SEC's Novel ETF Review Targets Crypto Funds and Prediction Markets

The Securities and Exchange Commission opened a 60-day public comment period on Monday for a new regulatory framework covering so-called novel ETFs – products that hold crypto assets, track prediction markets, or use non-traditional structures like staking and options-based income strategies.

“The examination aims to maintain transparency and investor protection,” SEC Chair Paul Atkins said in a statement accompanying the announcement. The agency will accept feedback for 60 days after the proposal is published in the Federal Register, then decide whether to adjust the rules.

The move follows a separate SEC-Commodity Futures Trading Commission request last week for public input on harmonizing margin requirements across securities and derivatives markets.

ETF assets have surged from roughly $4 trillion in 2019 to over $12 trillion by the end of 2025, according to SEC data. That growth has been driven partly by crypto-linked products, and issuers have pushed beyond simple spot funds into more complex structures.

Among the questions the SEC is asking: whether an ETF that mainly holds non-securities assets – like commodities or crypto tokens – should still be regulated as an investment company under the Investment Company Act of 1940. The answer determines everything from custody rules to leverage limits.

TD Cowen policy analyst Jaret Seiberg said the consultation could lead to concrete changes. “It could open the door for event-based contracts, crypto assets, and single-stock strategies,” Seiberg said in a note. He cautioned that the outcome depends heavily on how the SEC defines “non-securities assets.”

Multiple asset managers have already filed products that test current rules:

ProShares launched the GENIUS Money Market ETF in June, a fund that invests in Treasury instruments allowed under the GENIUS Act framework for payment stablecoins.

Grayscale introduced a staking product centered on the HYPE token, giving investors price exposure plus potential staking income.

BlackRock filed for an options-driven Bitcoin income ETF in January. Goldman Sachs followed in April with a fund that combines spot Bitcoin exposure with a covered-call overlay.

Franklin Templeton submitted two ETF proposals this month that reinvest equity dividends into Bitcoin instruments – futures, options, and related derivatives. Bitwise took a different route in January, filing for an actively managed ETF that pairs Bitcoin with gold and other precious metals.

The SEC’s current comment period covers all these categories. The agency is weighing whether existing rules accommodate funds that differ substantially from traditional ETF structures.

For traders and issuers, the 60-day window represents the first formal opportunity to shape the rules. A clear, permissive framework would reduce approval risk for the pending products. A restrictive outcome – or a prolonged review – could push innovation offshore or into exemptive relief applications that take years to resolve.

The SEC has not set a deadline for rulemaking after the comment period closes. The next concrete marker is the Federal Register publication date, which triggers the 60-day clock.