Grayscale CEO Demands Public Options Market For Bitcoin Spot ETFs

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Grayscale CEO Michael Sonnhenshein is calling for approval of public options on Bitcoin spot ETFs after his company’s Bitcoin fund successfully converted into one last month.

“It’s never been more important for the crypto and ETF communities alike to advocate for the development of a robust listed options market for spot bitcoin ETFs,” wrote Sonnhenshein in a post to X on Monday.

The Need For Bitcoin Options

Options are financial derivatives affording investors the right to buy or sell an underlying asset at a predetermined rate at a later time. Holders aren’t required to exercise this right, making options a popular way to trade without exposing themselves to an asset itself.

The U.S. Securities and Exchange Commission (SEC) approved Bitcoin spot ETFs to trade on national securities exchanges on January 11. Since then, many of those same exchanges, including the NYSE and others, have filed 19b-4 Forms to permit listed options on commodity-based ETFs, including Bitcoin spot ETFs.

The first bitcoin futures ETFs began trading in the US on October 19, 2021. It was only *ONE* day later that listed options were made available. Like bitcoin futures ETFs, these kinds of products are able to rely on rules that allow them go automatically effective.

— Sonnenshein (@Sonnenshein) February 5, 2024

So far, options have only been made available for Bitcoin futures ETFs. They launched just one day after the ProShares Bitcoin Strategy ETF (BITO) began trading in October 2021.

“Like bitcoin futures ETFs, these kinds of products are able to rely on rules that allow them to go automatically effective,” Sonnhenshein explained.

On the other hand, options for Bitcoin spot ETFs must go through a lengthy review period, much like the spot ETFs themselves.

The CEO argued that options will support Bitcoin’s price discovery, and help investors with crypto’s unique market conditions in creative ways.

“The same way bitcoin futures ETFs and spot bitcoin ETFs should (and now are) treated the same, so too should listed options on these products,” he wrote.

Grayscale’s Influence On Bitcoin Spot ETFs

Bitcoin spot ETFs were approved over two years after their futures counterparts. Previously, the SEC favored futures-based ETFs for hypothetically being more resistant to market manipulation than the Bitcoin spot market.

The SEC was forced to abandon this position after a decisive court loss to Grayscale last year. At the time, three judges ruled that the agency’s differential treatment of such similar products was “arbitrary and capricious.”

SEC chair Gary Gensler has made clear that while the agency now approves both products, it still does not endorse Bitcoin.

“Bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing,” Gensler wrote in his approval statement last month.

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