Crypto industry group urges SEC to streamline novel ETP approvals
The group called for coordination between the SEC, Treasury and IRS to improve tax parity between ETFs and non-ETF ETPs.
The Crypto Council for Innovation is calling on the SEC to modernize the regulatory framework for exchange-traded products, arguing that non-ETF products should receive approval efficiencies similar to those already available to ETFs.
In comments submitted Aug. 31 on the SEC’s proposed framework for Novel ETFs, CCI said the agency should create more efficient and predictable paths to market for all ETPs, including products providing exposure to crypto assets, blockchain opportunities and event contracts. The group said extending mechanisms such as automatic effectiveness and clearer timing standards would improve regulatory parity while encouraging competition and innovation.
CCI specifically highlighted Rule 6c-11, which allows qualifying ETFs to operate without seeking individual exemptive orders, and Rule 485, which allows ETF sponsors to register new funds through post-effective amendments with defined automatic effectiveness periods. CCI argued that similar efficiencies could benefit non-ETF ETPs without sacrificing investor protections.
The group also recommended that the SEC coordinate with the Treasury and IRS to address tax asymmetries between ETF and non-ETF structures. CCI said certain non-ETF ETPs can face less favorable tax treatment, creating an uneven playing field and potentially influencing how innovative products are structured.
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At the same time, CCI opposed changing the Investment Company Act’s longstanding definition of an investment company, saying the existing framework already gives regulators enough clarity and flexibility to determine whether a Novel ETF falls within the definition. Altering it could introduce unnecessary uncertainty, the group said.
CCI also backed clearer ETP naming and disclosure requirements to prevent investors from confusing non-investment-company products with ETFs. It pointed to exchange-traded commodity trusts and certain digital-asset products that may use the ETF label despite being structured differently under securities laws.
Finally, CCI supported allowing issuers to submit confidential draft registration statements or participate in voluntary pre-filing consultations to protect innovative products from copycat filings. It said any such process should not toll or extend existing Rule 485 timelines, ensuring that confidentiality does not come at the expense of predictable market access.