SEC Official Says Crypto ETF Process Was Flawed, Eyes Standard Rules

A senior SEC official has admitted the agency's past handling of crypto ETF approvals was insufficient, a concession that could push the regulator toward a more standardized review framework.

Brian Daily, who heads the SEC's Division of Investment Management, said earlier shortcomings in the approval process “hurt industry trust,” according to local outlet Pinews. The commission is currently fielding roughly 200 ETF filings per month, he said, spanning both conventional strategies and experimental structures tied to crypto and prediction markets.

Daily argued the regulator needs an “asset-neutral” framework that evaluates product risks and investor protections consistently, regardless of whether an ETF references equities, commodities or crypto assets. The goal is transparency and predictability, not looser standards, he said.

Market participants have long complained that inconsistent timelines and unclear benchmarks around crypto-related ETFs created uncertainty for issuers and market makers, even as demand for regulated digital-asset access grew. A clearer framework could reduce that uncertainty premium, though Daily said investor-protection standards would remain intact.

The SEC is also considering a confidential filing pathway intended to curb rapid replication of product ideas, an issue that has become more prominent as ETF sponsors race to launch first-to-market structures. Such confidentiality mechanisms are common in other parts of financial regulation. Their use in ETFs could give early applicants a window to refine disclosure and design before filings become public, potentially rewarding first movers with better-prepared products.

For crypto-linked ETFs, filings will likely be judged heavily on custody arrangements, valuation methodology, liquidity and market integrity considerations, and investor-risk disclosures. Sponsors that can document robust controls around custody partners, pricing sources, redemption planning and surveillance may move faster under a standardized framework.

Daily said the SEC is trying to pursue investor protection and support for financial innovation in parallel. The comments signal the agency may be moving toward more predictable benchmarks for evaluating next-generation ETFs, including crypto-linked products, at a time when issuers are multiplying and product design is evolving quickly.