WASHINGTON, D.C.— Benjamin Schiffrin, Director of Securities Policy, issued the following statement after the Securities and Exchange Commission (SEC) approved proposed rule changes filed by national securities exchanges to list and trade options on spot ether exchange-traded products (“ETPs”):

“Ether is volatile, and approving options trading on an ETP with such a volatile underlying asset is courting disaster. Retail investors already lose billions of dollars trading options. They could suffer immense harm trading options on an ETP whose underlying asset is ether.

“Recent events demonstrate the risks to investors. About six weeks ago, crypto exchange Bybit was hacked, resulting in an estimated loss of almost $1.5 billion worth of tokens. The stolen funds included about $1.12 billion worth of ether, with the remainder as ether derivatives. Following the hack, ether lost more than 10% of its value in two days.

“This was not the first time ether experienced extreme price volatility recently. A few weeks before the hack, ether worth almost $1 billion left centralized exchanges in a single day. These outflows coincided with Ether’s price sinking by over 25%.

“Options trades are typically unsuitable for retail investors even in the case of traditional securities such as stocks. Indeed, options trading, at least for retail investors, is essentially gambling. For example, between November 2019 and June 2021, retail investors lost over $2 billion trading options. So options trading is risky for retail investors generally. That risk will be compounded exponentially in the case of options on spot ether ETPs, which will inevitably be marketed to retail investors. So instead of protecting retail investors the SEC’s action approving options on spot ether ETPs endangers them.”

Our comment letter is available here.

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