On September 9, 2018, the SEC announced the temporary trading suspension of two securities known as Bitcoin Tracker One (“CXBTF”) and Ether Tracker One (“CETHF”). According to the SEC’s order, the broker-dealer application materials submitted to enable the offer and sale of these products in the United States, as well as certain trading websites, characterize them as “Exchange Traded Funds.” According to the SEC, other public sources characterize the instruments as “Exchange Traded Notes.” By contrast, the SEC observed that the issuer of these securities characterizes them in its offering materials as “non-equity linked certificates.” CXBTF and CETHF are listed and traded on the NASDAQ/OMX in Stockholm and have recently been quoted on OTC Link (formerly known as the “pink sheets”) in the U.S. The SEC temporarily suspended trading in these securities in light of apparent confusion among market participants regarding the characteristics of these instruments.

The timing of the order—coming on a Sunday afternoon—and associated publicity around it is somewhat unusual and is further illustrative of the SEC’s heightened interest in all things crypto. In contrast, this morning and with little fanfare, the SEC issued trading suspensions in at least 13 other penny stocks having no apparent ties to the crypto marketplace. As we recently summarized, in recent weeks the SEC and its staff have denied applications by other parties seeking to market Bitcoin exchange traded funds (“ETFs”), and it is likely that Sunday’s action is intended to prevent an end run around the SEC’s position on crypto ETFs. Temporary trading suspensions of this kind are permitted to last for up to two weeks, and the SEC usually uses this period to build its case in order to bring an administrative action seeking a permanent ban on trading of the subject securities.