SEC Opens Public Comment on ‘Novel’ ETFs, Putting Crypto and Prediction-Market Funds in Scope

The agency is asking whether funds built on crypto and event contracts even qualify as investment companies, in a review analysts say could reset the listing rules for the entire category by 2027.

The U.S. Securities and Exchange Commission opened a public comment period on ‘novel’ exchange-traded funds, asking how products built on crypto and other nontraditional assets should be regulated and signaling a possible overhaul of how such funds reach US markets.

The agency issued the request for comment on Tuesday, putting three questions to the public: whether some of these funds even count as investment companies, how they ought to be regulated, and whether the SEC’s registration pipeline can accommodate them. The agency will take feedback for 60 days once the request runs in the Federal Register.

“Innovation in exchange-traded funds depends on a consistent, transparent, and efficient regulatory framework,” SEC Chairman Paul Atkins said in a statement. “The Commission’s request for comment seeks input from the public on how the U.S. ETF market can continue to grow and innovate while serving investors effectively, and I look forward to reviewing feedback from market participants as we evaluate how to best respond to recent market changes.”

At the center of the review is the SEC’s standardized listing path, which today lets qualifying ETFs come to market through an automated route rather than petitioning the agency for individual relief — the system it moved to widen last year. The open question is whether that route should reach funds whose holdings sit outside the definition of a security under the Investment Company Act, the statute that determines what qualifies as an investment company.

The rethink follows a stretch of breakneck growth. The SEC pegged total ETF assets at more than $12 trillion at the end of 2025, up from $4 trillion in 2019, with much of the recent surge coming from digital assets. Under Atkins, who became chairman in April 2025, the regulator has cleared a widening lineup of crypto funds — moving past the bitcoin and ether products approved under predecessor Gary Gensler to tokens including Solana and Dogecoin. Funds built on prediction markets sit further back in the queue: the SEC has yet to let them list and has pushed back a string of applications.

For now, the request is only a first step. TD Cowen analyst Jaret Seiberg wrote to clients that the SEC appears to be laying the groundwork to eventually permit “a broader array of ETFs including those based on event contracts, crypto assets and single-stock strategies,” a shift he said could come as soon as 2027.

Related Listen: The Chopping Block: Has Crypto Lost Its Soul? Cypherpunk Nostalgia, Prediction Markets, & Permissionless Perps