United States securities and exchange commission logo
January 11, 2024
Gavin Michael
Chief Executive Officer
Bakkt Holdings, Inc.
10000 Avalon Boulevard, Suite 1000
Alpharetta, Georgia 30009
Re: Bakkt Holdings,
Inc.
Registration
Statement on Form S-3
Filed April 21,
2023
Response Dated
November 21, 2023
File No. 333-271361
Dear Gavin Michael:
We have reviewed your November 21, 2023 response to our comment
letter and have the
following comments. In some of our comments, we may ask you to provide
us with information
so we may better understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe a comment applies to your
facts and circumstances
or do not believe an amendment is appropriate, please tell us why in
your response.
After reviewing any amendment to your registration statement and
the information you
provide in response to this letter, we may have additional comments.
Unless we note otherwise,
any references to prior comments are to comments in our September 29,
2023 letter.
Response Dated November 21, 2023
General
1. We note your response
to comment 1 that you plan to provide revised disclosure in
response to our
comments in an amendment to the Company s recently filed Form 10-Q
for the quarter ended
September 30, 2023 prior to the effectiveness. Please supplementally
provide us with
proposed draft pages to an amendment to the Form 10-Q. Please also
revise to include a
recent developments section in your prospectus summary to disclose
the Apex Acquisition
and related material risks.
2. We note your response
and proposed disclosure to comment 2 that, "We generally do not
engage in any
direct-to-consumer marketing for the acquisition or engagement of end
Gavin Michael
FirstName LastNameGavin Michael
Bakkt Holdings, Inc.
Comapany
January 11,NameBakkt
2024 Holdings, Inc.
January
Page 2 11, 2024 Page 2
FirstName LastName
consumers..." Please delete generally from the beginning of this
sentence or disclose
any exceptions.
3. We note your proposed disclosure in response to comment 6 that your
insurance policy
with respect to crypto assets "contains customary exclusions and
limitations of coverage
as per industry standards. Please expand your disclosure to briefly
describe such
customary exclusions and limitations of coverage and provide examples,
as appropriate.
4. We note your proposed disclosure in response to comment 7 that all
crypto assets that you
make available to Customers are transferable to external wallets, with
the exception of: (i)
Ethereum Classic (ETC) and Dogecoin (DOGE), which are under
development and are
expected to be supported for transfers in the first quarter of 2024,
and (ii) crypto assets
made available to Customers residing in the State of New York. Please
provide us your
legal analysis as to why such instruments included in your list of
exceptions and traded
through your platform are not derivatives, such as swaps. In this
regard, it appears that
such trading may be synthetic with Customers depositing cash, trading
solely within your
closed platform, and being prohibited from withdrawing crypto assets
from the platform.
In responding to this comment, please address the rights and title a
Customer has with
respect to such crypto assets traded through your platform.
5. We note that your proposed disclosure in Annex A defines the term
Client to include
businesses with whom [you] contract to provide services to
Customers on our platforms,
and includes financial institutions, hedge funds, merchants,
retailers, and other
businesses. Please expand this definition to clarify that the term
Client also includes
the third-party partners to which you refer in your disclosures, as
you state in response to
comment 8. In addition, please tell us how you considered including
risk factor disclosure
regarding the enforceability of the agreements with Clients that are
not in writing and
describing any material impacts to your business.
Annex A
Item 5. Other Information, page 1
6. We note your response to comment 8 and your proposed disclosure in
Annex A that you
are developing functionalities to transfer supported crypto assets
between registered
Customers of the Company. Please describe in greater detail the
functionalities you are
developing, including whether they are intended to create a payment
platform or facilitate
the matching of transactions between Customers. Further, with respect
to your proposed
disclosure in Annex A that Customers may purchase crypto assets
through the Customer s
Banking as a Service provider account, please clarify what is
meant by this term, and
which parties maintain relationships with the bank that is providing
the service. Please
also revise to clarify that the company is not regulated as a bank and
does not have deposit
insurance for its customer accounts.
7. We note your response to comment 9 that your definition of "crypto"
asset includes the
terms virtual currencies, coins, and tokens. Please
explain their meanings so that a
Gavin Michael
FirstName LastNameGavin Michael
Bakkt Holdings, Inc.
