It was a wild few minutes on Wall Street when the official Securities and Exchange Commission X account posted that spot bitcoin ETFs had been approved. But moments later, SEC Chair Gary Gensler posted that "The @SECGov twitter account was compromised, and an unauthorized tweet was posted. The SEC has not approved the listing and trading of spot bitcoin exchange-traded products." Yahoo Finance's Julie Hyman, Josh Lipton, David Hollerith, and Jennifer Schonberger break down what happened and how bitcoin prices (BTC-USD) responded to the news.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Stephanie Mikulich

Video Transcript

JULIE HYMAN: Breaking news. Chaos over the approval of the spot bitcoin ETF. I want to lay out for our viewers what just happened. First, there was a tweet from the official SEC government account that said all spot bitcoin ETFs had been approved. Then a short while later, Gary Gensler's personal account tweeting, the SEC gov Twitter account was compromised and an unauthorized tweet was posted. The SEC has not approved the listing and trading of spot bitcoin exchange traded products.

There are so many implications of this. We were just speaking with Samir Kerbage of Hashdex, who happened to be on the set. He's one of the issuers who is looking for this approval from the SEC. He had said that it was likely that there would not be a public-facing announcement, but rather you would look on the Federal Register, which is a website that-- a technical website that lists these filings. So it was shocking. And then equally shocking to find that this official account had indeed been hacked.

JOSH LIPTON: Yeah. And our thanks, again, to Samir for rolling really, really well with it. It was-- listen, it was surprising to see it posted on a social media platform. But when it comes from a verified government source, you're thinking you can go with it. But we were both surprised that it came-- that they decided to an asset on X, kind of a smiling pic of Gary Gensler. But it has now been shifted here. And we were surprised by the timing as well, I think.

JULIE HYMAN: Yes. Well, yes, we were expecting this news perhaps to come tomorrow. I mean, I will say also, this doesn't reflect terribly well on X that this hack was able to be enacted, right, that this happened on that platform to put out this fake tweet.

I want to bring in our team coverage on this as well. We've been working now for several weeks talking about this spot bitcoin ETF. Our own David Hollerith, who's been covering it, Jennifer Schonberger, covering it from Washington, they are both here with more. Wow, you guys. That's all I can say.

David, let's start with you. You have been reporting that what we were expecting, which we now still seem to be expecting, is that we'll get some kind of news tomorrow after the close of trading.

DAVID HOLLERITH: Right. And, Julie, it kind of helps to point out, too, and you're well aware of this, is that the process of approving an ETF by way of the SEC is pretty bureaucratic. And it takes a lot of time. And it's usually doesn't cater this much excitement from the investing public.

Now this has obviously been an exception, given that bitcoin-- a bitcoin ETF is something the industry has sought since for the past decade. So all of-- I guess, through the second half of 2023, we saw anticipation building around this. And so now, you know, we're at this point where it's a pretty nebulous internal agency process. And everybody has been trying to get around this to understand when approval could happen, because it is such a close process.

And all because of that, you take that on top of all these people who were trying to come up with when the approval could actually happen. And it kind of creates this recipe where a lot of people want to believe the latest thing that happened. When this first came out, obviously, it's not very characteristic of the SEC to be issuing a statement. And traditionally, they're pretty closed or they're pretty tight-lipped about voicing these processes. And it usually comes out through SEC filings is where we see this.

JOSH LIPTON: And, Jennifer, I want to bring you in here as well. I mean, it was surprising, Jennifer, to see this news posted on a social media platform, to see it posted on X. But often, listen, you see a verified government account, you think you can trust it. What was your response to it?

JENNIFER SCHONBERGER: Yeah. You know, Josh, to your point, I was a bit skeptical at first, too. I kind of went and said, is this definitely the SEC's account? Yeah, it looks like it. But to your point and to David's point, generally the SEC is not going to put the approval on Twitter, now X, first. It's going to come in the form of a filing on EDGAR.

And the SEC scrambling coming out with a statement just moments ago. A spokesperson telling me that the SEC's Twitter account had been compromised. And that, quote, "the unauthorized tweet regarding bitcoin's ETF was not made by the SEC or its staff." So this is also something for X to look into as well when it comes to hackers.

JULIE HYMAN: Well, definitely. And that unauthorized tweet stayed up on the official SEC page for 10 minutes at least. I just checked once again, it has now been taken down. It has been erased. The Gensler tweet, obviously, remains there, guys.

