Major crypto asset managers and venture firms are pushing the Securities and Exchange Commission (SEC) to abandon a blanket regulatory approach to new exchange-traded products, arguing that Bitcoin, Ethereum, and other digital assets deserve individualized review rather than being lumped together with private equity funds, leveraged strategies, and prediction markets. The industry's pressure campaign, led by Grayscale, Andreessen Horowitz (a16z), and the Crypto Council for Innovation (CCI), centers on a fundamental disagreement with how the SEC plans to regulate what it calls "novel" ETFs (exchange-traded funds).

Why Is the SEC Treating All New ETFs the Same?

In late June, the SEC opened a public consultation on how it should regulate new ETFs and digital assets. The regulator's proposed framework would apply heightened scrutiny to any ETF deemed "novel," or new and unusual. The problem, according to the crypto industry, is that this category is far too broad. It lumps together products with vastly different risk profiles, liquidity characteristics, and investor protection needs. A Bitcoin spot ETF, for instance, operates on a mature, well-established infrastructure. A prediction market ETF, by contrast, involves entirely different valuation and custody challenges.

a16z made this case directly to the SEC, arguing that products do not present the same liquidity, valuation, or investor protection issues and therefore should not face identical regulatory hurdles. The venture firm also noted that crypto ETFs and exchange-traded products (ETPs) now have a more developed infrastructure. Bitcoin and Ethereum have already set precedents, and Solana also has products listed in the United States. Starting "almost from scratch" for each new category, a16z argued, does not make much sense.

What Specific Changes Are Crypto Firms Requesting?

The industry's requests fall into several categories, each designed to speed up approvals while maintaining investor safeguards. The most contentious proposal involves confidentiality. Grayscale and 21Shares both want the SEC to allow optional confidential draft registrations before public filing, a mechanism that could reduce the incentive for competitors to submit imitative or duplicative filings. Grayscale specifically wants SEC staff to commit to responding within 45 days to these confidential submissions.

The timing issue is also critical. Currently, an issuer can finish part of the registration of its fund while the authorization for listing by the exchange is still pending. a16z wants better coordination between these two procedures, proposing standardized timelines, shorter reviews, and simultaneous processing of applications when possible. The company also argues that filings are now submitted electronically, disclosures are largely templated, and many of the same questions come up across products, making a faster process feasible without sacrificing quality.

• Confidential Pre-Filing Process: Grayscale and 21Shares want an optional confidential procedure before public filing, with a defined SEC response time of 45 days, to reduce copycat applications and give sponsors time to refine their proposals.
• Faster and Coordinated Reviews: a16z is pushing for standardized timelines and simultaneous processing of SEC registration and exchange listing applications, arguing that electronic filings and templated disclosures make this feasible.
• Tailored Regulatory Treatment: All three organizations want the SEC to evaluate each ETF based on its actual risk profile rather than automatically applying heightened scrutiny to anything labeled "novel."
• Staking Receipt Token Eligibility: Multicoin Capital and Jito Labs are asking the SEC to allow staking receipt tokens, which represent crypto assets staked to earn rewards, to be held in spot crypto ETPs, potentially making up substantially all of a fund's digital asset holdings.

Not everyone in the industry agrees on every point. a16z wants to reserve the term "ETF" for funds registered under the Investment Company Act of 1940, with other products clearly identified as ETPs. Grayscale opposes this distinction, arguing that the term ETF can describe any listed product with an arbitrage mechanism and transparent pricing, regardless of its legal framework. The CCI prefers clearer information on the regulatory status of each product rather than a complete change of names.

There is also disagreement from outside the crypto industry. Jane Street warned that pressure to get an ETF to market quickly can result in rushed registrations and leave less time for sponsors to get feedback from market makers on fund structure and liquidity. Jane Street also proposed requiring ETFs to launch with at least two authorized participants, the firms that facilitate the creation and redemption of ETF shares. Charles Schwab opposed making the filing process fully confidential, arguing that if the SEC does hold confidential discussions with a sponsor, the filing should become public at least 75 days before the fund takes effect.

What Is at Stake in This Regulatory Battle?

The market being discussed is already enormous. Assets held in US ETFs exceed 12 trillion dollars, with more than 4,600 funds now available. Crypto represents only part of this market, but it is advancing quickly. US spot Bitcoin ETFs recently approached 100 billion dollars in assets, and Ethereum and Solana also have their own products. Managers are testing assets increasingly distant from the two largest cryptocurrencies, and Grayscale has already filed an application to launch a BNB (Binance Coin) ETF on Nasdaq, signaling that the industry is not waiting for regulatory clarity before moving forward.

The SEC faces a delicate balancing act. It must weigh investor protection against the speed of procedures and the arrival of much more varied crypto products. Comments on the SEC's request were due August 31, though the regulator continued to post submissions after the deadline. The SEC has not yet set a timeline for any further action.

For investors and the broader crypto ecosystem, the outcome of this regulatory negotiation will determine how quickly new digital asset ETFs can reach the market and how much flexibility issuers have in structuring products. A faster, more tailored approval process could accelerate institutional adoption of crypto assets. A more restrictive approach could slow innovation and push some products to less regulated markets or offshore venues. The industry's pressure campaign suggests that the stakes are high enough to warrant sustained engagement with regulators, even as the market continues to evolve.