Investment leaders from four large states have formally pressed Nasdaq and FTSE Russell to explain and potentially suspend recent methodology updates, warning that the adjustments could expose retirement systems and passive investors to avoidable risks tied to highly anticipated listings.
At the center of the controversy is SpaceX’s expected public debut, widely reported as a potential $75 billion-plus IPO. Officials argue that once trading begins, the company’s scale, valuation, and governance structure could introduce “high volatility and conflicts of interest” for index providers and the funds that track them.
Because index inclusion typically triggers automatic purchases from passive funds, billions of dollars could flow into SpaceX shares depending on timing and eligibility decisions.
Push for Transparency and a Temporary Pause on Rule Changes
In letters reviewed by Reuters, the officials urged both Nasdaq and FTSE Russell to pause implementation of their revised listing criteria until a full investor-impact review is completed.
The FTSE Russell correspondence, addressed to the index provider and its parent company London Stock Exchange Group (LSEG), was signed by New York State Comptroller Thomas DiNapoli, New York City Comptroller Mark Levine, Illinois State Treasurer Michael Frerichs, and Maryland Comptroller Brooke Lierman.
They warned that the changes may prioritize corporate listing interests over long-term investor protection. As stated in the letter:
"We respectfully urge the FTSE Russell Index Governance Board to reconsider its methodology changes and not place the interests of listing companies and their underwriters ahead of the interests of the passive fund assets that will bear the cost of any resulting mispricing" that may occur with SpaceX or other IPOs soon to follow like OpenAI and Anthropic, reads one of the letters, sent to FTSE Russell and its parent, London Stock Exchange Group, or LSEG.
An LSEG representative declined to comment on the matter.
Nasdaq’s Separate Rule Shift Under Scrutiny
A parallel letter sent to Nasdaq by Illinois Treasurer Michael Frerichs, Maryland Comptroller Brooke Lierman, and Oregon Treasurer Elizabeth Steiner raised similar concerns about the exchange’s revised index-entry rules.
The officials questioned whether Nasdaq had conducted and published a formal assessment of how the changes could affect more than $1.4 trillion in investor assets tied to index-tracking funds.
They also asked whether any external parties, including prospective issuers or advisers, influenced the rulemaking process.
Nasdaq, however, defended its approach, arguing that the structure of public markets has shifted significantly in recent years.
A Nasdaq spokesman said:
"Public markets look fundamentally different than they did a decade ago — companies are staying private longer, listing at larger scale, and arriving with more complex share structures. The updates to the Nasdaq-100 methodology reflect those shifts and were implemented following a formal public consultation.
"The changes were not designed for any single company, and are consistent with updates other major index providers have independently made in response to the same market dynamics," the Nasdaq spokesman said.
State Officials Warn of Forced Exposure for Retirement Funds
Beyond procedural concerns, the state officials emphasized potential real-world consequences for pension systems and retirement savers.
Oregon State Treasurer Elizabeth Steiner described the developments in strongly critical terms, saying she was "deeply troubled" by the exchanges' actions. She warned that they may be forcing institutions like retirement plans "to purchase stocks (through index funds) that have not proven their value or undergone the rigors of market correction," she said.
The broader concern among the officials is that rapid rule adjustments—made in response to shifting IPO behavior and the rise of large private companies—could unintentionally distort price discovery and concentrate risk within passive investment vehicles.
Rising Debate Over Index Governance in a Changing IPO Landscape
The dispute underscores a wider tension in global markets: how index providers should adapt to a wave of large, late-stage private companies entering public markets at unprecedented scale.
Supporters of the changes argue that outdated listing requirements may no longer reflect modern market realities. Critics, however, warn that relaxing standards too quickly could shift risk from issuers and underwriters onto ordinary investors whose exposure is automatic and non-discretionary.
For now, both Nasdaq and FTSE Russell face mounting pressure to justify whether their revised methodologies adequately protect the funds—and retirees—who ultimately bear the consequences of index-driven investing.