a16z and Grayscale urge SEC to assess novel ETFs individually, reject blanket restrictions

Industry input on ETF regulation

Venture capital firm Andreessen Horowitz (a16z), a leading investor in both crypto and technology startups, submitted a letter urging the SEC to assess new ETF products according to the unique characteristics of their underlying assets. The firm also advocated for better coordination between fund registration and exchange listing processes, along with a commitment to more consistent regulatory timelines.

Digital asset manager Grayscale and the Crypto Council for Innovation (CCI), an advocacy group representing several major players in the sector, also engaged with the SEC’s request for input. Both organizations supported an option for confidential pre-filing procedures, which would allow firms to consult with the regulator ahead of a public application, potentially streamlining the launch of innovative financial products.

All three organizations opposed any regulatory change that would automatically place investment products holding non-securities—such as cryptocurrencies—under the Investment Company Act. They argued that such changes may inappropriately broaden the framework’s scope, which is intended for funds holding traditional securities.

The letters, dated August 31, were made public by the SEC at the conclusion of a 60-day window for comments on the agency’s review of novel ETF products.

Current SEC consultation and industry feedback

The SEC opened its comment period on June 30, asking for public input on whether the current regulation of ETFs is sufficient for the next generation of funds—including those linked to digital assets—and whether changes to registration and approval processes are warranted. This consultation covers rules for registration, disclosures, and the protection of investors as financial technology evolves.

In their responses, industry stakeholders expressed general opposition to sweeping regulatory changes that could delay product rollouts or impose additional requirements without regard to the specific characteristics of each fund. Their positions, however, diverged on issues such as classification, approval protocols, and the fundamental definition of ETFs.

a16z emphasized the need for the ETF designation to be limited to funds governed by the Investment Company Act of 1940. Grayscale, which operates several cryptocurrency funds, argued for the ETF label to be defined by economic function, regardless of the regulatory structure under which a fund operates.

Each organization stressed that evaluating products based on individual merits rather than categorically restricting novel ETFs will better align regulation with industry innovation and investor interests.

The Crypto Council for Innovation further suggested that maintaining an optional confidential pre-filing process would help reduce regulatory uncertainty and facilitate responsible market development.

The ongoing dialogue reflects growing industry interest in launching more diverse digital-asset investment products, as both regulatory scrutiny and investor demand increase in the US.

The SEC is expected to review the submitted feedback and consider amendments to its policies concerning the registration and approval of novel ETFs, but no specific timeline for further action has been provided.

Mini dictionary: Investment Company Act of 1940, a US federal law that regulates investment companies and imposes standards to protect investors. ETFs governed under this act must follow specific disclosure, reporting, and compliance requirements.