Unfortunately for them, the SEC, quite reasonably, requires more than one regulated market to exist for the underlying commodity, and probably preferably not owned by the company behind the ETF itself. Seems obvious in retrospect.
From the ruling, it doesn't really seem that was an issue. That Gemini does very little of the US and an utterly miniscule amount ogmthr global bitcoin trade made the surveillance agreement with Gemini insufficient, but a single-but-dominant regulated exchange would probably be sufficient.
Then some proper options would be nice. Preferrably someone who doesn't trade against their own customers, which at least one exchange is open about. There's a lot that could be done in the Bitcoin ecosysten (well, at least we are rid of MtGox).
1. A governing body that can create rules and regulation for the market.
2. An enforcement body that can enact penalties for rule violations.
The problem I think is not so much the governing agency, it's the enforcement for rule violators. It's one thing to punish Mt. Gox for violating the exchange terms, but what if it's some shady anonymous bitcoin exchange broker in China?
It means commodity exchanges dealing in Bitcoin regulated by the CFTC or similar entities in other jurisdictions. There are some already, but they do a very small share of Bitcoin volume.
> Coinbase has KYC, banking relationships and tax integration, I'm sure that can be extended to an exchange.
That's money transmitter stuff, which is a different set of regulatory requirements.
And do it in all the major jurisdictions?
> and block ability to run smart contracts or any other software on it.
How do you think smart contacts play a role?
No, you'd just need for the regulated exchanges to control a substantial share of the total volume of trade, which could happen by shift in trader preferences, unregulated exchanges becoming regulated, or, yes, unregulated exchanges shutting down.