Crypto firms, asset managers, market makers and consumer advocates have offered sharply different views to the U.S. Securities and Exchange Commission on how to oversee a new class of exchange-traded products tied to crypto, private assets, event contracts and leveraged strategies.
The wave of letters responded to the SEC’s request for comment on “novel ETFs.” The agency opened that process in June, asking whether current rules adequately protect investors and whether registration procedures should change to accommodate new products. The filings were submitted on Monday, the last day comments would be accepted.
The Crypto Council for Innovation, or CCI, said the SEC should adapt existing efficiencies used for exchange-traded funds to other exchange-traded products that do not fall neatly into the same legal structure.
“Just as the Commission has modernized rules to promote efficiencies for ETFs, the Commission should consider providing similar efficiencies for non-ETF ETPs to promote regulatory parity, foster innovation, and expand investor choice,” the group wrote.
CCI’s filing joined submissions from Andreessen Horowitz, the Solana Policy Institute, Grayscale, Chainalysis, Charles Schwab, Jane Street, Franklin Templeton, Kalshi and others.
Crypto groups push for product-specific treatment
CCI asked the SEC to extend some of the regulatory efficiencies available to ETFs registered under the Investment Company Act of 1940 to other exchange-traded products. The group pointed to the fact that many spot crypto products use commodity-trust structures instead of registering as investment companies.
It also urged the SEC to “refrain from updating the definition of investment company,” arguing that changing the definition could create uncertainty without delivering a clear benefit to investors.
Exchange-traded products, or ETPs, and exchange-traded funds, or ETFs, both trade on exchanges and track an underlying asset or strategy. The SEC allowed the first U.S. Bitcoin futures ETF to start trading in October 2021. In January 2024, it approved the first spot Bitcoin ETFs in the country, products that hold Bitcoin directly rather than futures contracts.
Andreessen Horowitz took a similar line. The firm asked the SEC to keep the statutory definition of an investment company in place and not automatically bring products holding non-securities under the 1940 Act.
“The Commission should avoid treating all Novel ETFs as a single category because these products raise different market structure, valuation, liquidity, and investor protection considerations,” the firm wrote.
A16z said crypto ETPs already operate under exchange listing standards and established disclosure requirements. In its view, that existing market framework distinguishes them from funds holding illiquid private assets or using less-tested strategies.
The firm also called for tighter coordination between fund-registration reviews and exchange-listing reviews, which now run on different procedures and timelines. It proposed standardized schedules and shorter review periods for some products.
Disagreement extends to process, disclosures and surveillance
The comment letters also showed disagreement on how the SEC should handle filings and oversight tools.
Grayscale opposed new portfolio restrictions for established digital-asset products and backed optional confidential consultations before public filings. Charles Schwab pushed back on a fully confidential process and proposed that any resulting filing should be made public for at least 75 days before taking effect.
Blockchain analytics firm Chainalysis argued that public blockchains can support real-time surveillance, independently verifiable portfolio data and machine-readable disclosures.
“We recommend that, rather than restricting generic listing standards for blockchain-based Novel ETFs, the Commission clarifies through IM guidance that exchanges listing such products deploy monitoring systems meeting defined standards,” Chainalysis wrote. “Exchanges should document their analytical deployment, coverage scope, and identified gaps through periodic reporting.”
Kalshi and Public Citizen split over event contracts in funds
Prediction market operator Kalshi said event contracts should remain eligible for registered funds, which already face governance and investor-protection requirements.
“When investors seek pooled exposure to these event contracts, we believe the registered fund is an appropriate vehicle,” Kalshi wrote.
Event contracts pay a fixed amount, or nothing, based on a specified outcome. Kalshi acknowledged that some contracts may have less market depth than conventional futures, but said those differences “do not warrant categorical exclusion.” The firm said existing fund rules, tailored disclosures and coordination with the Commodity Futures Trading Commission could address risks tied to valuation, liquidity, leverage and market surveillance.
Consumer advocacy group Public Citizen took the opposite position. It warned that event-contract ETFs would place gambling-like products inside a vehicle that retail investors commonly associate with long-term investing.
“Retail investors rely on ETFs as a familiar and trustworthy format, expecting them to represent investments tied to productive economic activity,” the group wrote. “Investors who use ETFs to build long-term portfolios may not understand that these products do not compound, do not track an underlying enterprise, and do not behave like the diversified index funds they are accustomed to.”
SEC’s next decision
The SEC now has to decide whether these products should sit under a common regulatory framework or be governed under separate rules based on their structure and risk profile.