Grayscale, a16z Tell SEC Not to Lump Novel ETFs Into One Regulatory Bucket

There's a quiet battle happening over how the SEC thinks about new exchange-traded products, and it's not about custody or market manipulation for once. It's about categorization.

Grayscale, Andreessen Horowitz, and the Crypto Council for Innovation have filed comments with the SEC urging the agency to preserve its existing classification framework and resist the urge to treat novel exchange-traded products as a single, undifferentiated mass. The filing, submitted ahead of the SEC's rulemaking deadline, argues that product-by-product review isn't just preferable. It's necessary.

Here's the thing. The SEC's current approach to crypto ETPs has been a patchwork of ad-hoc approvals and denials, with no real taxonomy guiding the decisions. That's created a system where issuers can't predict timing, investors can't gauge risk, and lawyers get to bill an awful lot of hours.

The comment period and the clock

The timeline here matters. In late 2024, the SEC proposed a set of amendments to the rules governing exchange-traded products that would, among other things, update how the agency evaluates novel structures. The comment period, which opened in December 2024, has been extended twice, and the final deadline for public input landed in late September 2025.

That's when the Grayscale and a16z letters hit the SEC's inbox. The CCI, which represents major crypto players including Coinbase and Circle, filed separately around the same time.

The core argument from all three is straightforward. Novel ETPs aren't a monolithic class. A physically-backed bitcoin fund faces different market dynamics than an options-based strategy fund or a product tied to staked assets. Taking a blanket approach to these structures would be like treating every derivative product the same because they all have the word "future" in their prospectus.

Grayscale knows this dance well. The firm spent years fighting the SEC over converting its Bitcoin Trust into a spot ETF, a battle that ultimately reached the DC Circuit Court of Appeals before the agency finally caved in January 2024.

So when Grayscale speaks about the perils of over-classification, it's speaking from direct scar tissue.

What a one-size-fits-all rule would break

The practical stakes here are significant. Under the SEC's existing rules, ETPs are classified by their underlying assets and how those assets generate returns. That's why we've separate categories for commodity funds, equity funds, and fixed-income products. Each carries its own disclosure requirements, its own risk assessment, and its own approval pathway.

If the SEC collapses those distinctions and creates a single "novel ETP" category, issuers lose the predictability that comes from fitting within an established bucket. Instead of knowing which box they need to check, they'd face an undefined review process where the goalposts can move between applications.

That won't just slow down crypto product launches. It'll push more issuers toward offshore jurisdictions. Look at the exodus of derivatives trading to non-US venues after the CFTC's 2021 rulemaking. You can already see the pattern: when American regulation becomes murky, capital finds clarity elsewhere.

The skew tells a different story than the headlines. Mainstream media covers crypto ETPs as either "approved" or "denied," but the real market impact comes from the gradations in between. The approval timing, the fee structures, the comfort level the SEC shows toward different product types. Those variables move the market more than any single green light or red light.

Professional traders are pricing in a world where US regulators continue to move at their own pace, regardless of what other jurisdictions do. The EU's Markets in Crypto-Assets Regulation, or MiCA, has already created a unified framework for crypto products. The UK is working on similar rules. And the US is still debating whether a bitcoin fund and an ethereum fund are somehow the same thing because they're both crypto.

That's not a recipe for market leadership.

What's more, the "novel ETP" label risks swallowing products that should be treated differently. Take a tokenized money market fund. Its underlying assets are short-term government securities, and its risk profile looks nothing like a spot crypto fund. Under the SEC's current framework, that distinction is obvious. Collapse everything into one novel bucket, and you're asking investors to compare apples and oranges without even telling them which is which.

Retail investors end up the real losers here. When the SEC can't offer clear product categories, whether from laziness or regulatory overreach, issuers respond by designing products for the approval process rather than for actual investor needs. You end up with funds that say more about compliance strategies than market demand.

That's the opposite of how a healthy capital market should work.

What comes next

The SEC has roughly until March 2026 to finalize its ETP rule changes if it follows the typical 12 to 18 month post-comment timeline. But crypto rulemaking under this administration has been unpredictable, and the agency's leadership has shown more willingness to engage with industry concerns than its predecessor.

There's a real chance the SEC writes a final rule that preserves the existing categories and simply adds guidance for how crypto ETPs fit within them. That would be the pragmatic outcome. It wouldn't give crypto issuers everything they want, but it would restore a degree of transparency to the approval process.

The less likely scenario sees the SEC adopt broad language covering "novel" products, which would be a nice gift to the compliance industry and a direct tax on innovation. Law firms would call it progress. Issuers would call it a headache.

So, a question worth asking: if the SEC can't tell a tokenized treasury product apart from a bitcoin futures fund, what business does it have regulating either one?

Under neutral conditions, market participants would take their cues about what's next from the SEC's commentary on these filings, not from the final rule itself. The initial response arrives within weeks of the comment period closing, and that language will tell you more than any subsequent vote.

The smart money isn't waiting for the rule to figure out where to deploy. This is how the smart money is positioned: firms like Grayscale and a16z fighting the regulatory structure now, while simultaneously building products that work under multiple possible outcomes.

That's actually the tell. When the biggest players are hedging their own regulatory exposure, they're effectively betting on continued ambiguity. They don't expect clean rules. They expect negotiable ones.

Which means the SEC's final decision here, whatever it's, will matter less than how it's phrased. Vague language gives the agency discretion and gives issuers uncertainty. Precise language gives everyone a map.

For crypto, the real fight isn't about whether ETPs get approved. It's about whether the US can maintain the kind of clear regulatory structure that keeps product innovation onshore. If the SEC can't do that, it won't matter how many products they approve. The most interesting funds will keep building in places that respect the distinctions between them.