SEC Clears Binary Options Linked to Coinbase and MARA Performance

These binary options function differently than standard stock derivatives, which typically track the price of an underlying share. Instead, these contracts settle in cash based on whether a company hits a pre-defined financial or operational threshold. For instance, traders can now take positions on whether Coinbase’s transaction revenue or net income per share will exceed a set level during a specific reporting period. Similarly, contracts tied to the Bitcoin miner MARA will reference actual production metrics rather than the market price of the cryptocurrency itself.

SEC Chairman Paul Atkins emphasized that these products must operate within the existing regulatory framework for standardized options. This means they will be subject to established rules governing margin requirements, trading halts, and the oversight of market makers. By classifying these binary options as National Market System securities, the Commission aims to provide investor protections that differentiate these instruments from unregulated prediction markets. The approval is narrow in scope, applying only to standardized options on a registered exchange, leaving the Commodity Futures Trading Commission’s authority over differently structured derivatives intact.