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- a16z, Grayscale and CCI want the SEC to assess novel ETFs by their actual risk characteristics.
- Industry groups support clearer registration procedures and optional confidential SEC pre-filing discussions.
- The SEC’s review could shape how crypto and other innovative exchange-traded products are regulated.
Crypto industry groups are pressing the U.S. Securities and Exchange Commission (SEC) to take a more flexible approach to the next generation of exchange-traded funds, arguing that products should be assessed according to their actual risks rather than placed under broad restrictions simply because they are considered “novel.”
The comments came as the SEC wrapped up a 60-day consultation on how existing ETF rules should apply to emerging investment products. The submissions from venture capital firm a16z, digital asset manager Grayscale and the Crypto Council for Innovation (CCI) reflect growing industry pressure for clearer and more predictable rules around crypto-related exchange-traded products.
Industry Wants Risk-Based ETF Oversight
a16z urged the SEC to examine novel products based on their underlying features and risks. The firm also called for better coordination between fund registration and exchange-listing reviews, along with more predictable regulatory timelines.
The firm argued that crypto-based exchange-traded products now operate within a more developed market structure, supported by exchange listing standards and established disclosure practices. That, in its view, makes it inappropriate to automatically treat such products like funds involving private assets or other unconventional strategies.
Grayscale made a similar case, saying products with established compliance and disclosure frameworks should not face additional portfolio restrictions simply because regulators classify them as novel.
Confidential SEC Pre-Filing Process Gains Support
Grayscale and CCI also backed an optional confidential pre-filing process that could allow issuers to discuss proposed products with regulators before formally submitting applications.
CCI additionally called for regulatory efficiency between ETFs and other exchange-traded products while maintaining existing investor safeguards. The group favored clearer disclosures about registration status rather than major changes to the current approval structure.
The recommendations were broadly aligned against sweeping regulatory changes that could increase costs or delay product launches, although the groups differed on how ETFs should ultimately be defined and regulated.
Disagreement Over What Counts as an ETF
One notable difference involved the use of the ETF label. a16z argued that the term should generally apply to funds operating under the Investment Company Act of 1940.
Grayscale took a broader position, saying the label should reflect an investment product’s economic characteristics rather than the legal structure under which it operates.
All three commenters also opposed changes to investment-company classifications that could automatically bring products holding non-securities under the Investment Company Act framework.
The SEC launched its consultation on June 30, seeking industry views on whether existing regulations are sufficient for emerging ETFs, how these products should be supervised and whether the registration process needs updating.
The Aug. 31 submissions, posted near the end of the comment period, give regulators a clear industry preference: preserve investor protections while creating a more predictable framework for innovative exchange-traded products.
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The next stage will depend on how the SEC weighs those competing proposals as it considers potential changes to the regulatory process.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m your translator between the financial Old World and the new frontier of crypto. After a career demystifying economics and markets, I enjoy elucidating crypto – from investment risks to earth-shaking potential. Let’s explore!
