Etf was rejected mostly because its price is easily manipulated. Sec allegations were based in investor protection to fraud and price manipulation.
As explained here:
https://www.cnbc.com/2018/07/26/winklevoss-twins-bitcoin-etf-rejected-by-sec.htmlLast year, the SEC disapproved an application for the "Winklevoss Bitcoin Trust" but in June, the group submitted a proposed rule change. Among other arguments, the agency said in a release Thursday that it did not support the Winklevoss's argument that bitcoin markets, including the Gemini Exchange, are "uniquely resistant to manipulation." It also highlighted issues of fraud and investor protection.