CME Halts Nasdaq's Plan for Major Bitcoin Options
The CME Group has frozen Nasdaq's proposed launch of major Bitcoin index options after warning that a legal loophole could upend the entire commodities market.
Nasdaq had sought to offer direct Bitcoin index options through its securities market, but CME challenged the SEC's authority to approve them. The dispute combines a jurisdictional test with a commercial fight over institutional Bitcoin options.
The CME operates the largest US federally regulated crypto derivatives franchise under Commodity Futures Trading Commission (CFTC) oversight, while Nasdaq is seeking to offer comparable direct Bitcoin-options exposure through the securities market. Nasdaq's proposal would bring direct Bitcoin index options into the brokerage and clearing infrastructure investors already use for stocks and ETF options.
CME has argued that the SEC's interpretation of a provision in the Dodd-Frank Act stretches the law and could create uncertainty over the margin, customer-account, reporting and clearing rules governing a contract subject to both securities and commodities oversight. The group also warned that similar exemptions could raise compliance costs for CME exchanges and clearing operations.
The challenge could spread beyond Bitcoin, with CME warning that the SEC's interpretation contains no clear limit restricting it to cryptocurrency. Commodity-based ETFs already provide securities-market exposure to gold, oil, corn, wheat and other assets, and CME argues that Nasdaq or another securities exchange could use the same reasoning to seek direct options or futures on any commodity represented by an ETF.
CME has not quantified any potential loss of trading volume, fees, or market share, but its petition describes the approval as a direct competitive injury. The SEC granted CME's petition on July 29 to review the agency's May approval of QBTC, and public statements are due August 24.