Crypto firms, asset managers, market makers and consumer advocates filed competing letters with the SEC on regulating a new generation of exchange-traded products spanning crypto, private assets, event contracts and leveraged strategies. The submissions, due Monday, showed a wider split over confidential filings, event contracts and retail safeguards.
Industry groups seek ETF-like efficiencies
The Crypto Council for Innovation 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. Many spot crypto products currently use commodity-trust structures instead of registering as investment companies.
It also urged the agency to refrain from updating the definition of investment company, arguing a change could create uncertainty without a clear investor benefit. CCI's letter joined submissions from Andreessen Horowitz, the Solana Policy Institute, Grayscale, Chainalysis, Charles Schwab, Jane Street, Franklin Templeton and Kalshi, among others.
The SEC issued its request for comment in June, asking whether existing rules adequately protect investors and whether registration procedures should change for new products. The agency approved the first U.S. spot Bitcoin ETFs in January 2024, after the first Bitcoin futures ETF began trading in October 2021.
Firms split on confidentiality and structure
A16z asked the SEC to keep the statutory definition of an investment company rather than automatically pulling products that hold non-securities under the 1940 Act. It argued crypto ETPs already operate under exchange listing standards and established disclosure requirements, and called for closer coordination between fund-registration and exchange-listing reviews.
But other filings showed a wider split. Grayscale opposed new portfolio restrictions for established digital-asset products and backed optional confidential consultations before public filings. Charles Schwab took the opposite view, opposing a fully confidential process and proposing that a resulting filing stay public for at least 75 days before it takes effect.
Chainalysis argued public blockchains could support real-time surveillance and machine-readable disclosures instead of tighter generic listing standards.
Event contracts draw the sharpest divide
Kalshi argued event contracts should remain eligible for registered funds, saying existing fund rules and coordination with the Commodity Futures Trading Commission could address risks around valuation and market surveillance. Event contracts pay a fixed amount, or nothing, based on a specified outcome.
Public Citizen disagreed, warning that event-contract ETFs would place gambling-like products inside a vehicle retail investors associate with long-term investing. According to Public Citizen: "Retail investors rely on ETFs as a familiar and trustworthy format," the group wrote, adding that such products don't compound or track an underlying enterprise the way index funds do.
The SEC must now decide whether novel ETFs need one common regulatory framework or separate rules based on their structures and risks.
Source: Decrypt
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