So, OK, so let's level set then and assume we're back to where we were, that perhaps we will hear news about the spot bitcoin ETF tomorrow. Perhaps then they'll start trading at some point in the future. You know, what are you hearing from the issuers at this point, David, in terms-- I mean, this might have scrambled things a little bit, certainly surprised people. But what are you hearing from the issuers in terms of what they're now expecting?

DAVID HOLLERITH: To be honest, we haven't had time to speak with--

JULIE HYMAN: Yeah. This is all unfolding very quickly.

DAVID HOLLERITH: Yeah. Since this has happened. You know, from what we heard from applicants, the expectation was approval for some time on Wednesday, with trading beginning on Thursday. And we can't begin to understand how this might change the calculus, if at all.

But one thing, I guess, we could take in light of all this is that we did get to see a brief moment of what happens to the bitcoin price when-- if approval is to come out. And so now that we kind of know that, things were a little bit volatile and shaky after that. But again, it's likely not going to be the same.

JOSH LIPTON: And, Jennifer, I want to get your take on that as well. Listen, we're guessing here, but you think an event like this, in your opinion, does it append the timing or no? You think the SEC stays dead set. If they've made a decision, they've got a timeline in mind, and they're going to go with it.

JENNIFER SCHONBERGER: Well, they've got a deadline when it comes to ARK. So they still have to legally meet that deadline. So hacker, no, we're going to have a decision on this by tomorrow or maybe Thursday at the latest.

Now, there are obviously more than one applicants. We've got Grayscale. We've got BlackRock. The list goes on. Is the SEC going to do this in one slew and one batch? Or are we going to see a trickle down? That remains to be seen. And then will there'll be an effective date for trading, so that all of these can begin trading on the same day to create sort of a level playing field? These are all questions.

And then from there, you know, to Chair Gensler what is it that is changed in his mind and in the agency's mind that they no longer believe that it's going to be subject to market manipulation? And frankly, does this give them more power, more ability to better regulate crypto if they become a regulated exchange traded product?

JULIE HYMAN: Jen, I'm curious, this all happening, does this give the SEC any legal cover to delay? Because it is-- as part of a legal decision that they have to let ARK in 21shares know by tomorrow, tomorrow is the deadline, I mean, I know we're not legal experts here, but does this-- is there any chance this could change the timeline?

JENNIFER SCHONBERGER: I was going to say, I'm not a legal expert. So in my view and not having done any due diligence on this, I wouldn't think it would, but who knows?

JULIE HYMAN: Yeah. And I will say the one-- the official communication we did get today, by the way, from the Securities and Exchange is something on investor.gov by the SEC's director of investor education and advocacy, which basically warns about some of the pitfalls of cryptocurrencies or that investors need to exercise caution. So that's the official word. That is all we have today from the SEC. So just something to note as we try to figure out our way through this situation, Josh.

JOSH LIPTON: And, Dave, I want to get your-- you made an interesting point there, too, Dave. For however brief, that brief window in time, where we thought the approval was there, we did see a reaction in bitcoin, because that's an interesting-- listen, that's another really important question we've been asking, Dave, is if and when you get the approval, how bitcoin reacts. Is it a positive catalyst, right? Or is it going to be a sell the news event?

DAVID HOLLERITH: Yeah. I mean, I think you can't really-- you can't really expect anything good to happen when it's supposed to with bitcoin, given the amount of derivatives that are like trading in the market. But longer term, a lot of people do think that the ETFs, by giving more access to investors, will substantially help how the bitcoin market trades. And it will bring in more flows.

I mean, we have really big Wall Street names coming in wanting to issue these kinds of products. That being said, you know, obviously, the question of manipulation, really what led to this moment for approval was Grayscale's lawsuit with against the SEC as far as we know. And in that lawsuit, it was basically based on how the SEC argued manipulation in the Bitcoin markets worked and whether it was different from the future markets.

So if we take all of that in kind together, I think sort of the question here is just, what exactly is the SEC able to argue that is different now as opposed to how it was an hour ago?

JOSH LIPTON: David, Jennifer, thank you both so much for joining us here today and helping us make sense of what turned out to be a wild news day. We appreciate it.

JENNIFER SCHONBERGER: Thank you.