SEC Delays Decision on Options Trading on Spot Bitcoin ETFs

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The United States Securities and Exchange Commission (SEC) has delayed the decision to approve options trading on spot Bitcoin exchange-traded funds (ETFs). 

The SEC extended the response deadline for the Cboe Exchange and the Miami International Securities Exchange, both of which filed bids to offer options on Bitcoin ETFs. 

The agency has also postponed the decision on Nasdaq’s bid to offer options on BlackRock’s iShares Bitcoin Trust (IBIT), citing the need for more time to consider the request.

SEC Invokes Right to Defer the Decision

The filing deadline for the Bitcoin ETF options was January 25, and the SEC’s initial decision deadline was March 10. 

However, the SEC has invoked its right to defer a decision, granting an additional 45 days under U.S. securities laws. 

This means the SEC now has until April 24 to reach a final decision on options trading for Bitcoin ETFs.

Options are derivative products that provide traders with leverage, allowing them to make directional bets on the market.

For example, if a trader believes that Bitcoin’s price will rise, they can purchase a “call option” to buy 1 BTC at today’s price in a month’s time, putting down a smaller amount of money compared to buying 1 BTC outright. 

If Bitcoin’s price increases during that month, the trader can exercise their option, buy Bitcoin at a lower price, and potentially sell it for a profit. 

If Bitcoin’s price declines, the trader may choose to let the option contract expire and forfeit the premium paid.

Grayscale CEO Michael Sonnenshein has advocated for the approval of options for Bitcoin ETFs, stating that they contribute to a robust and healthy market. 

Bitcoin ETF Options Will Attract Hedge Funds

Analysts, such as VettaFi’s Dave Nadig, predict that the introduction of Bitcoin ETF options will attract hedge fund players who were not previously involved in the crypto ecosystem, providing them with an opportunity to participate in the market.

The SEC’s recent approval of ten spot Bitcoin ETFs on January 11 has already seen significant inflows of funds. 

As of March 6, excluding Grayscale’s converted ETF, the nine new ETFs had accumulated $25.87 billion in assets under management, according to BitMEX Research data.

In addition to options trading, the SEC is also evaluating seven spot Ether ETFs, with analysts speculating that the agency may wait until May 23 to approve them all, coinciding with the deadline for VanEck’s application.

Multiple leveraged Bitcoin ETFs are also under consideration by the SEC, including filings from asset manager Direxion for five inverse and long spot Bitcoin ETFs, ProShares’ five leveraged Bitcoin funds, and REX Shares’ six leveraged ETFs.

More recently, SEC Commissioner Hester Peirce said that the regulatory agency is operating in an “enforcement-only mode” when it comes to the regulation of cryptocurrencies. 

She said that one of the main barriers within the cryptocurrency industry is the SEC’s reliance on enforcement actions instead of establishing clear regulatory guidelines in advance. 

“If you really want to sort the bad behavior from the good behavior, having rules that are clear to people who want to follow them is a much better approach than doing this, parachute in later with enforcement.”

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