NYSE Removes Crypto ETF Options Caps

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Good Morning,

Crypto markets are getting more institutional by the day. NYSE completes the industry-wide removal of crypto ETF options caps, unlocking FLEX access and larger position limits for institutional players. Meanwhile, Kalshi's $1B raise at a $22B valuation signals that prediction markets are firmly on TradFi's radar, regulatory headwinds and all.

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In Today's Email:

• What Matters: NYSE Removes Crypto ETF Options Caps 👀 

• Product of the Week: Grayscale’s HYPE ETF 🚀 

• Charts: USR Exploited for $25M, Kalshi Raises $1B at $22B Valuation 📊 

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WHAT MATTERS

NYSE Removes Crypto ETF Options Caps

State of play: NYSE Arca and NYSE American have scrapped the 25,000-contract position and exercise limits on spot bitcoin and ether ETF options, effective immediately, completing an industry-wide transition.

• Every major US options exchange has now removed the caps first imposed when crypto ETF options launched in November 2024.

• The rule changes cover 11 crypto ETF products, including IBIT, FBTC, ARKB, and Grayscale and Bitwise's bitcoin and ethereum trusts.

• Position limits will now follow each exchange's standard framework, where large liquid ETFs can qualify for limits of 250,000 contracts or more.

• The filings also remove restrictions blocking these products from trading as FLEX options, enabling customizable contract terms like non-standard strike prices and expiration dates.

• Separately, Nasdaq ISE has a pending proposal to raise IBIT-specific limits to 1 million contracts, which would bring it closer to parity with the largest equity ETFs.

Why it matters: Removing position caps enables more efficient hedging strategies, basis trades, and overlay programs for institutional participants.

Our take: The real watch item is Nasdaq ISE's proposal to push IBIT limits to 1M contracts, which would signal regulators are comfortable treating bitcoin ETFs on par with the largest equity ETFs.

For builders and investors: Institutions now have full FLEX options access across every major exchange, unlocking bespoke contract terms previously unavailable.

PRODUCT OF THE WEEK

Grayscale’s HYPE ETF

Grayscale has filed an S-1 to list the Grayscale HYPE ETF (ticker: GHYP) on Nasdaq, the fund would use Coinbase Custody and CoinDesk Benchmark pricing, consistent with Grayscale's other products.

• HYPE staking is currently prohibited in the structure, though the filing includes a "Staking Condition" that could be met in the future.

• 21Shares and Bitwise had already submitted HYPE fund filings late last year, making Grayscale a late entrant.

• Hyperliquid is currently barred to US users, though the newly formed Hyperliquid Policy Center is lobbying in Washington DC.

Other cool products:

• USG, a new CDP stablecoin.

• Tempo, a payments-focused L1.

• Nado, a spot, perps & MM all in one CLOB DEX.

• YieldNest, a DeFi platform that utilizes AI-driven strategies.

• Elixir, a modular blockchain protocol designed to bring liquidity.

Take a peek at our referral reward at the bottom of this issue. Share this newsletter and receive our list of 500 crypto VC individuals 👇

CHARTS OF THE WEEK

Resolv's USR Stablecoin Exploited for $25M

State of play: An attacker exploited Resolv's USR minting contract, creating ~80M unbacked tokens from $200K in USDC and extracting ~$25M. USR crashed to $0.025 on Curve before partially recovering to ~$0.85.

• The attacker converted minted USR into 11,409 ETH (~$23.7M) across DEXs, with another $1.1M in wstUSR held in a separate wallet.

• Analysts traced the flaw to a privileged SERVICE_ROLE controlled by a single EOA with no mint limits, oracle checks, or amount validation.

• Resolv paused protocol functions, claiming collateral intact, but supply dilution wiped pool liquidity and left USR holders with steep losses.

• The depeg cascaded into Morpho and Gauntlet lending markets, where traders may have borrowed USDC against USR at its hardcoded $1 valuation.

• Stream Finance, already reeling from a $93M loss in Nov. 2025, holds ~$17M in RLP exposure on Morpho, putting its depositors at risk of another significant hit.

Our take: 14 audits and a $500K bug bounty meant nothing when a single unguarded EOA controlled minting. "Collateral intact" is a technicality: holders got diluted and liquidated.

Kalshi Raises $1B at $22B Valuation

State of play: Kalshi has raised over $1B in a Coatue-led round at a $22B valuation, roughly doubling from its $11B Series E in November. Annualized revenue has reached ~$1.5B, driven by growth in institutional participation.

• The round reflects surging investor demand across prediction markets, with both Kalshi and Polymarket reportedly exploring raises around $20B.

• Unlike Polymarket's crypto-native infrastructure, Kalshi operates a federally regulated exchange that converts crypto deposits into fiat for trading.

• Arizona filed criminal charges against Kalshi's parent entities, alleging it operates an illegal gambling business without a license; Kalshi called the charges "seriously flawed."

• A March 19 Ninth Circuit ruling denied Kalshi's emergency stay request in a Nevada case, potentially opening the door to further state-level action.

• Tradeweb Markets recently partnered with Kalshi to distribute prediction market data, signaling growing TradFi integration.

Our take: $22B on a prediction market is a big bet that federal derivatives regulation wins out over state-level pushback. Institutional market makers and TradFi partnerships suggest the smart money isn't worried yet.

QUICK BITES

• Banks push tokenized deposits as onchain cash race intensifies.

• Bitcoin mining difficulty drops 7.8% as miner exodus accelerates.

• USR stablecoin depegs after attacker mints 80M unbacked tokens.

• Nevada judge temporarily blocks Kalshi from operating in the state.

• CFTC details how to use digital assets as derivatives collateral in new FAQ.

• Fidelity urges SEC to refine rules for broker-dealers handling crypto assets.

• Grayscale files for HYPE ETF tracking largest onchain perps DEX Hyperliquid.

• NYSE exchanges complete industry-wide removal of crypto ETF options caps.

NOTEWORTHY READS & MEME

• Omer Goldberg’s read on USR Exploit.

• Matty’s read on the Anatomy of a Failed TGE.

• Cipher’s read on DeFi Exploits in 2026 So Far.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.