SEC Hits Pause on Ethereum ETF Options Following Bitcoin Nod

The U.S. Securities and Exchange Commission has postponed its decision on a proposed rule change by Nasdaq’s International Securities Exchange to allow the listing and trading of options on BlackRock’s iShares Ethereum Trust (ETHA). 

Initially expected by Sept. 26, the decision has now been delayed until Nov. 10, giving the SEC additional time to evaluate the proposal’s potential impact on market stability.

The SEC’s final decision on Ethereum options could further integrate the cryptocurrency into traditional financial markets. Some argue that options for crypto ETFs could inject another wave of liquidity and spur bullish market behavior.

If approved, the options would follow the same regulatory framework as other ETF-linked derivatives, offering investors new ways to hedge or speculate on Ethereum’s price movements.

Under Section 19(b)(2) of the Securities Exchange Act, the regulator can delay its ruling for up to 90 days, allowing a deeper evaluation of market stability and risk.

The proposal, submitted on July 22, aims to amend existing rules to enable options trading on BlackRock’s iShares Ethereum Trust, which holds Ethereum managed by Coinbase and cash reserves by The Bank of New York Mellon. 

The trust is structured as a passive investment vehicle, focusing solely on providing exposure to Ethereum without engaging in staking or proof-of-stake validation activities.

This decision comes on the heels of a similar approval on Monday when the SEC greenlit options trading on BlackRock’s iShares Bitcoin Trust (IBIT). The approval followed several amendments to address concerns over market manipulation and excessive risk-taking.

In a related development, the SEC has also postponed its ruling on a separate proposal by NYSE American LLC to list and trade options on the Bitwise Ethereum ETF, the Grayscale Ethereum Trust, and the Grayscale Ethereum Mini Trust. 

While the SEC ponders its decision on Ethereum options, the Ethereum ETF market has wobbled. Ethereum ETFs saw their largest net outflows since July, with over $79 million on Monday. 

The exodus was led by Grayscale’s spot Ether ETF (ETHE), which recorded a massive $80.6 million in single-day withdrawals—the largest since the spot Ether ETFs launched earlier this year.

Edited by Sebastian Sinclair