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Investors Deserve Options (On GBTC)

Last Update 03/06/2024

Grayscale Investments has filed with the U.S. Securities and Exchange Commission (SEC) a comment letter in support of NYSE American’s proposal1 to permit the listing and trading of options on commodity-based ETPs like Grayscale Bitcoin Trust ETF (GBTC) and NYSE Arca’s application to generally permit the listing and trading of options on commodity-based trust shares.

Our argument is straightforward: if investing in options for shares of products holding derivatives of an asset is acceptable for investors, investing in options for shares of products holding the asset itself should be as well.

Back in October 2021, the SEC permitted Bitcoin futures options to begin trading the day after the approval and listing of the first Bitcoin futures ETFs. This is because options for shares registered under the Securities Act of 1940 (like the initial Bitcoin Futures ETFs) are broadly permitted under existing listing rules.2 Meanwhile, spot commodity products like GBTC are registered under the Securities Act of 1933, and therefore must receive individual review and approval from the SEC.

This discrepancy goes back to the SEC’s first approval of the listing and trading of options on a commodity-based trust in 2008.3 Rather than issue an approval for all identically structured commodity-based trusts, the Commission issued an approval limited solely to the shares before them. Since then, approvals have been issued ad-hoc, resulting in an unwieldy patchwork system.4

We believe the Commission should update this outdated approach to approve options on spot commodity-based ETPs that are structured identically to already-approved ETPs and permit national securities exchanges to update their rules to permit the deemed approval of the listing and trading of such options. Naturally, this would include options on GBTC.

Recall that in Grayscale v. SEC, the DC Circuit Court of Appeals held that Bitcoin futures and spot Bitcoin were “materially similar across relevant regulatory factors” and that the SEC had acted arbitrarily and capriciously in its denial of our application, and vacated their June 2022 denial order.5 A similar set of circumstances that surrounded the GBTC listing application exists for NYSE Arca’s current application. Options on ETPs holding spot Bitcoin and options on ETFs holding Bitcoin futures are necessarily subject to the same risks. Even in its infancy, the spot Bitcoin ETP market serves more investors, enjoys tighter bid-ask spreads, and is far more liquid than the Bitcoin futures ETF market.6 We believe that whatever leads the SEC to accept one should lead them to accept the other.

We believe it is vital to the interests of investors to have access to exchange-listed options on GBTC and other spot Bitcoin ETPs. Options would facilitate price discovery in the ETP’s shares, provide investors with greater choice and help investors navigate varying market conditions or achieve desired investment outcomes, such as generating income, hedging, or reducing volatility. Approval would also serve as a boon to the commodity trust investor class, improve market efficiency, and end an expensive and time-consuming product-by-product approach to approval the Commission has relied on for over 15 years. It’s been long enough.


To read Grayscale’s letter, click here.


  1. See File No. SR-NYSEArca-2024-06, Release No. 34-99398 Notice of Filing of Proposed Rule Change to Amend Rule 5.3-O to Permit the Listing and Trading of Options on Commodity-Based Trust Shares
  2. See NYSE Arca Rule 5.3-O, Criteria for Underlying Securities
  3. See Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Listing and Trading on the Exchange of Options on the SPDR Gold Trust, Securities Exchange Act Release No. 34-57945, SR-NASDAQ-2008-051 (Jun. 10, 2008)(“For these reasons, the Commission designates the proposed rule change as operative upon filing),
  4. See NYSE Arca Rule 5.3-O(g)(iv) which permits the listing and trading of options on the SPDR Gold Trust; NYSE Arca Rule 5.3-O(g)(v) which permits the listing and trading of options on the iShares COMEX Gold Trust; NYSE Arca Rule 5.3-O(g)(vi) which permits the listing and trading of options on the iShares Silver Trust; NYSE Arca Rule 5.3-O(g)(viii) which permits the listing and trading of options on the ETFS Silver Trust or ETFS Gold Trust; and NYSE Arca Rule 5.3-O(g)(ix) which permits the listing and trading of options on the ETFS Palladium Trust or ETFS Platinum Trust.
  5. See Grayscale Invs., LLC v. SEC, No. 22-1142 (D.C. Cir. Aug. 29, 2023
  6. Letter from Robert E. Whaley, Professor of Management (Finance), Director, Financial Markets Research Center, Vanderbilt University Owen Graduate School of Management (dated May 25, 2022) (the “Whaley Letter”),  