Comapany
January 11,NameBakkt
2024 Holdings, Inc.
January
Page 3 11, 2024 Page 3
FirstName LastName
reader without specialized industry knowledge can understand them.
8. The discussion under Crypto Asset Trading on pages 5 - 9 of
Annex A focuses
primarily on the Customer side of a transaction. Please also provide
additional detail on
the execution of transactions with liquidity providers (and the
inter-relationship between
such transactions and the transactions with Customers). For example,
and without
limitation, please discuss:
How many liquidity providers do you route to;
How do you determine which liquidity provider to route to for a
particular order;
The material terms of your relationships with liquidity providers;
Whether the execution of a Customer s order contingent on the
execution of an
offsetting order with a liquidity provider, or alternatively,
whether Bakkt Crypto
executes a Customer s order and subsequently executes an
offsetting order with a
liquidity provider. If the latter, please explain why the use of
the term riskless
principal is appropriate in this context;
Whether Bakkt Crypto is required to pre-fund any transactions with
liquidity
providers and, if so, does Bakkt Crypto use its own cash or
crypto assets to do so; and
Any liquidity risk to the company associated with these
arrangements with liquidity
providers.
Bakkt Crypto, page 2
9. We note your response to comment 10 that you do not have any updates
at this time on
your plans to offer non-fungible tokens or NFTs and your proposed
disclosure that you are
evaluating the opportunity to purchase and sell NFTs. To the extent
that you may offer
NFTs to your Customers but do not have a timeline related thereto,
please disclose the
factors you will consider when determining whether and when to offer
NFTs to your
Customers. In addition, please identify the local Client with which
you have a partnership
and customers with in Spain, Mexico, Argentina, and soon Brazil.
Risk Factors, page 3
10. We note your proposed disclosure in Annex A that Bakkt Trust and Bakkt
Crypto hold
proprietary assets in the same wallets that hold customer assets.
Please expand your risk
factor disclosure to discuss related risks. Please also expand your
risk factor disclosure to
discuss the potential impact of the insolvency of one of your
third-party custodians.
11. We note your proposed disclosure in response to comment 22. Please
expand your
disclosure in the subsection headed "Custody Services for the Crypto
Assets Supported for
Trading" to include the information you provide in your response
regarding the material
terms of your third-party custody arrangements. In addition, your
response notes that
[a]ssets stored by Coinbase Custody and Bitgo are held 100% in
segregated cold
storage. However, you subsequently state that BitGo, at Bakkt
Crypto s direction,
establishes and maintains wallets for the storage of crypto assets,
including cold wallets
where BitGo holds a majority of the keys and a majority of those are
stored offline
Gavin Michael
Bakkt Holdings, Inc.
January 11, 2024
Page 4
(emphasis added). Please reconcile these statements. Please also clarify
what you mean by
the term segregated cold storage in the first sentence (as opposed
to unsegregated cold
storage). In addition, in the second sentence please explain why only a
majority of keys
held by BitGo in cold wallets are stored offline. If some portion of the
keys held in cold
wallets are stored online, it is unclear why those wallets would be
considered cold wallets.
Please also revise to describe the term and termination provisions of
your custody
agreements.
Regulatory regimes governing blockchain technologies and crypto, page 12
12. Please tell us how you considered revising your disclosure in this risk
factor to address the
Digital Financial Assets Law recently enacted in California and its
potential impact on the
Company.
A crypto asset's status as a "security" in any relevant jurisdiction..., page
14
13. We note your response to comment 26. To the extent that you do not
believe it would be
appropriate to reference the term "clearing agency" in your disclosure,
please provide your
analysis as to why you believe an entity that is not registered as a
broker-dealer may be
eligible to rely on the exclusion from the definition of clearing
agency for a broker or
dealer engaged in customary brokerage or dealing activities, and why you
believe the
Company would be considered to be engaged in customary brokerage or
dealing activities.
Please contact David Lin at 202-551-3552 or Sandra Hunter Berkheimer at
202-551-3758
with any other questions.
Sincerely,
FirstName LastNameGavin Michael
Division of
Corporation Finance
Comapany NameBakkt Holdings, Inc.
Office of Crypto
Assets
January 11, 2024 Page 4
cc: Matt Lyons
FirstName LastName