SEC giving novel ETFs a rethink as it opens comment period on overhauling U.S. rules

The current process allows ETFs that meet certain conditions to jump into the markets without requiring a complicated request for exemption from the regulator, and that approach has seen an explosive growth from $4 trillion in 2019 to $12 trillion in 2025.

“It is designed to build a record that could be used to justify policy changes in the future that would permit ETFs focused on a broader universe of assets,” said TD Cowen policy analyst Jaret Seiberg, in a note to clients. He said the broader range of ETFs could include “those based on event contracts, crypto assets and single-stock strategies.”

Atkins’ SEC has made it a priority to embrace new technologies, especially cryptocurrency, for which it’s working on major policies to allow for such innovations as tokenization of securities. In the meantime, its ETF stance may also get a rewrite.

“Market participants have raised questions regarding whether novel ETFs with a principal investment strategy to invest in assets that are not securities under the Investment Company Act are investment companies,” according to the SEC’s request, which posed a number of questions on that point. It also asked questions about the time period in which ETFs become effective and what must be disclosed during this process.