CME Group has won a temporary halt to Nasdaq PHLX’s proposed cash-settled Bitcoin index options after asking the U.S. Securities and Exchange Commission to reconsider whether the agency has authority over the product.
In a July 29 order, the SEC granted CME’s petition for review of a staff-level approval issued in May and kept that approval stayed while the full Commission considers the case. Written statements supporting or opposing the earlier decision are due by Aug. 24. Nasdaq PHLX cannot begin trading the proposed options while the review is pending.
The dispute centers on a narrow but consequential jurisdictional question: whether options linked directly to Bitcoin’s price belong under SEC oversight because they would trade on a securities exchange, or under the Commodity Futures Trading Commission because Bitcoin is generally treated as a commodity rather than a security.
CME argued that the proposed Nasdaq contracts are commodity option swaps, placing them within the CFTC’s exclusive jurisdiction. Its petition said the SEC’s Division of Trading and Markets exceeded its delegated authority when it approved Nasdaq’s proposal and adopted a new reading of Section 717 of the Dodd-Frank Act.
The SEC’s order does not indicate whether any commissioner agrees with CME’s legal arguments. It simply opens a Commission-level review and preserves the pause on the earlier approval.
A product linked to Bitcoin rather than an ETF
Nasdaq first outlined the planned product in 2024 with CF Benchmarks. The contracts would trade under the ticker QBTC and would track the CME CF Bitcoin Real Time Index, divided by 100.
That distinction drives the regulatory conflict. QBTC would reference a benchmark designed to measure Bitcoin’s market value, rather than shares in a spot Bitcoin exchange-traded fund. Options on a spot Bitcoin ETF have a securities-based underlying asset, since the ETF itself is a registered security. Nasdaq’s proposed options would instead derive their value from an index representing Bitcoin trading activity.
CF Benchmarks calculates the real-time index every 200 milliseconds using order-book data from qualifying Bitcoin-U.S. dollar markets. The index would provide the intraday reference level for the options, while final settlement would use the CME CF Bitcoin Reference Rate New York Variant, also divided by 100.
The proposed contracts would be European-style, meaning holders could exercise them only at expiration rather than before it. They would settle entirely in U.S. dollars, with no Bitcoin delivered to either side of the trade. The final settlement rate would be based on Bitcoin-dollar transactions during the one-hour period ending at 4 p.m. New York time.
Cash settlement does not resolve the classification question. CME’s position is that a contract can settle in dollars while remaining a derivative on a non-security commodity. Under that reasoning, the absence of delivered Bitcoin does not turn the contract into a securities product.
CME challenges use of CFTC exemptions
The Division of Trading and Markets approved Nasdaq PHLX’s proposal through delegated authority on May 22. Yet the SEC approval alone would not have allowed the exchange to launch the contracts.
Nasdaq PHLX would also need CFTC exemptions permitting concurrent SEC and CFTC oversight. The requested relief would allow the exchange to list the products without becoming subject to the full framework normally applied to CFTC-regulated derivatives venues. The structure would also allow the Options Clearing Corporation to clear the contracts without registering as a derivatives clearing organization with the CFTC.
CME’s petition challenges that route. The company argued that the CFTC cannot use exemptive authority to move a commodity derivatives product into SEC jurisdiction, and that the SEC cannot oversee a contract with no securities-related features.
The petition goes beyond the proposed Bitcoin options. CME warned that the SEC staff’s approach could allow securities exchanges to list options or futures tied to other non-security commodities under SEC rules. That could affect the boundary between securities exchanges and derivatives marketplaces for products connected to assets such as commodities, indexes, or digital assets that do not qualify as securities.
For CME, which operates a major U.S. derivatives marketplace and lists regulated Bitcoin futures and options products, the case also concerns the competitive framework for crypto derivatives. A Nasdaq product approved under a combined exemption structure could offer another route for bringing Bitcoin-linked options to a securities exchange rather than a conventional futures venue.
Commission review shifts the dispute beyond staff approval
The SEC’s decision to grant review does not automatically void the Division of Trading and Markets’ May approval. It means the full Commission will evaluate a decision that had initially been made through delegated authority, a common mechanism that allows agency staff to act on routine or technical matters.
CME maintains that this case was not routine because it involved a new interpretation of Dodd-Frank’s jurisdictional provisions. The company asked the Commission to vacate the approval.
Nasdaq’s proposal had attempted to use an established listed-options model: standardized contracts, trading on Nasdaq PHLX, and clearing through the Options Clearing Corporation. The Bitcoin reference index and CFTC exemption requests created the unusual element. Securities exchanges regularly list options tied to securities and securities indexes, while derivatives exchanges operate futures and options on commodities. A direct Bitcoin-price option sits near the line between those market structures.
The SEC and CFTC have long shared parts of the digital-asset regulatory landscape, though their responsibilities differ by product and legal classification. The case does not determine whether Bitcoin itself is a security; CME’s petition starts from the opposite premise, describing it as a non-security commodity. The immediate question is whether an exchange-regulated options framework can be used for a cash-settled contract that tracks that commodity.
The Aug. 24 deadline sets the next stage
Interested parties have until Aug. 24 to submit written statements on the review. The SEC has not provided a timetable for a final decision, and its July 29 order did not address whether Nasdaq could revise the product, seek a different regulatory structure, or pursue the CFTC exemptions separately.
A decision favoring CME could leave Bitcoin index options primarily within the established CFTC derivatives framework unless Congress or regulators create a different pathway. A decision upholding the staff approval would give securities exchanges a potential model for listing cash-settled products tied directly to Bitcoin benchmarks, subject to the required CFTC relief.
For now, the proposed QBTC contracts remain a regulatory test case rather than a tradable instrument. The Commission’s eventual ruling will determine whether Nasdaq PHLX can proceed with its planned Bitcoin-index options or whether the product must be treated as a commodity derivative outside the SEC’s listing regime.
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