SEC Approves Options Trading for Spot Ether ETFs, Boosting Institutional Appeal

The United States Securities and Exchange Commission (SEC) has approved options trading for multiple spot Ether exchange-traded funds (ETFs), a move that may broaden the investment appeal of Ether among institutional traders. The SEC issued the approval on April 9 after reviewing a proposed rule change submitted by BlackRock for its iShares Ethereum Trust (ETHA) on July 22, 2024. Similar approvals were granted to Bitwise Ethereum ETF (ETHW), Grayscale Ethereum Trust (ETHE), and Grayscale Ethereum Mini Trust (ETH), as well as Fidelity Ethereum Fund (FETH).

The SEC’s approval of options trading on the iShares Ethereum Trust. Source: SEC

Options on ETFs are a portfolio tool that gives investors the ability to hedge against a decline in assets. The strategy’s inclusion is seen as an important step in broadening Ether’s (ETH) investment appeal after regulators approved the spot Ethereum ETFs last July. So far, net inflows into the spot Ether funds have been fairly muted, with most of the institutional interest flooding into Bitcoin (BTC) funds. BlackRock’s ETHA currently has $1.8 billion in net assets, down 56% since the start of the year.

Since the election of US President Donald Trump, the SEC has signaled its readiness to scale back its enforcement initiatives against the crypto industry. Although this was expected, legal experts with the Harvard Law School Forum on Corporate Governance were surprised by “how quickly the shifting priorities would come to fruition” since Trump took office. As Cointelegraph recently reported, the securities regulator has closed its investigations into various crypto companies, including exchanges Gemini and Coinbase, decentralized exchange developer Uniswap Labs, and NFT marketplace OpenSea. On the legislative side, regulators are moving quickly to pass pro-stablecoin legislation. The House Financial Services Committee recently advanced the STABLE Act, which is meant to enshrine the use of stablecoins in the United States, and the Senate Banking Committee pushed through the GENIUS Act, which aims to regulate stablecoin issuers. Lawmakers have also tipped plans to advance a comprehensive crypto market structure bill, which is expected to be finalized this year.

The approval of options trading on spot Ethereum ETFs provides investors with new tools to manage risk and speculate on the price movements of Ethereum. Options contracts allow investors to buy or sell Ethereum at a predetermined price within a specific time frame, offering a flexible way to hedge against market volatility or capitalize on price changes. This development is expected to attract a broader range of investors to the Ethereum market, including those who may have been hesitant to engage directly with cryptocurrencies. The introduction of options trading on spot Ethereum ETFs is a significant step forward in the mainstream adoption of cryptocurrencies, paving the way for further innovation and investment in the sector. The SEC's evolving stance on cryptocurrencies, as indicated by this decision, suggests a growing acceptance of Ethereum as a legitimate asset class. This move is likely to encourage more institutional participation in the cryptocurrency market, further integrating digital assets into traditional financial systems.