Crypto firms urge SEC to evaluate novel ETFs case by case

Grayscale Investments, venture‑capital firm a16z and the Crypto Council for Innovation (CCI) submitted letters to the U.S. Securities and Exchange Commission (SEC) urging a differentiated regulatory approach for “novel” exchange‑traded funds (ETFs) that involve crypto assets, private investments, leverage or event contracts.

Call for product‑specific risk assessment

The three groups argued that the SEC should evaluate each fund based on its economic structure and underlying risks rather than applying a single set of restrictions to all novel products. They opposed an automatic classification of funds holding non‑securities as investment companies under the Investment Company Act of 1940.

Preferred regulatory processes

a16z requested coordinated reviews of registration statements and exchange‑listing applications, along with clearer timelines for prospective issuers. Grayscale and CCI supported an optional confidential pre‑filing discussion to surface regulatory concerns before public submissions.

Key regulatory questions

The SEC’s June‑30 consultation asked for feedback on investment‑company classifications, portfolio conditions, disclosure standards and the registration process for funds using new assets or strategies. It did not propose a rule or set a decision deadline.

Industry perspective on terminology

a16z suggested reserving the “ETF” label for open‑end funds registered under the Investment Company Act, while Grayscale argued that naming should reflect a product’s economic features rather than its legal wrapper. CCI called for clearer disclosures indicating whether a product is a registered investment company.

Potential impact

Adopting a uniform classification could affect commodity trusts and other crypto products that are structured outside the Investment Company Act. The SEC’s recent generic listing standards for commodity‑based trust shares have already shortened review times for qualifying spot crypto products, but the differing registration routes remain relevant.

Next steps

The SEC must now review the public comments. It may issue guidance, propose rule amendments, adjust staff procedures, or take no immediate action. Any formal rule change would require a new public comment period.