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One label should not mean one rulebook
A16z argued the SEC should assess each product according to its economic structure and underlying risks, warning that asset-based labels could group established crypto products with less developed strategies carrying different liquidity, valuation and custody concerns. The firm pointed to the growth of regulated crypto market infrastructure, established disclosure practices and generic exchange listing standards as developments that distinguish some digital asset products from funds holding private securities or using highly leveraged strategies.
Grayscale made a similar case, opposing additional portfolio conditions or disclosure requirements applied solely because regulators describe a product as novel. Funds with established compliance records should continue to be evaluated under the rules governing their legal structure and assets, the manager said, with regulators identifying a specific risk before applying additional conditions.
CCI called for comparable regulatory treatment across exchange traded products, supporting clear investor disclosures while opposing broad changes that could delay otherwise eligible products.
Investment company status is the central dispute
The SEC asked whether a product mainly investing in assets that are not securities could still qualify as an investment company under the Investment Company Act of 1940. Under the law's objective test, an issuer may qualify if investment securities exceed 40% of its total unconsolidated assets after excluding government securities and cash, alongside a subjective test examining activities, public representations, management and income sources.
All three respondents opposed changing those tests to automatically capture exchange traded products holding nonsecurity assets, a shift that could affect commodity trusts and crypto products structured outside the Act. Spot crypto products typically use commodity-based trust structures rather than registering as open-end investment companies, and the SEC itself traditionally calls the spot Bitcoin products approved in January 2024 exchange traded products rather than ETFs.
The distinction affects governance, registration requirements and investor protections, though not whether a product trades on a national exchange. A16z proposed reserving "ETF" for open-end funds registered under the Act, while Grayscale argued the label should reflect a product's economic features rather than its legal wrapper, and CCI proposed clearer disclosures showing whether a product is a registered investment company.
Faster, coordinated reviews sought
The SEC's registration and exchange listing reviews proceed through separate channels: fund documents are reviewed by the Division of Investment Management, while exchange listing proposals fall under the Division of Trading and Markets. A16z said the agency should coordinate the two reviews and adopt predictable timelines, noting that without coordination an issuer could resolve registration questions while still facing uncertainty over whether an exchange can list the product.
Grayscale and CCI supported an optional confidential prefiling process to identify legal or disclosure concerns before public submissions, arguing early discussions could reduce repeated amendments and prevent avoidable delays. The proposals would not remove the SEC's authority to request changes or reject filings.
The debate follows the SEC's September 2025 adoption of generic listing standards for commodity-based trust shares, which can reduce qualifying crypto fund review periods from as long as 240 days to approximately 75 days. Grayscale recently withdrew three proposed altcoin products after their registrations never became effective. With U.S. ETF assets growing from more than $4 trillion in 2019 to over $12 trillion at the end of 2025, and novel products from crypto index funds to prediction-market ETFs queuing for approval, how the agency sorts these submissions will shape the next generation of exchange traded products.
