The US Securities and Exchange Commission has formally opened proceedings to review NYSE American’s proposal to list options linked to the Grayscale Coindesk Crypto 5 ETF.
The move marks another step in the regulatory assessment of crypto-based investment products as demand from institutional investors for digital asset derivatives continues to grow.
NYSE American originally submitted the proposal on 29 December, seeking approval to trade options tied to a diversified basket of cryptocurrencies.
According to the filing, the underlying fund is heavily weighted towards bitcoin, which accounts for 76.02 per cent of the portfolio, while ethereum makes up 14.90 per cent.
The regulator confirmed that the formal review process began on 9 April under Release No. 34-105187.
“This order institutes proceedings … to determine whether to approve or disapprove the proposed rule change,”
The SEC said.
The current review timeline requires public comments to be submitted within 21 days of publication in the Federal Register.
Rebuttal responses must be filed within 35 days, giving market participants an opportunity to challenge or support the proposal.
A final decision is expected by 11 July, although the SEC may extend the review period until 9 September if additional analysis is required.
The proposed instrument would offer physically settled, American-style options linked to a broader cryptocurrency basket rather than a single digital asset.
NYSE American stated that its existing market surveillance systems and reporting infrastructure are capable of handling the expected trading activity.
The exchange also noted that its current operational capacity remains sufficient to support projected demand without disrupting existing derivatives markets.
Regulators are now closely examining whether the proposal provides adequate safeguards against market manipulation and other risks.
The SEC is specifically reviewing whether the rule change complies with Section 6(b)(5) of the Exchange Act, which requires measures to prevent fraudulent and manipulative practices.
The review reflects continued caution from regulators over crypto-linked derivatives, particularly where the underlying markets remain subject to uneven oversight.
The Commission has also invited public comment on whether the proposal meets regulatory standards and offers sufficient investor protection.
“Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved,”
The SEC said.
Market analysts said the outcome of the review could set an important precedent for future crypto ETF options and broader institutional access to digital asset derivatives.