Coinbase, Uniswap, Robinhood, Kraken, and Consensys are the names the digital asset industry has grown used to watching receive the dreaded Wells Notices from the United States Securities and Exchange Commission. These companies are exchanges offering a wide range of tokens on their platforms, many of which are clearly investment vehicles with the promise of future profits thanks to the work of centralized teams. It would make sense for some of the offerings on these platforms to fall under the category of security.
But, last week, a new and unexpected name joined the list: OpenSea, the largest online NFT marketplace. And now hundreds of thousands of online artists feel as if they are under attack. But it is likely the true artists don’t need to worry. An NFT project for the sake of art is likely not the type of project the SEC has on its radar.
Most NFTs are not securities
The move by the SEC came as a major surprise, as most NFTs are clearly not securities—they’re just art people buy and sell. And there is a long history of people—indeed, investors—buying art that the SEC does not regulate as a security. And so, the precedent for going after OpenSea is thin.
Heretofore, NFTs have generally been viewed as a consumer product, not a financial product, stripping the SEC of any regulatory authority. Sure, there are some exceptions—such as fractionalized ownership in ventures—though OpenSea did try and keep projects promising returns off the platform.
Despite the facts, the SEC is considering a case against the NFT marketplace.
The facts are on the side of OpenSea and NFT artists
The facts of any case against OpenSea are that the platform generally allows users to buy and sell art, not securities.
There would be no precedent for the SEC to go after NFT artists. In fact, any and all of the facts speak against categorizing art in any shape or form as a security. It doesn’t make sense. Everyone knows individuals and entities buy and sell art that is not regulated as a security. Online NFTs, in most cases, follow this model.
Therefore, as far as most of the projects on OpenSea go, the SEC won’t have a leg upon which to stand when it comes to any potential legislation.
Instead, the SEC’s focus will be on NFTs promoted as investments and also offer some future profits due to the efforts of an NFT collection’s founders rather than pure artists just trying to sell their art online in a new and exciting way.
SEC precedent vs. NFTs similar to token precedents
In past SEC cases against the NFT industry, the SEC has established a clear pattern. How the NFTs had been promoted was at the heart of the case, as well as the promise of future profits thanks to the work of the NFT collection’s team.
Just like during the ICO days, when many projects made bold promises without working on tech, many non-NFT projects functioned as vaporware or vehicles by which founders attempted to raise investments. Instead of innovation, many projects were based on hype and hype alone, especially around the potential resale value of the project, which the SEC sees as a red flag.
NFT projects with royalty schemes, revenue distribution, and similar are the ones the SEC is likely after. For that reason, most NFT artists can breathe a sigh of relief, leave the fight to OpenSea lawyers, and get back to creating.
Those who are attempting more complicated NFT structures must now play a waiting game. Indeed, if there is to be a benefit of the SEC’s Wells Notice to OpenSea, it will long at least be for the possibility of regulatory clarity in the realm of NFTs.
Could Operation Choke Point 2.0 and the SEC’s focus on OpenSea and Custodia push the crypto industry into a corner?
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SEC strikes the crypto industry again…
As the U.S. approaches the upcoming presidential elections, the crypto industry once again finds itself at a crossroads.
With Democratic candidate Kamala Harris viewed by many as a potential ally, the current administration, led by SEC Chair Gary Gensler—appointed by President Joe Biden—has ramped up its regulatory actions, now setting its sights on the non-fungible token market.
On Aug. 28, the SEC issued a Wells notice to OpenSea, the largest NFT marketplace, signaling its intent to take enforcement action against the platform.
A Wells notice is a formal communication from the SEC indicating that the agency is considering enforcement action against a company or individual, and it provides them an opportunity to respond before a final decision is made.
According to OpenSea’s CEO, Devin Finzer, the SEC contends that certain NFTs on the platform may be classified as securities—a claim that could have stark repercussions for the entire NFT space.
OpenSea has received a Wells notice from the SEC threatening to sue us because they believe NFTs on our platform are securities.
We’re shocked the SEC would make such a sweeping move against creators and artists. But we’re ready to stand up and fight.
