The U.S. Securities and Exchange Commission has placed Nasdaq PHLX’s proposed Bitcoin index options under formal Commission review following a jurisdictional challenge from CME Group. An order issued on July 29 and published in the Federal Register on August 3 establishes August 24 as the deadline for written statements supporting or opposing the earlier staff approval.

The Commission’s action accepts CME’s petition without ruling on the underlying legal arguments. The May 22 staff approval, granted through delegated authority by the Division of Trading and Markets, remains stayed until the full Commission issues a subsequent order. No timetable has been set for a final decision.

Details of the Proposed Contracts

Nasdaq PHLX sought to list cash-settled, European-style options under the ticker QBTC. The contracts would track the CME CF Bitcoin Real Time Index divided by 100. Final settlement would rely on the New York variant of the CME CF Bitcoin Reference Rate, also divided by 100. Proposed rules include a 24,000-contract position and exercise limit.

These instruments differ from options already available on shares of spot Bitcoin exchange-traded funds. ETF-linked options reference securities, while QBTC would reference an index that tracks Bitcoin itself. That distinction forms the core of the regulatory dispute, as Bitcoin is treated as a commodity for purposes of federal derivatives oversight.

CME’s Jurisdictional Arguments

CME Group contends that Bitcoin is a non-security commodity and that options based directly on its value qualify as commodity option swaps. Under the Commodity Exchange Act, the Commodity Futures Trading Commission holds exclusive federal authority over such contracts, according to the exchange operator.

In its petition, CME described the SEC staff’s legal interpretation as erroneous and asserted that the Division of Trading and Markets exceeded its delegated authority. The firm warned that the approval could allow a competing product while imposing additional regulatory costs on CME’s exchanges and clearing operations. It also cautioned that the decision might open a pathway for securities exchanges to list derivatives on other non-security commodities under SEC rules.

CME asked the Commission to vacate the staff approval rather than await the outcome of any separate CFTC exemption process.

Nasdaq’s Position and Remaining Requirements

The May staff approval took a different view, reasoning that Section 717 of the Dodd-Frank Act could support concurrent SEC and CFTC jurisdiction if the CFTC grants appropriate relief. Nasdaq has indicated the product could enable holders of spot Bitcoin ETFs to hedge exposure on a national securities exchange within a consistent margin framework.

Even if the Commission ultimately restores the approval, trading cannot begin without additional steps. Nasdaq must secure necessary CFTC exemptions, including relief that would allow the Options Clearing Corporation to clear the contracts without registering as a CFTC derivatives clearing organization. The Options Clearing Corporation must also update its standardized options risk disclosure.

Next Steps in the Review Process

Interested parties may submit written statements by August 24. After considering those filings, the Commission will decide whether the staff approval should stand. The order makes no findings on the merits of CME’s challenge and does not indicate any preliminary view on the jurisdictional questions raised.

Until the Commission issues a further order, Nasdaq PHLX’s Bitcoin index options remain unable to launch. The outcome of the review will determine whether the product proceeds under the framework contemplated by the staff or requires a different regulatory path.