Comment letters warn a new label would choke the 75-day launch route into a US$12 trillion market
Asset managers, exchanges, brokerage firms, and clearing houses spent the closing days of a 60-day comment window warning the US Securities and Exchange Commission (SEC) against grouping crypto, leveraged, private-asset, and prediction-market products under a single "novel exchange-traded fund" label.
According to a Reuters review of the letters, the sweeping nature of the regulator's questions and the lack of a precise definition of "novel" may make it difficult for regulators trying to chart a path forward.
Angela Brickl, chief operating officer and general counsel of Rafferty Asset Management, wrote in her firm's submission that "'Novel ETFs' cannot be effectively defined," Reuters reported.
Brickl added, in comments carried by the same outlet, that a definition keyed to today's list of new asset classes will be obsolete on arrival because tomorrow's innovations will fall outside it, and that the limitation will penalize every new idea or product modification.
Rafferty's Direxion business offers leveraged single-stock and leveraged index exchange-traded funds (ETFs).
Reuters reported that many issuers and exchanges want to avoid sweeping changes to the SEC process allowing most new ETFs to launch automatically 75 days after filing, and said a separate process for novel ETFs would risk growth in the US$12tn US ETF market.
The SEC did not immediately respond to a Reuters request for comment.
Jeffrey Davis, senior vice president of Nasdaq, acknowledged in his letter that some recent ETF filings have "tested the boundaries" of current rules, the publication reported.
Davis urged the regulator to drop asset-class labels altogether and focus instead on structural characteristics that meaningfully affect investor protection and market integrity.
Mike Khouw, a strategist at YieldMax, told Reuters that "lumping together all of these products is painting with too broad a brush."
YieldMax did not file a comment letter, the outlet reported, though the firm is tracking the review because it builds ETFs using complex options strategies.
Prediction-market funds drew responses from only a handful of commenters by Monday's deadline, per Reuters.
Douglas Crescenzi, chief operating officer of Adjacent Markets, which builds indexes tied to event contracts, urged regulators to treat those products like any other ETF.
Ben Schiffrin, director of securities policy at advocacy group Better Markets, said there was "no reason for the SEC to treat these funds as equivalent to ETFs that invest in securities," the same outlet reported.
TradingView reported that venture capital firm a16z, digital asset manager Grayscale, and the Crypto Council for Innovation (CCI) filed letters dated August 31 asking the SEC to assess products by individual risk parameters rather than by category.
All three opposed changes to investment-company classifications that could automatically sweep products holding non-securities into the Investment Company Act framework.
Grayscale and CCI backed optional confidential pre-filing processes, while a16z asked the regulator to coordinate fund-registration and exchange-listing reviews and adopt more predictable timelines.
The commenters split on terminology.
TradingView reported that a16z proposed reserving the term ETF for funds registered under the Investment Company Act of 1940, while Grayscale argued the term should describe economic characteristics regardless of legal wrapper.
CCI pressed for clearer registration-status disclosures instead of an overhaul of the approval framework.
The SEC opened the consultation on June 30, seeking input on ETFs that invest in innovative asset classes or engage in novel investment strategies.
"Innovation in exchange-traded funds depends on a consistent, transparent, and efficient regulatory framework," SEC chairman Paul S. Atkins said in the commission's announcement.
The request was published in the Federal Register on July 2 under file number S7-2026-24, with comments due on or before August 31.
Canadian ETF assets hit a record US$730.31bn at the end of July, up 25.0 percent from US$584.47bn at the end of 2025, ETFGI reported, with year-to-date net inflows of US$109.26bn.
Figures from the research firm are stated in US dollars.
In Canadian dollar terms, Toronto Stock Exchange's second-quarter ETF report, citing National Bank of Canada Capital Markets, recorded $44.3bn in quarterly flows and $104.2bn in first-half inflows.
Canadian public crypto asset funds sit inside National Instrument 81-102 as alternative mutual funds, the Ontario Securities Commission stated in CSA Staff Notice 81-336, which set out Canadian Securities Administrators staff expectations on liquidity, ETF structure, and custody.
That notice recorded 22 public crypto asset funds in Canada holding roughly $2.86bn in net assets as of April 30, 2023.
