US Representatives Mike Flood and Wiley Nickel are urging the U.S. Securities and Exchange Commission (SEC) to approve options trading on spot bitcoin exchange-traded products (ETPs). They are concerned about the delay in approval and question the perceived difference in treatment between options for Bitcoin futures ETFs, which are already trading, and options for spot Bitcoin ETPs. Flood and Nickel stress the importance of options trading for investors and call on SEC Chair Gary Gensler to provide an explanation for the delay. They cite the approval of spot bitcoin ETFs in January and the billions of dollars these products have attracted as reasons for their request.
The delay in approving options on spot bitcoin ETFs has raised concerns among lawmakers, especially in light of previous court rulings that have questioned the SEC’s rationale for treating similar products differently. Flood and Nickel emphasize the critical role options trading plays in providing investors with risk management tools and additional investment strategies. They point out the quick approval of options for Bitcoin futures ETFs compared to the delay in approving options for spot Bitcoin ETPs, questioning the difference in treatment by the SEC. Flood and Nickel’s letter focuses on the SEC’s role in addressing regulatory challenges surrounding options trading and protecting investors.
The SEC has delayed the decision to approve options trading on spot Bitcoin ETFs, as indicated in a filing on April 8. The SEC extended its decision-making timeline regarding options trading for Bitcoin ETFs proposed by Grayscale and Bitwise. Consultations regarding a proposed rule change began on April 25, signaling a potential shift in regulatory stance. Multiple exchanges have sought to enable options trading on recently approved spot bitcoin ETFs, but the process has been delayed. The SEC is reviewing the impact of introducing Bitcoin options trading on market stability and efficiency, particularly during volatile periods, and assessing the adequacy of current surveillance and enforcement measures for managing the complexities of Bitcoin options.
The Commission has opted for a longer review period to thoroughly assess the applications, setting May 29, 2024, as the new deadline for a decision. This delay follows a previous postponement in March 2024, affecting proposals from Cboe Exchange Inc. and Nasdaq ISE, indicating the SEC’s cautious approach to regulating crypto-related financial products. Flood and Nickel’s letter to the SEC emphasizes the necessity of approving options on spot Bitcoin ETPs and highlights the importance of options trading for investors. They call on Chair Gensler to address the delay and provide an explanation for the difference in treatment between Bitcoin futures ETFs and spot Bitcoin ETPs.
The eventual approval of spot bitcoin ETFs earlier this year was pushed in part by a ruling in a D.C. court that required the SEC to re-review Grayscale’s bid for a spot bitcoin ETF. Flood and Nickel continue to press for the approval of options on spot Bitcoin ETPs, citing the critical role that options trading plays in providing investors with risk management tools and additional investment strategies. They urge the SEC to consider the importance of options trading for investor protection and encourage the timely approval of options on spot Bitcoin ETPs to ensure market efficiency and investor confidence.
