The U.S. SEC has frozen its approval for Nasdaq's cash-settled bitcoin index options (QBTC) following a legal challenge from rival exchange CME Group. CME argues that bitcoin is a commodity, placing such products under the exclusive jurisdiction of the CFTC, not the SEC, and that the approval could set a dangerous precedent. The product remains suspended pending a full commission review, with public comments due by August 24.
SEC approval freeze
- ▪The SEC has invited interested parties to submit statements supporting or opposing the approval by August 24
- ▪The U.S. Securities and Exchange Commission (SEC) has paused its approval for Nasdaq to list cash-settled bitcoin index options
- ▪The SEC's pause is to reconsider its decision following a legal challenge from CME Group
CME jurisdictional challenge
- ▪CME Group contends that options tied to bitcoin's value fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC)
- ▪CME's petition warned that the SEC's approval could set a precedent for securities exchanges to list derivatives on other commodities
- ▪CME Group challenged the SEC's approval in June, arguing that bitcoin is a commodity
CFTC versus SEC authority
- ▪CME argued that regulatory exemptions cannot be used to transfer a product from one regulator's jurisdiction to another
- ▪If CME Group's argument is correct, the SEC would lack the authority to approve the QBTC product
- ▪CME Group already operates regulated bitcoin futures and options markets under the CFTC's framework
QBTC product structure
- ▪The QBTC product required exemptions from the CFTC before it could launch, even with the SEC's initial approval
- ▪Nasdaq's proposed QBTC contracts would use CME CF benchmarks for both their underlying index and final settlement price
- ▪The proposed Nasdaq product, under the ticker QBTC, received conditional approval from the SEC in May
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