Hassan Maishera
TL;DR
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CME Group is asking the SEC to overturn its conditional approval of Nasdaq's proposed cash-settled Bitcoin index options.
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CME argues the contracts are tied directly to Bitcoin, a commodity, and should fall exclusively under the CFTC's jurisdiction.
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The SEC has paused the approval while the full Commission reviews CME's petition, with public comments due by August 24.
CME Group has formally challenged the U.S. Securities and Exchange Commission's (SEC) conditional approval of Nasdaq PHLX's proposed cash-settled Bitcoin index options, arguing that the contracts should be regulated solely by the Commodity Futures Trading Commission (CFTC).
In an order issued on July 29, the SEC granted CME's petition for review and temporarily stayed the approval while the full Commission evaluates the challenge. Interested parties have until August 24 to submit statements supporting or opposing the proposal.
The order does not indicate whether SEC commissioners agree with CME's legal arguments.
Jurisdiction Dispute Centers on Bitcoin's Commodity Status
Nasdaq first unveiled plans in 2024 to launch Bitcoin index options in partnership with CF Benchmarks.
Unlike options linked to spot Bitcoin exchange-traded funds (ETFs), whose underlying assets are securities, Nasdaq's proposed contracts would reference an index tracking the price of Bitcoin itself.
That distinction lies at the heart of CME's challenge. According to CME, because Bitcoin is legally classified as a commodity rather than a security, options tied directly to its value qualify as commodity option swaps that fall under the CFTC's exclusive authority.
The exchange operator argues that neither the CFTC nor the SEC has the legal authority to transfer or assume jurisdiction over products that lack any securities-related characteristics.
Neither CME nor Nasdaq immediately commented on the dispute.
SEC Approval Remains on Hold
The SEC's Division of Trading and Markets initially approved Nasdaq's proposal on May 22 under delegated authority.
However, Nasdaq cannot launch the contracts unless it first secures exemptions from the CFTC.
Those exemptions would allow Nasdaq PHLX—formerly the Philadelphia Stock Exchange—to list the products under concurrent SEC and CFTC oversight. They would also permit the Options Clearing Corporation (OCC) to clear the contracts without registering as a CFTC-regulated derivatives clearing organization.
CME contends that such exemptions cannot legally shift regulatory authority from the CFTC to the SEC.
Beyond the jurisdictional dispute, CME argues that the SEC's Division of Trading and Markets exceeded its delegated authority by adopting what it described as a novel interpretation of Section 717 of the Dodd-Frank Act.
The exchange has asked the full Commission to vacate the approval, warning that allowing Nasdaq's proposal to proceed could establish a precedent enabling securities exchanges to list derivatives tied to other non-security commodities under SEC rules.
CME also acknowledged that Nasdaq's proposed product would compete directly with its own cryptocurrency derivatives business, arguing that the SEC's decision could increase regulatory costs for its exchanges and clearing operations.
How Nasdaq's Bitcoin Index Options Would Work
Nasdaq's proposed contracts would trade under the ticker QBTC and track the CME CF Bitcoin Real Time Index, with the index value divided by 100.
The benchmark is updated every 200 milliseconds using order-book data from qualifying Bitcoin-U.S. dollar trading venues.
The contracts would be European-style options, meaning they can only be exercised at expiration, and would settle entirely in U.S. dollars rather than Bitcoin.
Final settlement prices would be determined using the CME CF Bitcoin Reference Rate New York Variant, also divided by 100. The benchmark reflects Bitcoin-U.S. dollar transactions recorded during the one-hour period ending at 4:00 p.m. New York time.
Nasdaq has argued that the proposed Bitcoin index options would provide investors—particularly holders of spot Bitcoin ETFs—with a more efficient way to hedge or adjust their exposure.
Because the contracts would trade on a national securities exchange, investors could manage ETF positions within the same margin framework rather than relying on separate derivatives markets.
The SEC's final decision could have significant implications for the regulatory treatment of future crypto derivatives and the division of oversight between the SEC and the CFTC.