This notice arrived just a day after former President Donald Trump, who has positioned himself to be pro-crypto, launched his fourth collection of digital trading card NFTs, which included unique perks like pieces of his debate suit and exclusive experiences at Trump National Golf Club.
OpenSea isn’t alone in facing the SEC’s scrutiny. In April, decentralized exchange Uniswap (UNI) also received a Wells notice, with the SEC alleging that it was operating as an unregistered securities broker.
Other major players like Coinbase, Kraken, and Robinhood have faced similar actions in the past.
These moves indicate that Operation Choke Point 2.0—believed to be a Biden administration strategy to sever the crypto industry’s ties with traditional banking services—is still in full force. What’s really happening?
Dissecting the OpenSea saga
In his tweet, Finzer expressed deep concern over the SEC’s approach, describing it as a “sweeping move against creators and artists.”
According to Finzer, the SEC alleges that the sale of NFTs on OpenSea broke securities laws because NFTs are considered securities, and those transactions constituted sales of unregistered securities.
The CEO pointed out that this action could stifle innovation across the NFT space, potentially affecting hundreds of thousands of online artists and creatives. The crux of Finzer’s argument is that NFTs are fundamentally different from financial securities.
Finzer mentioned, “NFTs are fundamentally creative goods: art, collectibles, video game items, domain names, event tickets, and more,” arguing that they should not be regulated in the same way as traditional financial instruments.
OpenSea contests the regulator’s allegations, asserting that they do not apply and that the platform is “ready to stand up and fight.”
From student artists finding full-time careers selling their digital art to indie game developers creating open markets for their in-game items, NFTs have enabled new opportunities that would be at risk if the SEC’s actions continue unchecked.
As Finzer mentioned, “it would be a terrible outcome if creators stopped making digital art because of regulatory saber-rattling.”
Finzer also drew attention to ongoing legal battles that echo OpenSea’s plight. He referenced the lawsuit filed against the SEC by musician Jonathan Mann and conceptual artist Brian Frye, who feared that the sale of their art and music could be classified as unregistered securities offerings.
To combat the SEC’s latest move, OpenSea has pledged $5 million to support NFT creators and developers who might find themselves in similar legal battles.
Regulatory ambiguity surrounding NFTs
When it comes to NFTs in the U.S., the regulatory environment is still murky. This lack of clear rules has created confusion and uncertainty, not just for creators and buyers, but also for platforms facilitating NFT transactions.
Currently, there isn’t a specific law in the U.S. that governs NFTs. Instead, regulators like the SEC attempt to fit NFTs under existing laws, which were primarily designed for traditional financial products.
The big question regulators are asking is: are NFTs securities? If they are, they would fall under strict SEC regulations, similar to stocks or bonds. But this is where things get tricky.
According to the Howey Test, a legal standard used by the SEC to determine whether something is a security, an asset is considered a security if it involves an investment of money in a common enterprise with an expectation of profit derived from the efforts of others.
This test was originally designed for traditional investments, but now the SEC is applying it to NFTs, which are often bought for reasons other than profit, such as collecting or supporting an artist.
The main problem with applying existing regulations to NFTs is that they don’t account for the market’s diversity and complexity.
NFTs can represent anything from digital art to in-game items, each with its own unique characteristics and value proposition. Applying a one-size-fits-all regulatory approach could stifle innovation and limit the potential of NFTs.
For example, if all NFTs are classified as securities, platforms would need to comply with the same regulations as stock exchanges, which could be incredibly costly and complicated.
Smaller creators and developers might find it impossible to meet these requirements, potentially pushing them out of the market entirely. This could limit the diversity and creativity that have made NFTs so popular.
Moreover, there’s a global aspect to consider. The U.S. is just one part of the global NFT market, and over-regulation in the U.S. could push NFT activities to other countries with more favorable regulations.
The SEC’s recent actions, including the Wells notice sent to OpenSea, signal a more aggressive approach to regulating the NFT space. By potentially classifying certain NFTs as securities, the SEC is attempting to extend its regulatory reach, which could increase costs for users and reduce the number of new NFTs entering the market.
