Crypto Industry Urges SEC Against Broad, New ETF Restrictions

Prominent crypto industry players have urged the US Securities and Exchange Commission (SEC) to avoid treating “novel” exchange-traded products (ETFs) as a single, one-size-fits-all regulatory category. Instead, they say the SEC should assess each proposal based on its specific risk profile and product mechanics, with more predictable review timelines and streamlined coordination between fund registration and exchange listing.

The comments—submitted in filings posted by the SEC during the tail end of a 60-day public comment period—were dated Aug. 31. Venture capital firm a16z, digital asset investment manager Grayscale, and the Crypto Council for Innovation (CCI) argued for maintaining existing investment-company classification guardrails and avoiding sweeping rule changes that could automatically pull non-securities holdings into the Investment Company Act framework.

Key takeaways

• a16z, Grayscale, and CCI urged the SEC to evaluate “novel” ETFs by their underlying characteristics rather than applying blanket restrictions.
• The trio opposed changes to investment-company classifications that could inadvertently subject products holding non-securities to the Investment Company Act.
• They asked for more predictable and coordinated review processes linking fund-registration steps with exchange-listing approvals.
• There was disagreement on how the term “ETF” should be used—legal wrapper versus economic characteristics.
• Several commenters supported optional confidential pre-filing processes to clarify expectations earlier.

Why the SEC’s “novel ETF” review is drawing heavy pushback

On June 30, the SEC opened a consultation seeking public input on how to regulate the “next generation” of ETFs. The request focused on whether current regulatory approaches remain adequate, what additional oversight—if any—may be required, and whether the registration process should be adjusted to handle new types of exchange-traded products.

As the public comment window neared its end, the crypto industry’s message was consistent on one central point: “novel” should not mean “automatically treated as fundamentally equivalent to every other new product.” In their filings, the companies argued that differences in market structure, disclosure practices, and the nature of underlying assets can materially change risk and therefore should drive the SEC’s approach.

Risk-based evaluation vs. categorical regulation

In comments submitted to the SEC, a16z argued that crypto-focused exchange-traded products have benefited from more mature market infrastructure. The firm pointed to exchange-approved listing standards and established disclosure requirements as reasons not to lump these proposals together with offerings that use different—or more opaque—strategies, including products holding private assets.

Grayscale made a related argument from the compliance angle. It said digital asset products with established compliance and disclosure records should not be forced into new portfolio conditions or different disclosure regimes solely because they are labeled “novel.” In other words, the SEC should not reframe existing investor protections just because the product is packaged in a new form.

CCI aligned with both positions while emphasizing regulatory efficiency. It called for comparable operational processes across ETFs and non-ETF exchange-traded products, aiming to preserve investor protections without slowing down approvals by rebuilding the framework from scratch.

Across all three comment letters, the practical concern was that categorical changes could raise costs for issuers and delay launches even where the underlying risks are not equivalent.

Protecting existing classifications—and avoiding an “automatic sweep”

One of the strongest shared objections centered on how the SEC might alter investment-company classifications. The commenters opposed changing the way products are categorized in ways that could automatically pull products holding non-securities into the Investment Company Act of 1940 framework.

The industry stakeholders appear to be treating classification as the linchpin for regulatory predictability. If the SEC were to broaden classification triggers in a way that turns certain holdings into a default “investment company” matter, the result could be to impose requirements that were not designed for the specific structure of many digital asset exchange-traded offerings.

For investors and market participants, the stakes are not only legal clarity but also timing and execution. Classification decisions can determine which filing routes apply, what ongoing obligations follow, and how long review cycles may become.

Confidential pre-filing and a coordinated path to approval

While the letters diverged on terminology and the mechanics of how ETFs should be defined, they converged on process improvements—particularly around earlier engagement with regulators and coordinating steps that affect review duration.

Grayscale and CCI supported optional confidential pre-filing processes. The goal, in general terms, would be to identify compliance expectations earlier, reducing the likelihood of avoidable revisions late in the approval timeline.

a16z also focused on the timeline question, asking the SEC to coordinate fund-registration reviews with exchange-listing reviews. The firm argued that a more coordinated and predictable workflow could prevent fragmented scrutiny from turning every filing into a protracted, iterative process.

Together, these proposals point to a consistent industry view: clearer expectations and better-aligned procedural steps could reduce uncertainty without requiring the SEC to reshape substantive rules in a blanket fashion.

Debate over what “ETF” should mean

Even among commenters pushing for faster, clearer processes, there was a notable disagreement about label boundaries.

a16z suggested that the term “ETF” should be reserved for funds operating under the Investment Company Act of 1940. Grayscale, by contrast, said “ETF” should refer to economic characteristics regardless of the legal wrapper. This difference matters because the regulatory consequences—and investor expectations—can attach to the label itself.

CCI’s emphasis was different again: it urged the SEC to improve registration-status disclosures rather than overhaul the current approval framework. That approach implies the central problem may be transparency about what a product is and how it is regulated, rather than redefining categories or changing which regimes apply from the outset.

For market participants, this terminology debate is more than semantics. How the SEC draws lines between product types can influence how issuers structure offerings and how investors interpret the level of protection and oversight attached to the wrappers they encounter.

Going forward, the SEC’s next step will be to digest these public comments and clarify whether it intends to adjust registration procedures, refine disclosure expectations, or keep classification rules largely intact. Investors and issuers should watch for indications that the SEC will adopt a risk-based, product-specific review approach—and whether it will offer procedural measures like pre-filing pathways and improved coordination that stakeholders say are necessary to reduce delays.