Crypto industry groups, asset managers, and consumer advocates have submitted competing regulatory proposals to the Securities and Exchange Commission following the agency's request for comment on novel exchange-traded products.
The Crypto Council for Innovation called on the SEC to extend regulatory efficiencies available to ETFs to other exchange-traded products, arguing this would promote regulatory parity and investor choice. The group also urged the agency to refrain from updating the definition of investment company.
Other major submissions came from Andreessen Horowitz, Grayscale, Charles Schwab, Jane Street, Franklin Templeton, Kalshi, Chainalysis, and the Solana Policy Institute. The comments arrived Monday, the deadline for submissions.
Differing Approaches on Product Classification
Andreessen Horowitz argued the SEC should assess products individually based on their assets and risks rather than treating all novel ETFs as a single category. The firm noted that crypto exchange-traded products already operate under exchange listing standards and disclosure requirements that differentiate them from products holding illiquid private assets.
A16z also proposed closer coordination between fund registration and exchange listing reviews, suggesting standardized schedules and shorter review periods for certain products.
Disagreements on Specific Product Types
Significant divisions emerged regarding event contracts and other novel structures. Kalshi, a prediction market platform, argued that event contracts should remain eligible for registered funds, which provide governance and investor-protection requirements. The firm contended that existing fund rules and CFTC coordination could address risks.
Public Citizen, a consumer advocacy group, opposed this approach, warning that event-contract ETFs would place gambling-like products inside a vehicle retail investors associate with traditional long-term investing.
On disclosure and surveillance, Grayscale supported optional confidential consultations before public filings, while Charles Schwab proposed making filings public for at least 75 days before taking effect. Chainalysis recommended that exchanges listing blockchain-based novel ETFs deploy monitoring systems meeting defined standards and document their deployment through periodic reporting.
Background
The SEC issued its request for comment in June, asking whether existing rules adequately protect investors and whether registration procedures should change. The agency approved the first U.S. Bitcoin futures ETF in October 2021 and the first spot Bitcoin ETFs in January 2024.
The SEC must now determine whether novel products require a common regulatory framework or separate rules tailored to their structures and risks.