Ripple effects across the industry
The ongoing crackdown under Operation Choke Point 2.0 is sending shockwaves not only through the NFT market but across the entire crypto industry.
A clear example of this is the recent restructuring at Custodia Bank, a small yet influential financial institution based in Wyoming that serves crypto companies.
Custodia Bank, once a key provider of banking services to crypto businesses, recently announced the layoff of nine out of its 36 employees, as reported by Fox Business. This difficult decision was made to preserve capital as the bank battles the Federal Reserve in court.
At the core of this legal battle is Custodia’s pursuit of a master account with the Fed—a crucial asset that would grant the bank access to the central bank’s liquidity facilities and payment services.
Without this account, Custodia is forced to operate through other institutions that do have master accounts, leading to much higher operational costs.
Banking regulators have become increasingly cautious about allowing traditional banks to engage with crypto firms. This heightened scrutiny has made many traditional banks hesitant to maintain relationships with crypto companies, contributing to a growing sense of isolation within the industry.
Despite assurances from government officials, including Deputy Treasury Secretary Wally Adeyemo, that there is no coordinated effort to exclude the crypto industry from the broader financial system, the experiences of industry participants suggest otherwise.
Custodia Bank itself has faced this harsh reality, with two of its partner institutions terminating their relationships, leaving it even more vulnerable as it fights for survival.
The crackdown under Operation Choke Point 2.0 reflects the real-world impact of regulatory pressure on the crypto industry. Even a small, state-chartered bank like Custodia, which plays a critical role for businesses lacking other banking options, is struggling to stay afloat.
Social media backlash
The SEC’s recent move against OpenSea has sparked a wave of frustration and anger across social media, with many users expressing disbelief and concern over what they perceive as a heavy-handed approach to regulating the NFT market.
One of the most angered critics highlighted the absurdity of labeling NFTs as securities. The user questioned whether the SEC would also start classifying “paintings” or “Beanie Babies” as securities, sarcastically asking if “eBay” might be next on the SEC’s list.
Ridiculous to claim NFTs in general are securities. Are paintings securities now? Beanie Babies? Is the SEC coming after eBay next? Seriously silly. You could surely make an NFT that was a security, but you can make slips of paper into securities too (“stock certificates”).
Another user expressed disbelief at the SEC’s continued actions against the crypto industry, lamenting the agency’s measures as a direct assault on innovation.
Wow. The SEC continues to take measures against innovation.
The frustration isn’t limited to the SEC’s actions alone; it extends to the political sphere as well. One user even voiced their disillusionment with the Democratic Party.
Crypto for Harris my ass. Don’t vote Dems if you want crypto and american innovation.
Drawing a historical parallel, another user pointed out that in 1976, the SEC ruled that art galleries did not need to register as securities dealers, even when promoting and selling art as investments.
In 1976, the SEC ruled that art galleries, even when promoting and selling to buyers that had investment motives, didn’t need to register with the SEC.
The tweet wryly notes the inconsistency in the SEC’s stance, suggesting that while “galleries” were deemed acceptable, “NFT marketplaces” are not.
The growing chorus of voices on social media reflects a deepening divide between the crypto community and regulatory bodies like the SEC.
As these discussions continue, the debate over how to regulate digital assets is far from over, with many in the industry calling for more clarity and fairness.
Multiple pro-crypto voices weighed in against the Wells Notice issued to NFT Market OpenSea on Aug. 28, as the SEC’s sweeping crackdown advanced unchecked.
OpenSea was named next on the Securities and Exchange Commission’s chopping block barely a week after Democratic candidate Kamala Harris was reportedly opening up to embracing friendly crypto policies.
News of @Opensea receiving a Wells Notice shows plain and simple that the current SEC’s crusade against the crypto industry continues unabated. This is in contrast to what Vice President Harris said two weeks ago announcing her economic agenda: pic.twitter.com/cafsHJ6DhU
The SEC’s Wells Notice suggests OpenSea might be sued for breaking federal securities laws by facilitating non-fungible token or digital collectible sales via its on-chain trading shop.
