Reps. Nickel and Flood Advocate for SEC Approval of Options on Spot Bitcoin ETFs

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US Representatives Mike Flood and Wiley Nickel are pressing the U.S. Securities and Exchange Commission (SEC) to approve options trading on spot bitcoin exchange-traded products (ETPs), urging SEC Chair Gary Gensler to address the delay. 

Flood and Nickel emphasize the importance of explaining the perceived difference in treatment between options for Bitcoin futures ETFs, which are already trading, and options for spot Bitcoin ETPs. 

Tendered Reason For Approval Request

The two lawmakers referenced the SEC’s January approval of spot bitcoin ETFs, highlighting the billions of dollars these products have attracted since their introduction.

“We urge you, without delay, to approve options on spot Bitcoin ETPs or to provide an explanation for the Commission’s difference in treatment between options for Bitcoin futures ETFs—which are currently trading—and options for spot Bitcoin ETPs,” write Flood and Nickel, a Republican and Democrat, respectively.

The delay in approving options on spot bitcoin ETFs has raised concerns among lawmakers, particularly in light of previous court rulings that questioned the SEC’s rationale for treating similar products differently. 

Flood and Nickel stress the necessity of options trading for the investors the SEC aims to protect. 

The eventual approval of spot bitcoin ETFs earlier this year was pushed in part by a ruling over the summer by three judges in a D.C. court that decided that the SEC had to re-review Grayscale’s bid for a spot bitcoin ETF after the asset management firm sued the agency last year following the rejection of its plan to convert its flagship GBTC fund. 

“It has been almost two months since NYSE applied for the listing of options on spot Bitcoin ETFs; in the case of Bitcoin Futures ETFs, the SEC permitted options to be listed and begin trading the very next day. Why the difference in treatment?”

Flood and Nickel’s letter emphasizes the critical role options trading plays in providing investors with risk management tools and additional investment strategies. 

While the SEC’s approval process typically involves multiple agencies, including the Commodity Futures Trading Commission (CFTC), Flood and Nickel’s letter focuses on the SEC’s role in addressing the current regulatory challenges surrounding options trading on spot bitcoin ETFs.

SEC Indecisiveness Towards ETFs

SEC Delays Decision on Options Trading on Spot Bitcoin ETFs

The US SEC has delayed the decision to approve options trading on the spot Bitcoin ETFs.#CryptoNews#newshttps://t.co/GZ9NGTcocc

— Cryptonews.com (@cryptonews) March 8, 2024

Before now, according to the SEC’s filing on April 8, the SEC extended its decision-making timeline regarding options trading for Bitcoin ETFs proposed by Grayscale and Bitwise.

Fast-forward to April 25, when the SEC embarked on consultations regarding a proposed rule change, indicating 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’s review aims to assess the impact of introducing Bitcoin options trading on market stability and efficiency, particularly during volatile periods. It also considers whether current surveillance and enforcement measures are adequate 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, which affected proposals from Cboe Exchange Inc. and Nasdaq ISE, indicating the SEC’s cautious approach to regulating crypto-related financial products.

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