other means of closely monitoring traders & trades for the filings to be approved. This is actually a primary reason why Grayscale's ETF among

There are first a few things to make clear. Regulators seem to have little issue, or a least much less issue with approving a derivatives-based or futures ETF. There have to date been around 15 approved derivatives ETFs. A number of them have been denied but many approved. The real issue is with spot exchanges, all of which have been denied to date(or are pending approval).

I went back all the way to a number of them and all of them have a common thread of the regulators having an issue with exchanges ability to prevent, detect and stop issues of fraud and market manipulation on the ETF. We have seen so-dubbed "surveillance-sharing agreements" that are listed in the firms' recent ETF filings, and this is something the SEC basically expects, even requires the firms to submit one in their ETF filing. Taken from Grayscale's filing(and reflected in many others) the ETF disapproval documents show:

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https://preview.redd.it/u4wox9e1cjab1.png?819&format=png&auto=webp&s=e5f97eda58f479ff02612953e0a5a372eca700fd

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https://preview.redd.it/gotokta2cjab1.png?821&format=png&auto=webp&s=0e671f5e9611dccbc81ca756743375cc4c21b26d

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They say that in every case of an ETF/ETP there has been at least one surveillance-sharing agreement such that you're shooting yourself in the foot and significantly lowering your chances of approval if you don't submit your ETF filing with one. In relation to preventing fraud(or so they say), virtually every rejected ETF filing has specifically been rejected for issues surrounding these surveillance-sharing agreements.

They do leave open the option of alternatives to these surveillance-sharing agreements but it keeps coming up being referred to specifically by that title throughout this and other rejected spot ETF filings such that it is clearly the default and is essentially expected. Short and simple: no surveillance-sharing, no approval.

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