The Chicago Board Options Exchange (Cboe), the largest U.S. options platform, has filed applications with the Securities and Exchange Commission (SEC) to list six bitcoin-based exchange-traded funds (ETFs). The move comes just over two weeks after Cboe launched its bitcoin futures contracts, signaling the exchange's growing confidence in securing regulatory approval for crypto-linked investment vehicles.
Six ETFs Cover Long and Short Strategies
According to public filings with the SEC, the proposed ETFs will be listed on Cboe's Bats BZX exchange. They include the Rex Bitcoin Strategy Fund, Rex Short Bitcoin Strategy Fund, Graniteshares Strategy Fund, Graniteshares Short Fund, First Trust Inverse Fund, and First Trust Bitcoin Strategy Fund. Unlike the physically-backed bitcoin ETF previously proposed by the Winklevoss twins, Cboe's products will be directly correlated to the price of bitcoin futures traded on its own platform, rather than holding spot bitcoin. This design aims to leverage existing regulated futures markets for valuation and liquidity.
Liquidity Build-Up as a Prerequisite
Cboe CEO Ed Tilly had stated on December 4, before the futures launch, that the exchange would reapply for ETFs once the futures market demonstrated sufficient liquidity and oversight. “Once liquidity builds in the Cboe bitcoin futures contract and the exchanges are able to show how their oversight of the underlying market works, Cboe plans to reapply with the SEC to launch a bitcoin ETF,” Tilly told Reuters. With two weeks of trading data now available, Cboe believes it can meet those criteria. Meanwhile, competitors have also entered the crypto derivatives space: LedgerX has been processing bitcoin options for months, CME Group launched its bitcoin futures shortly after Cboe, and Nasdaq has announced plans to list bitcoin futures in 2018. This increasing variety of regulated derivative products provides the SEC with a richer dataset to evaluate market risk and price integrity.
Regulatory Outlook: A Higher Chance of Approval?
Cboe joins a growing list of firms optimistic that U.S. regulators will allow bitcoin ETFs. In addition to VanEck and Rex, the New York Stock Exchange (NYSE) has also filed to list Proshares bitcoin ETFs. Historically, the SEC has rejected multiple bitcoin ETF proposals on concerns over market manipulation, lack of surveillance, and custody issues. However, the participation of established exchanges like Cboe and CME, along with their demonstrated ability to monitor and regulate their futures markets, may tip the scales. If the SEC deems that these markets provide enough protection against fraud and manipulation, the path for spot-based ETFs may also be smoothed.
Approval of a bitcoin ETF would allow mainstream investors to gain bitcoin exposure through traditional brokerage accounts, eliminating the need to manage private keys or interact with crypto exchanges. This could unlock substantial capital from pension funds, endowments, and retail investors, potentially driving bitcoin prices higher. However, the SEC's review process is protracted, and no timeline has been set. The crypto community will be watching closely for any signals from the regulator.
Cboe's filings represent another milestone in the ongoing institutionalization of digital assets. With multiple exchanges now operating regulated futures and options, and ETF applications piling up, the market may be approaching a critical inflection point. Whether the SEC will finally approve a bitcoin ETF in 2018 or extend its cautious stance remains the biggest question for the industry.