Important Information:

Grayscale Investments, LLC (“Grayscale”) is the sponsor of GBTC. Grayscale is not registered as an investment adviser under the Investment Advisers Act of 1940 and GBTC is not registered under the Investment Company Act of 1940. GBTC is subject to the rules and regulations of the Securities Act of 1933.

The Grayscale Bitcoin Trust (BTC) (the “Trust”) has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the Trust has filed with the SEC for more complete information about the Trust and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at Alternatively, the Trust or any authorized participant will arrange to send you the prospectus (when available) if you request it by calling (833)903-2211 or by contacting Foreside Fund Services, LLC, Three Canal Plaza, Suite100, Portland, Maine 04101.

Foreside Fund Services, LLC is the Marketing Agent for the Grayscale Bitcoin Trust ETF.

Investments involve risk. Principal loss is possible. The Trust may trade at a premium or discount to their net asset value.

The Trust relies on third party service providers to perform certain functions essential to the affairs of the funds and the replacement of such service providers could pose a challenge to the safekeeping of the digital asset and to the operations of the Trust.

NAV per Share is not calculated in accordance with GAAP. NAV per Share is not intended to be a substitute for the Trust's Principal Market NAV per Share calculated in accordance with GAAP.

Extreme volatility of trading prices that many digital assets, including Bitcoin, have experienced in recent periods and may continue to experience, could have a material adverse effect on the value of GBTC and the shares could lose all or substantially all of their value.

Digital assets represent a new and rapidly evolving industry. The value of GBTC depends on the acceptance of the digital assets, the capabilities and development of blockchain technologies and the fundamental investment characteristics of the digital asset.

Digital asset networks are developed by a diverse set of contributors and the perception that certain high-profile contributors will no longer contribute to the network could have an adverse effect on the market price of the related digital asset.

Digital assets may have concentrated ownership and large sales or distributions by holders of such digital assets could have an adverse effect on the market price of such digital assets.

The value of GBTC relates directly to the value of the underlying digital asset, the value of which may be highly volatile and subject to fluctuations due to a number of factors.

A substantial direct investment in digital assets may require expensive and sometimes complicated arrangements in connection with the acquisition, security and safekeeping of the digital asset and may involve the payment of substantial acquisition fees from third party facilitators through cash payments of U.S.dollars. Because the value of GBTC is correlated with the value of Bitcoin, it is important to understand the investment attributes of, and the market for,the underlying digital asset. Please consult with your financial professional.

Prior to 1/11/2024, shares of Grayscale Bitcoin Trust (BTC) (the “Trust”) were offered only in private placement transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and were quote don the OTCQX® Best Market. The Trust did not have an ongoing share creation and redemption program. Effective as of the open of business on 1/11/2024, the shares of the Trust were listed to NYSE Arca as an exchange-traded product, the Trust established an ongoing share creation and redemption program and the shares are being offered on a registered basis pursuant to a Registration Statement on Form S-3.

The Trust’s investment objective both before and after 1/11/2024 has remained constant, namely to reflect the value of Bitcoin held by the Trust, less the Trust’s expenses and other liabilities. However prior to 1/11/2024, the Trust did not meet its investment objective and the Trust’s shares traded at both premiums and discounts to such value, which at times were substantial, in part due to the lack of an ongoing redemption program. Furthermore, the Trust’s performance prior to 1/11/2024 is based on market-determined prices on the OTCQX, while the Trust’s performance following such date is based on market-determined prices on NYSE Arca. As a result, the Trust’s historical data prior to 1/11/2024 is not directly comparable to, and should not be used to make conclusions in conjunction with, the Trust’s performance following that date. The performance of the Trust before and after 1/11/2024 may differ significantly.

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