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United States securities and exchange commission logo
September 29, 2023
Gavin Michael
Chief Executive Officer
Bakkt Holdings, Inc.
10000 Avalon Boulevard, Suite 1000
Alpharetta, Georgia 30009
Re: Bakkt Holdings,
Inc.
Post-Effective
Amendment No. 2 to Form S-1 on Form S-3
Filed April 21,
2023
Response Dated
August 2, 2023
File No. 333-261034
Dear Gavin Michael:
We have reviewed your August 2, 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 our comments apply 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 these comments, we may have additional comments.
Unless we note
otherwise, our references to prior comments are to comments in our June
12, 2023 letter.
Response Dated August 2, 2023
General
1. We note your response
to comment 1 and the introductory portion of your response letter
where you state that
you intend to include additional, or revised, disclosures in response to
the staff's comments in
a Current Report on Form 8-K that you will incorporate by
reference into the
registration statement. Please revise your next post-effective amendment
to include the
additional, or revised, disclosures in response to our comments directly
therein.
2. Please disclose your
marketing efforts in connection with the Bakkt Crypto platform and
Gavin Michael
Bakkt Holdings, Inc.
September 29, 2023
Page 2
clarify whether and how you encourage customers to use the platform,
including
your digital engagement practices, addressing, without limitation:
The analytical and technological tools and methods you use in
connection with
such practices and your use of technology to develop and provide
investment
education tools;
Whether any of such practices encourage retail investors to trade
more often, invest
in different crypto assets or change investment strategies;
Whether you use any optimization functions (e.g., to increase
platform revenues, data
collection and customer engagement). To the extent your use of
any optimization
functions may lead to potential conflicts between your platform
and investors, please
add related risk factor disclosure; and
Your data collection practices or those of your third-party
service providers.
3. We note your disclosure in your Form 10-Q for the period ended June
30, 2023 that you
provide custody services for Bakkt Crypto's customers and for Bakkt
Trust's standalone
custody customers. Please also address custody services for
customers of Bakkt
Marketplace. In addition, we note that you acquired Bumped Financial,
LLC (renamed
Bakkt Brokerage) in February 2023. Please clarify the activities
engaged in, or expected to
be engaged in, by Bakkt Brokerage.
4. Please revise your disclosure to discuss the capital requirements
applicable to Bakkt
Brokerage, LLC.
5. We note your disclosure on page 42 of your Form 10-Q for the period
ended June 30,
2023 that you receive client platform fees. Please revise your
disclosure to clarify what
these fees are for and who pays them.
6. Please revise to describe the terms and provisions of your insurance
policies, including
insurance policies covering the crypto assets that you hold on behalf
of customers in
wallets in your custody or with third-party custodians, including, the
amount of coverage,
term, termination provisions, renewal options and limitations on
coverage.
7. We note your proposed disclosure that Bakkt Crypto account holders are
able to purchase
crypto assets, store crypto assets in Bakkt Crypto-controlled wallets,
liquidate their
holdings, and transfer select crypto assets between a Bakkt
Crypto-controlled wallet and
external wallets in certain jurisdictions. Please revise your disclosure
to clarify whether
there currently are, or in the future may be, any crypto assets that
Bakkt account holders
are able to purchase that cannot be transferred to an external wallet
(i.e., off Bakkt
FirstName LastNameGavin Michael
Crypto s platform). If any such crypto assets are currently known or
expected, please
Comapany NameBakkt
revise Holdings,
to affirmatively Inc.the same to the extent the information
is material and
identify
reasonably
September available.
29, 2023 Page 2
FirstName LastName
Gavin Michael
FirstName LastNameGavin Michael
Bakkt Holdings, Inc.
Comapany 29,
September NameBakkt
2023 Holdings, Inc.
September
Page 3 29, 2023 Page 3
FirstName LastName
Annex A
Business Updates
Apex Crypto Acquisition, page 1
8. We note your proposed disclosure under this heading that, Bakkt
Crypto offers
consumers the opportunity to purchase, store and sell virtual
currencies through front-end
trading platforms sponsored by Bakkt Crypto s third-party partners.
Please revise to
include diagrams, along with narrative descriptions of how Bakkt
Crypto s business
model works, including the different types of customer transactions
and depicting the flow
of funds between parties involved. Your discussion should clarify your
role in the
transaction (e.g., principal vs. agent) and at what point(s) in the
process commissions and
fees are recognized and earned on all customer transactions. In
addition, similar
information should be provided reflecting all of the company s
rights or abilities to
borrow, pledge, repledge, hypothecate, rehypothecate, loan or invest
the customer assets
as well as their own. In addition, and for example purposes only:
Please revise to describe how transactions are executed and
settled. Please also clarify
if Bakkt Crypto routes orders to other trading venues and whether
customers are
required to pre-fund their transactions.
Please revise to clarify how the Bakkt Crypto trading platform
differs from or
interacts with the trading platform operated by Bakkt
Marketplace, and clarify
whether or not it is your intent to combine these platforms.
