I disagree that the SEC should disapprove the ETF on grounds of the block size debate. Indeed the possibility of a hard fork presents a risk to investors, and indeed the SEC has a mandate to protect investors, BUT these two do not belong together, and unfortunately many people get this wrong.
The SEC mandate is to protect investors from mismanagement and fraud, for example cornering of the market, failure of the ETF to track the underlying asset price, insufficient liquidity to convert the notes to the underlying asset, and so on. These are all related to the mechanics of the ETF and the market around it, and not to the underlying asset (bitcoin).
That bitcoin has risks, we all know. Another major exchange might be hacked, key developers might leave, a competitor could rise, SHA256 or secp256k1 could be weakened, and yes, a hard fork could happen. All these are risks to bitcoin and not the ETF per se (anymore than exposing the holder to the underlying). “Unsophisticated investors” should not invest in bitcoin nor the ETF until they are educated, and the SEC has no mandate to protect investors from themselves.
I would like to add that holding bitcoin directly has many complexities as running a wallet in a secure environment is highly non-trivial. The ETF actually provides a service to “unsophisticated investors” that want exposure to bitcoin but lack the ability to properly secure it.