The SEC has launched a public comment period on “novel ETFs” as crypto products and prediction market offerings push the boundaries of the current approval process.
The review includes funds that invest in innovative assets or employ fresh strategies, such as funds that might not fall into an existing category.
The request solicits opinions and input from the funds, advisers, investors and other market participants on whether the SEC’s new action would better serve investors, maintain orderly markets and foster capital formation. Comments will be accepted for 60 days following the date the request is published in the Federal Register.
“Innovation in exchange-traded funds depends on a consistent, transparent, and efficient regulatory framework,” SEC Chair Paul Atkins said.
The SEC said it wants feedback on the legal status of certain novel ETFs, how they should be regulated, and how the registration process should work as new fund types enter the market. The move follows rapid growth in ETF assets, which rose from over $4 trillion at the end of 2019 to over $12 trillion at the end of 2025.
Crypto ETFs add pressure to the approval process
The review comes after a wave of crypto ETF approvals and filings. Since Atkins became SEC chair in April 2025, the agency has approved dozens of crypto ETFs beyond Bitcoin and Ethereum products, including funds tied to assets such as SOL and DOGE.
As previously reported by The Coin Headlines, Morgan Stanley recently filed amended S-1 statements for ETH and SOL spot ETFs with proposed fees of 0.14 percent. Moreover, the planned ETH fund would trade under the MSSE ticker, while the Solana product would trade as MSOL if approved.
The SEC’s current ETF framework dates back to rule 6c-11, adopted in 2019. That rule allowed ETFs meeting certain conditions to operate without waiting for separate exemptive orders, helping reduce delays for many standard products.
However, the latest request shows that the agency sees a need to revisit how that process works for more complex funds. The SEC asked whether automatic effectiveness periods of 75 and 60 days should be extended for novel ETFs, and whether it should be able to delay a fund’s effectiveness on its own.
Prediction market ETFs remain under review
Prediction market ETFs have drawn special attention because they would give investors exposure to event contracts tied to political, economic, or other real-world outcomes. The SEC has not yet approved those funds for listing and trading, and several proposals have faced delays.
Reuters reported that the SEC has delayed dozens of ETFs tied to real-world events, including elections. The report also said the status of event contracts remains in flux, while analysts view event contract and leveraged ETF proposals as likely triggers for the agency’s review.
Bloomberg senior ETF analyst Eric Balchunas said on X that the SEC’s comment request aims to build a clearer framework for “what should be ETF-able.” He said such a framework could standardize approvals, reduce backlogs, and limit issuer leapfrogging.
The topic also connects with broader prediction market growth. Previously, we covered Kalshi’s lawsuit against Illinois over a new state law covering prediction markets. That report noted Kalshi’s claim that federally regulated event contracts should not face separate state-level restrictions.
Prediction markets grow fast
The SEC review arrives as prediction markets move closer to mainstream finance. As we reported, Polymarket’s soccer category saw more than $2 billion in trading volume during the first 10 days of the World Cup, while Kalshi’s open interest rose to a record $1.16 billion.
In addition, DraftKings launched its DKeX prediction exchange as sector activity rose, as reported on June 27. Prediction market volume reached $14.4 billion in weekly activity, with sports and non-sports markets both drawing more traders.
This shows why ETF issuers may want to package event-based products inside traditional brokerage accounts. A prediction market ETF could widen access, but it may also raise questions about investor disclosures, product structure, and whether event contracts belong inside the ETF wrapper.
For crypto ETF issuers, the SEC’s review could bring more clarity. For prediction market fund sponsors, it may decide how far event-based products can move into public markets. The 60-day comment period now gives issuers, exchanges, and investors a formal path to shape the next stage of ETF regulation.