OpenSea launched in 2017 and gained traction in 2020/2021 during the NFT boom. Many likened the digital art collections on the NFT marketplace to Baseball and Pokemon trading cards but with web3-inspired art issued on decentralized networks like Ethereum (ETH).
SEC are clowns taking the idiotic stance that digital art magically transforms into a security when it’s put on a blockchain.
Hayden Adams, Uniswap CEO
While OpenSea committed to a $5 million legal relief package for creators, MonkeDAO lawyer Ariel Givner pacified fears of direct litigation against individual artists. Coinbase CEO Brian Armstrong expressed a bullish outlook on crypto operators scrutinized by the SEC.
The industry’s chorus condemned the move as another “regulation by enforcement” play from the SEC, under chair Gary Gensler, who, according to multiple pro-crypto figures, should be sacked. Speculators also emphasized that OpenSea’s Wells Notice was published less than a day after former President Donald Trump released his fourth NFT collection.
Just one day after Trump launched another NFT collection, just a coincidence for sure…
The news did little to benefit Harris’ odds on Polymarket, as Trump took the lead by 1%. Wagers on who wins the 2024 Presidential Election remain a coin toss on the Polygon-based predictions market. News of yet another SEC crackdown on crypto may strain the already tense relations between a possible Harris presidency and an industry that has spent $119 million on lobbying in 2024.
Ok so if OpenSea received a Wells notice why has Sotheby’s not received one for selling art?
Or Nintendo for selling Pokemon
Or Rolex for selling watches
Or Valve for selling CS skins
So just NFTs are bad because they are on-chain or where do you draw the line? https://t.co/VUqy7Au6ZC
NFT marketplace OpenSea received a Wells Notice from the U.S. SEC, indicating intent to sue the web3 startup.
The Securities and Exchange Commission’s crackdown on allegedly non-compliant crypto service providers has now targeted OpenSea, one of Ethereum’s (ETH) first and largest digital collectible trading platforms.
SEC investigators issue Wells Notices as a precursor to potential lawsuits, although this step doesn’t always result in legal action.
Reacting to the news on Aug. 28 and alerting the community, OpenSea CEO Devin Finzer said the firm is “ready to stand up and fight” the SEC’s move to stifle innovation and unfairly scrutinize thousands of creators.
We should not regulate digital art in the same way we regulate collateralized debt obligations.
Devin Finzer, OpenSea CEO
Finzer echoed concerns within the crypto community regarding the SEC’s rigid approach to cryptocurrencies and now non-fungible tokens (NFTs), emphasizing that NFTs are fundamentally different from the investment contracts typically regulated by the Wall Street watchdog.
In an X post, Finzer indicated that OpenSea plans to join contemporaries like Coinbase, Consensys, Kraken, Robinhood, and Uniswap in defending against the SEC’s probes and securities allegations.
Finzer and OpenSea also committed $5 million to a legal fund to support creators and developers affected by the SEC’s Wells Notice.
It would be a terrible outcome if creators stopped making digital art because of regulatory saber-rattling.
The SEC has unleashed litigations against a swathe of crypto-related entities in the last two years, including NFT projects such as Ashton Kutcher and Mila Kunis’ owned Stoner Cats, but this was the first time federal prosecutors scrutinized a digital collectibles trading venue.
OpenSea has received a Wells notice from the SEC threatening to sue us because they believe NFTs on our platform are securities.
We’re shocked the SEC would make such a sweeping move against creators and artists. But we’re ready to stand up and fight.
Crypto index fund manager Bitwise is set to acquire the assets of its rival, Osprey Bitcoin Trust.
Bitwise, the largest crypto index fund manager in the U.S., announced in a press release on Aug. 27 that it has entered into an asset purchase agreement with Osprey Funds to acquire the assets of the Osprey Bitcoin Trust.
While the financial details of the transaction were not disclosed, OBTC unitholders under the terms of the deal will receive BITB shares in a liquidating distribution, with no changes expected for existing BITB holders. According to data from Osprey Funds’ official website, the trust had over $123 million in assets under management as of Aug. 26.
