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Grayscale, Andreessen Horowitz and the Crypto Council for Innovation have urged the Securities and Exchange Commission not to impose blanket restrictions on exchange-traded funds it considers “novel,” including products holding crypto assets.
Their comments respond to the SEC’s June review of ETFs involving crypto, event contracts, private assets, leverage and other newer strategies. The consultation closed August 31 and does not itself change ETF rules or block new products.
Grayscale And A16z Oppose Treating Novel ETFs as One Category
A16z argued that the SEC should assess products individually based on their structure, assets and risks rather than place all novel ETFs under a single regulatory category.
Grayscale similarly opposed additional portfolio restrictions or disclosure requirements solely because an ETF is considered novel. The Crypto Council for Innovation argued that products with different custody, liquidity and valuation characteristics should not face one uniform approach.
The SEC is considering whether Rule 6c-11 should be changed to impose additional concentration limits, asset exclusions or strategy restrictions on certain ETFs.
Nonsecurity Assets Raise Investment Company Act Questions
The SEC also asked whether funds primarily holding assets that are not securities can qualify as investment companies under the Investment Company Act of 1940.
Crypto industry commenters opposed automatically treating nonsecurity holdings, including some cryptocurrencies, as grounds for forcing products into a different exchange-traded structure.
A16z also asked the SEC to coordinate fund-registration and exchange-listing reviews and provide applicants with more predictable timelines.
Grayscale and CCI Back Confidential Pre-Filing Discussions
Grayscale and CCI supported optional confidential discussions between ETF issuers and SEC staff before public filings, allowing potential regulatory issues to be identified earlier. The SEC is also reviewing whether existing registration timelines give staff enough time to assess newer ETF structures.
The agency has not announced its next step. It could change internal procedures, issue guidance or propose formal rule amendments, which would require another public rulemaking process before becoming binding.