Please identify the third-party partners to which you refer and
identify the role of
each third-party partner.
You state that Bakkt Crypto is gauging demand for, among other
things, internal
and/or external wallet transfers of crypto assets, subject to
risk assessment on
incoming and outgoing transfers. Please clarify what this is
intended to refer to and
how it differs from Bakkt Crypto s existing operations.
You state that a majority of the fintech partners with which Bakkt
Crypto had an
agreement are also part of Apex Fintech Solutions client
network. Please elaborate
on this statement and how it relates to Bakkt Crypto s
business.
You state that [i]n most cases, the agreements also contain
provisions giving Bakkt
Crypto discretion in the choice of crypto assets offered to each
partner through its
platform (emphasis added). Does this mean that, in some
cases, Bakkt Crypto is
contractually obligated to provide services relating to certain
crypto assets that it
might not otherwise support? If so, please discuss the regulatory
risks associated with
these contractual provisions.
9. We note your references to "virtual currencies" and "crypto assets."
To the extent you are
using these terms interchangeably, please revise your disclosure to
use one term. If these
terms are instead being used to mean different things, please revise
to define each term on
first use.
10. We note your proposed disclosure under this heading that you are
gauging demand for
offering the following additional products or services in the near
future to your customers:
Gavin Michael
FirstName LastNameGavin Michael
Bakkt Holdings, Inc.
Comapany 29,
September NameBakkt
2023 Holdings, Inc.
September
Page 4 29, 2023 Page 4
FirstName LastName
The opportunity to purchase, store and sell non-fungible tokens
or NFTs;
Services for customers in jurisdictions outside of the United
States;
Internal and/or external wallet transfers of crypto assets,
subject to risk assessment on
incoming and outgoing transfers; and
Enhanced capabilities on your trading platform, including support
for larger
orders and recurring buys, and extending the platform to support
institutional
execution.
To the extent available, please revise to update the status of these
potential products or
services, including timelines and anticipated costs to making them
available to your
customers.
Crypto Assets and Services Offered by Bakkt, page 2
11. We note your table on page 3 identifying all of the crypto assets that
you facilitate
transactions in. Please revise to also identify all of the crypto
asset services that you offer
for each asset. Consider also using a table or chart to identify the
corresponding services
for each asset.
12. We note your proposed disclosure that [a]s of August 2, 2023, [you]
have delisted, or
determined to delist, 37 of the 45 crypto assets that had historically
been available for
trading on the Bakkt Crypto platform. Please revise to clarify the
specific date or dates
on which the crypto assets were delisted. Please also discuss how you
expect those
delistings to impact your business and results of operations in future
periods.
Crypto Services for Retail Customers, page 3
13. We note your proposed disclosure in response to comment 4 that you
intend to expand
your services to include crypto payouts and crypto rewards. Please
provide expanded
disclosure regarding these proposed services and disclose the steps
necessary to introduce
each service. Also please disclose the expected timeline and
associated costs and risks
related to the development and operation of each service.
14. We note your proposed disclosure that you are evaluating
opportunities to offer staking
(only to customers in jurisdictions outside of the United States).
Please tell us whether or
not you intend to have a staking program, and provide disclosure
regarding any staking
program to the extent available. Please also disclose the expected
timeline and associated
costs and risks related to the development and operation of a staking
program. To the
extent that you may offer staking to your customers but do not have a
timeline related to
the development of the staking program, in future filings, please
disclose the factors you
will consider when determining whether and when to offer a staking
program to your
customers.
Bakkt Rewards, page 3
15. Please revise to describe the material terms and conditions of the
Bakkt Rewards program,
to the extent such material terms are currently known although not
finalized. Please
Gavin Michael
Bakkt Holdings, Inc.
September 29, 2023
Page 5
address the following points, to the extent the information is
material and reasonably
available:
Discuss how the platform users earn crypto asset rewards or reward
currencies
(e.g., points or miles);
Disclose how and when you issue the crypto rewards or reward
currencies to a
platform user s account;
Clarify whether you are considering expanding the available
rewards to crypto assets
other than bitcoin;
Noting your proposed disclosure that existing reward currencies
(e.g., points or
miles) can be redeemed into crypto assets by platform users,
please disclose the
exchange rate for redemption of reward currencies into crypto
assets, whether it
is subject to change and, if so, how and when;
Clarify what rewards other than crypto assets, if any, users are
able to receive by
redeeming reward currencies;
Clarify whether the reward currencies can be spent outside of your
platform or have
monetary value outside of your platform; and
Describe any other rights or benefits conferred by the reward
currencies (e.g.,
expiration date, transferability, etc.).
