Crypto Groups Urge SEC to Tailor Rules for Novel ETFs

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 is reviewing its approval framework for novel exchange-traded funds, including nontraditional products involving cryptocurrencies, tokenized assets and event contracts. The review centers on whether such funds should qualify for an automatic approval mechanism, with implications for issuers’ listing timelines, compliance costs and investor-protection standards.

The SEC has opened a 60-day public comment period on proposed changes to U.S. rules governing novel ETFs, seeking market participants’ views on an automatic approval system and the conditions under which it should apply. The process does not mean new products will be approved immediately, but it could change the review threshold for ETFs involving cryptocurrencies and other assets. No monetary amounts or date for a final decision have been disclosed.