The deal is structured to be tax-free for OBTC unitholders under U.S. federal income tax laws, per the press release. Osprey Funds says further details will be outlined in a registration statement to be filed with the Securities and Exchange Commission. The transaction, which aims to provide OBTC unitholders with equivalent exposure to bitcoin via BITB, is expected to close later this year, pending customary closing conditions.
This acquisition follows Osprey’s earlier announcement regarding its exploration of strategic alternatives to enhance unitholder value, including the possibility of a sale or merger of the Trust.
Bitwise expands with Osprey Bitcoin Trust acquisition
The move to join forces with Bitwise represents a “significant step” forward, Osprey says, adding that the acquisition offers OBTC unitholders the opportunity to “benefit from the scale and expertise of Bitwise.”
The acquisition follows Bitwise’s recent expansion into the European market with the acquisition of ETC Group, a London-based crypto exchange-traded product issuer managing over $1 billion in assets. The deal added nine European-listed crypto ETPs to Bitwise’s portfolio, marking a significant step in its international growth.
Founded in 2019, ETC Group is known for its physical Bitcoin ETP, among other products. Bitwise plans to rebrand all of ETC Group’s offerings under its own name, though no material changes to the existing investment strategies are anticipated.
XRP has seen a solid performance this week, rising for two consecutive days and reaching its highest level since Aug. 9.
Ripple (XRP) climbed to $0.60, marking an almost 60% recovery from its crypto Black Mondaylow of $0.3817. This rebound makes XRP the best-performing top ten cryptocurrency since the market crash in early August.
Some analysts are optimistic about XRP’s future prospects. In a post on X, JackTheRippler highlighted a technical chart showing Ripple’s historical price action and suggested that the token could “explode like a volcano” if history repeats itself.
#XRP will explode like a volcano. If history repeats itself, which has always happened in the crypto space, we could see a 60,000% pump!
Another technical analyst, JD, pointed out that XRP had formed a golden cross, a technical pattern often associated with large gains. This cross, which occurs when an asset’s 50-day and 200-day moving averages intersect, appeared on Ripple’s chart on Aug. 6.
Ripple’s SEC ruling and RLUSD stablecoin launch
Ripple Labs recently secured a favorable outcome in its long-running legal battle with the Securities and Exchange Commission. Judge Analisa Torres ordered the company to pay a $125 million fine, significantly less than the $2 billion the SEC had sought.
This ruling could pave the way for companies like BlackRock, Franklin Templeton, and Fidelity to file for a spot Ripple ETF. Such an ETF would be notable, given that the SEC recently rejected applications for Solana (SOL) ETFs, citing security concerns.
A Ripple ETF could make sense, as XRP is the seventh-largest cryptocurrency with a market cap of over $33 billion and trading volumes exceeding $1.4 billion. Unlike Ethereum (ETH), Ripple does not offer staking, meaning that investors would only lose the expense ratio.
However, Ripple’s long-term performance has been lackluster, with the coin still 70% below its all-time high of $1.96, potentially making it less attractive to ETF issuers. Additionally, the XRP Ledger has shown limited traction among developers, with only $275,000 in assets.
XRP bulls are also looking forward to the upcoming RLUSD stablecoin, which is currently in beta testing. RLUSD will be a regulated stablecoin pegged to the US dollar on a 1:1 basis.
The risk here is that the stablecoin may not gain traction because of Tether’s (USDT) dominance. For example, PayPal’s PYUSD and Tron’s USDD have only $746 million and $871 million in market cap, showing how difficult it is to gain market share.
XRP could further benefit from macroeconomic factors, such as the anticipated Federal Reserve rate cut and the ongoing decline of the US dollar. The US dollar index has fallen to 101.7 from its year-to-date high of 106, a trend that typically bodes well for risky assets like cryptocurrencies.
Stablecoins have grown to become an over $160 billion market. Yet, regulatory uncertainty across the globe threatens their future. We have seen the digital asset industry invest in effective lobbying campaigns. More of that is needed.
