The SEC has decided to pause Nasdaq’s authorization of cash-settled bitcoin index options to re-examine the matter following a legal dispute initiated by CME Group, according to an order released for public review on July 31.
In May, the SEC provided conditional approval for Nasdaq PHLX to list cash-settled bitcoin index options under the QBTC ticker. However, the product’s launch was contingent upon obtaining exemptions from the Commodity Futures Trading Commission (CFTC).
CME Group filed a challenge in June, asserting that because bitcoin is classified as a commodity, options linked to its value fall under the exclusive regulatory authority of the CFTC rather than the SEC.
Should CME’s argument prevail, the SEC would lack the jurisdiction to approve QBTC. In that scenario, Nasdaq would be required to either register as a venue for CFTC-regulated futures or swaps or restructure the contracts to track a security, such as a spot bitcoin ETF.
The CME currently manages regulated markets for bitcoin futures and options. Nasdaq’s QBTC would compete for similar trading volume without being required to operate under the same CFTC regulatory framework that governs the CME.
The petition further cautioned that this approval could establish a precedent allowing securities exchanges to list derivatives based on other commodities. Notably, Nasdaq’s proposed contracts would rely on CME CF benchmarks for both the underlying index and the final settlement price.
The current order keeps the approval in a state of suspension, allowing interested parties to submit supporting or opposing statements until Aug. 24. This stay has been active since CME officially filed its challenge on June 11.
The SEC’s initial May approval relied on the assumption that the CFTC would grant exemptions, enabling Nasdaq and the Options Clearing Corporation to offer the product via the securities market. However, CME contends that regulatory agencies cannot use such exemptions to shift a product’s oversight from one regulator to another.
QBTC’s approval will remain on hold while the full commission conducts its review of the previous decision.