Bakkt Payouts, page 3
16. Please disclose in greater detail how the Bakkt Payouts program will
operate, including
how the crypto assets are acquired and whether this service will
support all of the crypto
assets listed in the table on page 3. In addition, noting your
proposed disclosure that Bakkt
intends to support "scheduled automatic buys," which you refer to as
"Dollar Cost
Averaging," please revise to provide examples illustrating how this
program operates.
Please also revise your risk factor disclosures regarding facilitating
transactions in
securities to cover these services.
17. As a related matter, we note your proposed disclosure that this
product is currently
pending the approval of the New York State Department of Financial
Services. Please
revise to discuss the current status of the approval process,
including any contingencies
needed to be resolved prior to obtaining approval, and the estimated
timing of obtaining
approval.
Institutional Client Business - Crypto Custody Services, page 4
18. We note your proposed disclosure that Bakkt Trust intends to expand the
list of crypto
FirstName LastNameGavin Michael
assets for which it provides custody services to include more of the
crypto assets which
Comapany NameBakkt
you support Holdings,
for trading. Inc. revise your disclosure to specify
which crypto assets Bakkt
Please
Trust29,
September intends to provide
2023 Page 5 custody services for going forward.
FirstName LastName
Gavin Michael
FirstName LastNameGavin Michael
Bakkt Holdings, Inc.
Comapany 29,
September NameBakkt
2023 Holdings, Inc.
September
Page 6 29, 2023 Page 6
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Policies and Procedures
Custody-Related Policies, page 4
19. We note your proposed disclosure under this heading that Bakkt Crypto
makes use of
third-party providers of custodial services, including Coinbase
Custody Trust Company,
LLC and BitGo Trust Company, to hold customer crypto assets as
custodian However,
on page 39 of your most recent 10-Q you state that we do not
presently utilize third-party
custodians. Please reconcile these statements.
20. Please file any agreement you have for the provision of custodial
services as an exhibit to
the registration statement pursuant to Item 601(b)(10) of Regulation
S-K.
21. Please revise to disclose the proportion of customer crypto assets
that Bakkt Crypto self-
custodies using the Fireblocks Vault service, which you reference.
Also please discuss the
material risks attendant to self-custodying customer crypto assets.
22. We note your proposed disclosure that you make use of third-party
providers of custodial
services and that you also self custody customer crypto assets. Please
revise to further
describe your custodial practices for crypto assets, including the
items below:
Discuss what portion of the crypto assets are held in hot wallets
and cold
wallets, respectively, and whether there are differential storage
practices with regard
to your own crypto asset holdings versus customers ;
Disclose the geographic location where the crypto assets are held
in cold wallets and
how the private keys are located;
Disclose the material terms of your arrangements with each of
Coinbase Custody
Trust Company, LLC and BitGo Trust Company as custodian,
including,
without limitation: (i) in what manner the custodian is required
to store your crypto
assets; (ii) whether it is contractually required to hold your
crypto assets in cold
storage; (iii) what security precautions your custodian is
required to undertake; and
(iv) what inspection rights you have. Also please clarify whether
Bakkt Crypto
utilizes the custodial services of any third parties other than
those you reference (i.e.,
Coinbase Custody Trust Company, LLC and BitGo Trust Company);
Identify the person(s) that have access to the crypto assets and
whether any persons
(e.g., auditors, etc.) are responsible for verifying the existence
thereof. Also clarify
whether any insurance providers have inspection rights associated
with the crypto
assets held in storage;
Identify the person(s) that have the authority to release the
proceeds from your
wallets; and
Discuss how the existence, exclusive ownership and software
functionality of private
digital keys and other ownership records are validated by the
relevant parties.
Listing-Related Policies, page 5
23. Please revise to discuss in greater detail the material terms of Bakkt
Marketplace's crypto
asset listing policy, as well as the weight ascribed to the various
factors considered, such
Gavin Michael
Bakkt Holdings, Inc.
September 29, 2023
Page 7
as the Crypto Rating Council scoring system.
Risk Factor Updates
Regulatory regimes governing blockchain technologies and crypto..., page 12
24. We note your proposed disclosure under this risk factor. Please
further revise to discuss
the IRS s recent proposed regulations relating to the reporting of
crypto asset transactions
by brokers.
25. We note your proposed disclosure regarding the Southern District of
New York's decision
in Ripple Labs, Inc. Please balance your disclosure by addressing the
Southern District of
New York's decision in Terraform Labs.
A crypto asset's status as a "security" in any relevant jurisdiction..., page
14
26. We note your proposed disclosure on page 17 that you "could be subject
to judicial or
administrative sanctions for acting as a broker, dealer, or national
securities exchange
without appropriate registration." Please revise to also address
acting as a clearing agency
without appropriate registration.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
Please contact David Lin at (202) 551- 3552 or Sandra Hunter Berkheimer
at (202) 551-
3758 with any questions.
FirstName LastNameGavin Michael Sincerely,
Comapany NameBakkt Holdings, Inc.
Division of
Corporation Finance
September 29, 2023 Page 7 Office of Crypto
Assets
FirstName LastName