Numerous threats remain to the stablecoin market. For instance, regulators could reel in the market by mandating changes to issuer business models. As Tether (USDT) makes clear on its transparency page, stablecoins are not precisely backed by dollars. Instead, a pool of assets earning a little more than 5% for stablecoin issuers back the world’s first popular real-world asset. Issuers generally do not pass any of the yields they earn to holders.
Tightening the regulatory belts
Stablecoin sponsors argue this is why stablecoins are not securities and face a comparatively light regulatory regime compared to most tokens with centralized teams. However, stablecoins’ existence as a currency and a lightly regulated financial instrument could be coming to an end. While Donald J. Trump promises to allow the expansion of stablecoins in the United States, the European Union and Switzerland are exploring legislation that could undermine stablecoins.
Questions remain over the future of stablecoins, which differ from many digital assets due to major stablecoins’ dependence upon central issuers.
Even though stablecoins don’t produce profit for holders, they could still be considered a security. In fact, a February 2024 New York federal court ruling determined a stablecoin may become a security when combined with a yield.
Stablecoins have an issuer who profits off the stablecoin: companies like Tether, Circle, Coinbase, etc. In addition, Circle uses BlackRock as a “primary asset manager of USDC cash reserves.” Moreover, securitized bonds exist today with negative nominal coupons despite investors having no reasonable expectation of profit.
Circle argued in a September 2023 amicus curiae brief in a legal battle between Binance and the SEC that stablecoins are not securities simply because users don’t expect to profit. The SEC, however, argued in a case against Binance that BUSD, Binance’s stablecoin, has represented security “since its inception,” mostly leaning on the fact that it offers yield.
Indeed, Binance’s stablecoin places money into “profit-generating” opportunities. In addition, Binance promised “interest-like” payments to people in the US for “simply buying BUSD and deploying BUSD into yield programs.
The SEC approach
The SEC does not only rely on the Howey analysis. It could be argued, for instance, that stablecoins represent a share in an open-end company under the Investment Company Act of 1940, especially if the stablecoin looks like a money market fund, which have Net Asset Value of shares pegged 1:1 to the US dollar.
It is therefore not unreasonable to think the SEC might view a stablecoin backed by a bundle of assets as an asset backed security.
In the Binance case, the New York Department of Financial Services ordered Paxos to stop administering BUSD. A Paxos spokeswoman in 2023 said the company does not view their stablecoins as securities under Howey or Reves. Stablecoin sponsors argue that stablecoins do not meet the three-part Howey test of an investment contract and sponsors keep profits to themselves. They argue stablecoins preserve value and prevent losses, but do not create profit.
In a court of law, an SEC lawyer might argue that just because issuers keep all of the profit for themselves doesn’t mean stablecoins are non-securities. All it takes is for a judge to agree and make a ruling based on this argument. A stablecoin is, after all, a receipt for an off-chain asset. There are also secondary markets for stablecoins, as well as an issuer-investor relationship. Financial instruments representing underlying digital assets—such as the Bitcoin (BTC) ETF—are considered securities. So, why not stablecoins, as well?
Stablecoin proponents will have been wrong. For a stablecoin to constitute a security, the buyer of a security doesn’t necessarily need to expect to make or lose money by buying and selling a security. The crypto market would be upended since it operates based on the assumption that stablecoins are currencies and not securities.
Centralization, one more time
What’s more, the dominant stablecoin model is highly centralized, both adding to concerns these might be securities and putting the stablecoin and broader crypto market at risk for government interference.
US authorities—or any country authorities—could revoke stablecoin issuers’ access to the banking and financial system. If a USD stablecoins issuer is overseas, the US government could request foreign governments to disinclude such entities from their respective banking systems. Furthermore, US authorities could require stablecoin issuers to comply with anti-money laundering and know your customer procedures, as Swiss authorities have done with a recent guidance document.
If the digital asset industry exerts the influence it so clearly now has, then stablecoins can continue to proliferate and millions can reap the benefits of financial inclusion.
Why is the SEC’s decision on Bitcoin ETF options so crucial? Could this be the move that finally legitimizes Bitcoin in the eyes of traditional finance?
