The U.S. Securities and Exchange Commission (SEC) has paused Nasdaq's approval of cash-settled bitcoin index options and will reconsider the decision following a legal challenge from CME Group, the agency said in an order released for public inspection on July 31.
Back in May, the SEC granted Nasdaq PHLX conditional approval to list cash-settled bitcoin index options under the ticker QBTC. The product still required exemptions from the Commodity Futures Trading Commission (CFTC) before it could launch.
CME Group challenged the approval in June, arguing that bitcoin is a commodity and, as such, options tied directly to its value fall under the CFTC’s exclusive jurisdiction rather than the SEC’s.
If the CME is right, the SEC would have no authority to approve QBTC, and Nasdaq would need to register as a CFTC-regulated futures or swaps venue, or redesign the contracts to track a security such as a spot bitcoin exchange-traded fund.
The CME already operates regulated bitcoin futures and options markets, while Nasdaq’s QBTC would compete for the same trading activity without Nasdaq registering under the CFTC framework that governs the CME.
The petition also warned that the approval could set a precedent allowing securities exchanges to list derivatives on other commodities. Nasdaq’s proposed contracts would use CME CF benchmarks for both their underlying index and final settlement price.
The order keeps the approval frozen and gives interested parties until Aug. 24 to submit statements supporting or opposing it. The stay has been in place since CME filed notice of its challenge on June 11.
The SEC’s May approval envisioned the CFTC granting exemptions, which would allow Nasdaq and the Options Clearing Corporation to offer the product through the securities market. The CME argued that the agencies cannot use exemptions to transfer a product from one regulator to another.
QBTC will remain suspended while the full commission reviews the earlier approval.