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 options trading on spot bitcoin exchange-traded products (ETPs).
The lawmakers are advocating for equality in the treatment of Bitcoin futures exchange-traded funds (ETFs) and spot Bitcoin ETPs. They have raised concerns about the inconsistency in regulatory actions, where options trading for Bitcoin futures ETFs was quickly approved, while options for spot Bitcoin ETPs are still pending approval. This has puzzled lawmakers and raised questions about the SEC’s rationale, especially considering past court decisions challenging the SEC’s differential treatment of similar financial products.
In their communication with SEC Chair Gary Gensler, Flood and Nickel emphasized the importance of options trading for spot Bitcoin ETPs. They argued that it is necessary for providing investors with risk management tools and diversified investment strategies. They pointed out that while options for Bitcoin futures ETFs were immediately allowed to trade after approval, a similar request for spot Bitcoin ETPs has been pending for almost two months since the New York Stock Exchange submitted the necessary applications.
This push for regulatory clarity gained momentum after a significant court decision last summer, where a D.C. court ordered the SEC to reconsider an application for a spot Bitcoin ETF by asset management firm Grayscale. This ruling played a crucial role in the eventual approval of spot Bitcoin ETFs earlier this year.
Despite the SEC’s usual practice of involving multiple regulatory bodies in such approvals, Flood and Nickel’s focus remained on the SEC’s actions or lack thereof. They have expressed concerns about the SEC’s extended timelines and perceived indecisiveness, which could hinder the development and efficiency of the crypto market.
On April 8, the SEC announced an extension of its decision timeline regarding options trading for Bitcoin ETFs proposed by firms like Grayscale and Bitwise. By April 25, the SEC had started consultations regarding a proposed rule change, indicating a possible shift in its regulatory stance. However, multiple exchanges eager to initiate options trading on newly approved spot Bitcoin ETFs have faced procedural delays.
The SEC’s thorough review process aims to evaluate the potential impact of introducing Bitcoin options trading on market stability, particularly during volatile periods. This includes assessing whether the current surveillance and enforcement mechanisms are adequate to handle the complexities of Bitcoin options.
The SEC has set May 29, 2024, as the new deadline for its decision, following a previous postponement in March 2024 that affected proposals from notable exchanges such as Cboe Exchange Inc. and Nasdaq ISE. This cautious approach highlights the SEC’s ongoing struggles with the regulatory challenges posed by emerging crypto-related financial products.
