Crypto firms push back against blanket SEC rules for novel ETFs

The organizations submitted their feedback following the close of a 60-day SEC consultation on August 31. The regulator sought input on how to classify and govern funds that utilize new assets or complex strategies, prompting industry leaders to warn against automatically categorizing non-security holdings under the Investment Company Act of 1940.

A16z emphasized that each product warrants an assessment based on its specific economic structure rather than broad asset-based labels. Grayscale and the Crypto Council for Innovation echoed this sentiment, suggesting that funds with established compliance records should remain under existing rules. They contend that regulators should isolate specific risks, such as liquidity or custody concerns, rather than imposing additional portfolio conditions simply because a product is deemed novel.

Coordination and transparency in the review process

Beyond classification, the firms called for structural improvements to the agency's review pipeline. Currently, fund registrations and exchange listing proposals are handled through separate channels, leading to potential bottlenecks. A16z proposed more synchronized timelines between the Division of Investment Management and the Division of Trading and Markets to reduce uncertainty. Meanwhile, Grayscale and the Crypto Council for Innovation advocated for optional confidential pre-filing discussions, a measure they believe would resolve regulatory hurdles before public submissions, thereby preventing unnecessary delays. With the consultation concluded, the SEC now faces the task of deciding whether to issue new guidance or formal rule amendments, though no official deadline for a response has been set.