CME Says Bitcoin Index Options Fall Under CFTC, Challenges SEC Approval

CME Group has challenged the U.S. Securities and Exchange Commission's approval of Nasdaq's cash-settled Bitcoin index options product.

The Block reported on Aug. 2 that CME had asked the SEC to review its decision to conditionally approve the listing of Nasdaq PHLX's cash-settled Bitcoin index options. CME argues the product falls under the exclusive jurisdiction of the Commodity Futures Trading Commission because it is based on Bitcoin, which it says is a commodity rather than a security.

The SEC accepted CME's petition for review on July 29 and temporarily stayed the approval until the commission reaches a final decision. The agency is accepting public comment through Aug. 24.

The disputed product is a Bitcoin index option that Nasdaq began pursuing with CF Benchmarks in 2024. Unlike options on spot-Bitcoin exchange-traded funds, which are based on securities, the product tracks a Bitcoin price index directly, fueling a jurisdictional dispute.

The SEC's Division of Trading and Markets approved Nasdaq's listing proposal in May. Nasdaq still needs separate exemptive relief from the CFTC before trading can begin.

CME says options based on Bitcoin should be overseen exclusively by the CFTC because Bitcoin is a commodity, not a security. It also argues the CFTC cannot use exemptive authority to transfer supervisory power to the SEC and that the SEC lacks authority over products that are not securities.

CME further contends that the SEC's Division of Trading and Markets applied a new legal interpretation beyond its delegated authority and should vacate the approval. It says keeping the decision in place could set a precedent for options or futures tied to other non-security commodities to be listed under SEC rules. CME also argues the product would compete directly with its own Bitcoin derivatives and could impose additional regulatory costs on exchange and clearing operations.

Nasdaq plans to list the product under the ticker QBTC, using an underlying index equal to the CME CF Bitcoin Real Time Index divided by 100. The option is structured in European style, meaning it can be exercised only at expiration, and it will be cash-settled in U.S. dollars rather than Bitcoin. Nasdaq expects the product to provide spot-Bitcoin ETF investors with a hedging tool within the same securities market.