WASHINGTON, D.C.—Director of Securities Policy Benjamin Schiffrin issued the following statement on the filing of Better Markets’ Comment Letter to the Securities and Exchange Commission (SEC) in response to proposed rule changes filed by national securities exchanges to list and trade options on spot bitcoin exchange-traded products (“ETPs”):
“In January 2024, the SEC approved the listing and trading of spot bitcoin ETPs. That decision was a historic mistake that allows the mass marketing of a worthless, volatile, and fraud-filled financial product to retail investors. The SEC should not compound that mistake by allowing even risker options on spot bitcoin ETPs to be marketed to retail investors too.
“Although proponents of options on spot bitcoin ETPs say that these products would allow investors to hedge their positions in spot bitcoin and better manage risk, the inevitable marketing of such options to retail investors could cause tremendous harm. Options trading is typically unsuitable for retail investors. Yet the rise of online trading platforms such as Robinhood, which use digital engagement practices to entice investors to trade as much as possible, has spurred retail investors to trade risky options. We saw the consequences with the meme stock frenzy surrounding GameStop and other stocks in 2021. If that is what transpired with options on traditional securities such as stocks, the availability of options on a volatile product like spot bitcoin ETPs could leave a trail of destruction in its wake.
“Moreover, the approval of options on spot bitcoin ETPs could pose risks to the broader financial system. The SEC’s approval of spot bitcoin ETPs already further entangled crypto with the rest of the financial world, which creates financial stability risks due to bitcoin’s extreme volatility. The approval of options on spot bitcoin ETPs would further interweave the crypto industry with traditional finance and aggravate these systemic risks.”
You can find the comment letter here.
###
Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
