Regulation
US Lawmakers Pressure SEC to Speed Up Options Trading for Spot Bitcoin ETFs
U.S. Representatives Mike Flood, a Republican, and Wiley Nickel, a Democrat, are actively urging the Securities and Exchange Commission (SEC) to expedite the approval process for trading options on Bitcoin exchange-traded products (ETPs) in cash.
They advocate for parity in the treatment of Bitcoin futures exchange-traded funds (ETFs), which already allow options trading, and spotted Bitcoin ETPs that are currently stuck in a regulatory limbo.
Lawmakers Call for Parity in Bitcoin Options Trading
Lawmakers pointed to the SEC’s successful January approval of spot Bitcoin ETFs, which have since attracted substantial investments, totaling billions of dollars. Their concern centers on the inconsistency of regulatory measures in which options transactions for Bitcoin futures ETFs were quickly approved, while similar options for Bitcoin spot ETPs are still awaiting approval. This discrepancy has not only puzzled lawmakers, but also raised broader concerns about the SEC’s reasoning, particularly in light of prior court rulings challenging the SEC’s disparate treatment of comparable financial products.
In their communications with SEC Chairman Gary Gensler, Flood and Nickel highlighted the crucial need for options trading for spot Bitcoin ETPs, arguing that this is essential to providing investors with the tools necessary to manage risk and diversified investment strategies. They pointed out that even if options on Bitcoin futures ETFs were allowed to exchange immediately Following their approval, a similar application for a spot Bitcoin ETF has dragged on for almost two months since the New York Stock Exchange submitted the necessary applications.
This push for regulatory clarity gained additional momentum following a pivotal decision last summer by a trio of judges in a Washington, DC court. The court asked the SEC to reconsider an application from asset management firm Grayscale for a spot Bitcoin ETF, after Grayscale’s initial application to convert its flagship GBTC fund was rejected the previous year. This court decision was instrumental in the eventual authorization of spot bitcoin ETFs earlier this year.
Court Ruling Paves Way for Spot Bitcoin ETFs
Despite the SEC’s usual procedure of involving multiple regulators, including the Commodity Futures Trading Commission (CFTC), in such approvals, Flood and Nickel’s focus remained squarely on the actions – or inactions – of the SEC. They expressed concerns about the SEC’s extended deadlines and perceived indecision that could hinder the development and efficiency of the crypto market.
Earlier, on April 8, the SEC announced an extension of its decision deadline regarding options trading for Bitcoin ETFs offered by companies like Grayscale and Bitwise. On April 25, the SEC began consultations on a proposed rule change, signaling a possible change in its regulatory position. However, several exchanges eager to begin options trading on the newly approved spot Bitcoin ETFs have faced procedural delays.
SEC Review: Bitcoin Options Market Risk Assessment
The SEC’s comprehensive review process aims to assess the potential impact of the introduction of Bitcoin options trading on market stability, particularly during volatile periods. This involves assessing whether current monitoring and enforcement mechanisms are sufficient to manage the complexity of Bitcoin options.
The SEC set May 29, 2024 as the new deadline for its decision, after a prior delay to March 2024 that affected proposals from notable exchanges such as Cboe Exchange Inc. and Nasdaq ISE. This cautious approach highlights the SEC’s current struggles with regulatory challenges posed by new crypto-related financial products.