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After months of anticipation, the momentum behind options on spot Bitcoin (BTC) exchange-traded funds is finally building up. What once seemed like a distant possibility is now gaining traction with regulators, thanks to the growing interest in spot Bitcoin ETFs.
According to Bloomberg analyst James Seyffart, options could debut as early as Q4 2024, with the U.S. Securities and Exchange Commission expected to make a crucial decision by September 21.
We think the #Bitcoin ETF options happen in 4th quarter this year. Final deadline for SEC decision is ~Sept. 21 but there’s more steps needed after that from OCC & CFTC.
Seyffart isn’t the only one with high hopes. Another analyst, Eric Balchunas, shares the optimism, seeing the SEC’s engagement as a positive indicator for the market.
Just as “comments from the SEC” was a good sign in our ETF approval odds we think this is good sign here too. Bc if they were just gonna deny outright why bother engaging at all? https://t.co/CPAOl5eU3f
Nate Geraci, President of the ETF Store, also points out that options trading already exists for some crypto derivatives exchange-traded products (ETPs), which could pave the way for these new Bitcoin ETF options.
So, what does all this mean for the market? Let’s explore this deeper and understand the potential implications of Bitcoin ETF options coming to life.
Ongoing efforts to introduce options on Bitcoin ETFs
The story of Bitcoin in 2024 has been nothing short of exhilarating, not just in terms of its market presence but also as a key political topic leading up to the U.S. presidential election in November.
Amid this, spot BTC ETFs, which went live in January 2024, have seen explosive growth, amassing over $58 billion in assets under management (AUM) as of August 12, setting the stage for something even more ambitious: the introduction of options on these ETFs.
Back in January 2024, three major U.S. equities exchanges—New York Stock Exchange (NYSE), Chicago Board Options Exchange (CBOE), and Nasdaq—submitted requests to the SEC to list options on these spot BTC ETFs.
These requests were met with a resounding silence from the SEC. Months passed with little to no feedback, leaving the exchanges and the market in a state of uncertainty.
The SEC’s initial response came in March when it asked for more time to make a decision, followed by similar delays in April and July.
Things took a surprising turn on August 8, when all three exchanges — CBOE, Nasdaq, and NYSE — suddenly withdrew their initial applications. The reason behind this coordinated move remains unclear, but it’s speculated that they may have received some feedback from the SEC that led to this decision.
Idk if i jinxed it or what. But three exchanges have withdrawn their applications to list the spot #Bitcoin ETF options since i tweeted this.
Notably, on the same day, CBOE submitted an amended application to the SEC. This new 44-page filing was much more detailed than the original 15-page submission, addressing issues like position limits and concerns about market manipulation, which suggests that these exchanges may have received some feedback from the SEC.
Despite this progress, there’s no guarantee that the SEC is fully engaging with the exchanges on these matters. Analyst Seyffart even hinted that this could be another delaying tactic, potentially pushing the decision deadline back to late April 2025.
Adding to the mix, there’s another development on the horizon. Representatives from Nasdaq and BlackRock have requested the SEC to allow trading options on the iShares Ethereum Trust ETF, which is the only Ethereum-based ETF listed on the Nasdaq exchange.
This proposal, if approved could expand the list of ETFs eligible for options trading, further broadening the scope of crypto-related financial instruments available in the market.
However, similar to the Bitcoin ETF options, the final decision on this application isn’t expected until April 2025.
The growing demand for options on Bitcoin ETFs
As Bitcoin continues to mature as an asset class, there’s a growing demand to add options to spot BTC ETFs. But why?
At their core, options are contracts that give investors the right — but not the obligation — to buy (call option) or sell (put option) an asset at a predetermined price before a specific date.
In traditional finance, options are widely used for hedging risks, speculating on future price movements, and generating income through various strategies.
Let’s explore a few advantages:
Risk management
One of the primary reasons institutions are keen on seeing options linked to Bitcoin ETFs is the ability to manage risk more effectively.
For instance, during Bitcoin’s severe price drops—such as the dramatic 50% plunge in May 2021 or the recent ‘Crypto Black Monday’ crash—investors could have used put options to protect their positions from heavy losses.
