SEC Staff Warns Against Mutual Funds That Own Bitcoin Futures

What You Need to Know

  • Investors should consider the risks, the risk disclosure of funds and their own risk tolerance, the statement says.
  • BlackRock and Morgan Stanley have moved toward adding Bitcoin futures to funds.
  • SEC Chairman Gensler has warned about the risks of Bitcoin and said his agency lacks the authority to regulate it.

The Securities and Exchange Commission’s Division of Investment Management has issued a staff statement warning investors about investing in a mutual fund with exposure to the Bitcoin futures market. 

“Among other things, investors should understand that Bitcoin, including gaining exposure through the Bitcoin futures market, is a highly speculative investment,” the statement reads. “As such, investors should consider the volatility of Bitcoin and the Bitcoin futures market, as well as the lack of regulation and potential for fraud or manipulation in the underlying Bitcoin market.”

The statement recommends that before making such an investment, investors first consider the risks involved, the risk disclosure of the fund and their own risk tolerance.

It does not identify any particular funds, but at least two fund companies — BlackRock and Morgan Stanley — have filed statements of information with the SEC for some funds having the ability to invest in Bitcoin futures. The BlackRock funds are the Strategic Income Opportunities Portfolio and BlackRock Global Allocation Fund. Twelve funds are included in the Morgan Stanley filing, including the Advantage Portfolio and Global Opportunity Portfolio and the International Portfolio versions of each.

The latest SEC warning about cryptocurrencies comes less than a week after Gary Gensler, the new SEC chairman, told a congressional committee and CNBC that more investor protections are needed for Bitcoin and other crypto markets, but the SEC does not yet have the authority to provide them. Congress needs to give that authority to regulators, he said.

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