Crypto Council Advocates for Streamlined ETP Approvals with SEC

The Crypto Council for Innovation (CCI) has submitted comments to the SEC, advocating for a modernization of the regulatory framework governing exchange-traded products (ETPs). The group argues that non-ETF products should benefit from approval efficiencies akin to those already enjoyed by ETFs.

In comments made on August 31 regarding the SEC’s proposed framework for Novel ETFs, CCI highlighted the need for more efficient and predictable pathways to market for all ETPs. This includes products that provide exposure to crypto assets and blockchain opportunities. The organization suggested that mechanisms like automatic effectiveness and clearer timing standards could enhance regulatory parity, fostering competition and innovation.

CCI specifically referenced Rule 6c-11, which permits qualifying ETFs to operate without individual exemptive orders, and Rule 485, which allows ETF sponsors to register new funds through post-effective amendments with defined automatic effectiveness periods. The group contended that similar efficiencies could be extended to non-ETF ETPs without compromising investor protections.

Furthermore, CCI called for the SEC to collaborate with the Treasury and IRS to address tax disparities between ETF and non-ETF structures. They noted that certain non-ETF ETPs face less favorable tax treatment, creating an uneven competitive landscape that could influence product structuring.

While advocating for these changes, CCI opposed altering the Investment Company Act’s definition of an investment company, asserting that the current framework provides sufficient clarity and flexibility for regulators. They warned that changes could lead to unnecessary uncertainty.

Additionally, CCI supported clearer naming and disclosure requirements for ETPs to prevent confusion between non-investment-company products and traditional ETFs. They pointed out the risk of mislabeling exchange-traded commodity trusts and certain digital-asset products.

Finally, the group backed the idea of allowing issuers to submit confidential draft registration statements or engage in voluntary pre-filing consultations to safeguard innovative products from copycat filings, ensuring that confidentiality does not hinder predictable market access.