The ability to hedge against volatility is essential for institutional investors who manage billions of dollars and need to safeguard their portfolios against sudden market shifts.
Enhanced liquidity
Another critical advantage of introducing options to BTC ETFs is the potential boost in market liquidity. Historically, the launch of options trading on major assets has led to increased liquidity and trading volumes.
For example, the Chicago Mercantile Exchange (CME) observed this trend when it introduced Bitcoin options in January 2020.
If the same happens with BTC ETFs, it could make it easier for large investors to enter and exit positions, reducing the risk of sharp price movements. More liquidity often attracts more participants, creating a more stable and balanced market.
Price discovery
Options markets are often seen as a more efficient mechanism for price discovery, providing valuable insights into investor sentiment and expectations about future price movements.
For instance, the surge in Bitcoin options trading on platforms like Deribit or Delta offers the market a clearer picture of where investors believe Bitcoin is headed.
If similar options become available for BTC ETFs, they could play a crucial role in helping investors understand and anticipate market trends.
The road ahead
If approved, these options could attract a wave of institutional investment, offering new tools for managing risk and profiting from market fluctuations, potentially leading to increased demand for Bitcoin, driving up prices, and encouraging the creation of new financial products.
However, the SEC has been notoriously slow in approving crypto-related innovations. Its repeated delays and requests for more information have left the timeline uncertain. Whether these options will finally get the green light remains to be seen.
Ripple price staged a strong comeback this week after the developers won an important case in the United States.
Ripple’s big win vs SEC
Ripple (XRP) token rose for the third consecutive day and reached a high of $0.6430, 48% above its lowest point this month and 70% higher than its July low.
In a US court ruling, the judge overseeing the well-followed case ordered the company to pay a $125 million fine, much lower than the $2 billion that the SEC was seeking.
The court also placed an injuction on Ripple against doing some activities. In a statement, Attorney Jeremy Hogan, who has followed the case well, noted that it was a ‘big win’ for Ripple.
He also clarified other parts of the ruling, noting that Ripple can still sell most of its XRP and ODL tokens since they are not under the jurisdiction of the US. It can also sell XRP to institutions as long as it does so under an exemption to the registration.
I see lots of questions re what the injunction means for ODL sales. I don’t see it changing the status quo AT ALL, for the following reasons:
1. As Ripple has stated, the majority of its XRP and ODL sales are outside the U.S. jurisdiction and not subject to the ruling. Those… pic.twitter.com/3GimWEcp0c
Ripple’s big win triggered upside among other altcoins since it signals that they have a winning chance if the SEC sues. Just recently, the SEC backed down on claiming that cryptocurrencies like Solana (SOL), Cardano (ADA), and Polygon (MATIC) were securities in an ongoing case against Binance.
The most directly affected token in Ripple’s ruling was Stellar Lumens (XLM), a popular cryptocurrency with a market cap of almost $2 billion. Ripple and Stellar have a similar goal of solving the cash remittance issue by partnering with major institutions. Stellar’s founder, Jed McCaleb, was a Ripple co-founder.
XRP price could suffer a harsh reversal
I see lots of questions re what the injunction means for ODL sales. I don’t see it changing the status quo AT ALL, for the following reasons:
1. As Ripple has stated, the majority of its XRP and ODL sales are outside the U.S. jurisdiction and not subject to the ruling. Those… pic.twitter.com/3GimWEcp0c
Despite the ongoing excitement about the Ripple vs SEC ruling, there is a risk that XRP could suffer a reversal in the coming days.
Since a potential settlement between Ripple and SEC was expected, there is a chance that traders will start selling the news.
A good example of this is what happened when the initial ruling came out in June last year. At the time, the XRP price rose from $0.47 to a high of $0.9322. This rebound turned into a bull trap as the token resumed its downward trend and reached a low of $0.382 in July.
XRP price will need to rise above the key resistance point at $0.6586 (July 31 high) to continue its uptrend. Moving above that level will invalidate a double-top pattern whose neckline is at $0.3812. It will also raise the possibility of the token rising by 23% to $0.7490.
