SEC Reassesses Approval Rules for Novel Crypto ETFs, Opens Public Consultation

Proposed novel exchange-traded funds would be linked to prediction markets, allowing investors to wager on binary event contracts such as election outcomes. The products have drawn intense scrutiny because they combine traditional financial instruments with highly speculative contracts that can leave investors with a total loss if their predictions prove wrong. They have also sparked ethical concerns over the “gamification” of financial markets and investor protection.

Since February 2026, the U.S. Securities and Exchange Commission has put more than 24 proposed novel ETFs on hold, including applications from Roundhill and other issuers. The SEC formally issued a request for comment on June 30, 2026, opening a 60-day public consultation. The initial responses have been largely skeptical, reflecting widespread concern that the products could fuel speculation and sharply increase risks for ordinary retail investors.

The U.S. Securities and Exchange Commission has long applied securities laws to crypto-asset issuance and fundraising, leaving development teams uncertain about whether tokens qualify as securities and must be registered. The proposed “Regulation Crypto” would provide a temporary registration exemption, reducing compliance costs for startups and signaling a shift in the SEC's regulatory approach toward supporting industry growth.

The SEC is expected to propose its first major crypto rule as soon as July 2026, with a safe harbor for crypto developers, startups and fundraising activities at its core. The proposal would ease registration requirements and barriers to raising capital. The duration of the exemption, eligibility conditions and fundraising cap have not been disclosed. The measure would still be subject to public consultation and a formal rulemaking process.