Issuers ask the SEC for a quiet door on novel ETFs; the market makers ask for a wider one

What happened

The comment period on the Securities and Exchange Commission's Request for Comment on Novel ETFs closed on Monday 31 August 2026. The request is Release No. 33-11426, 34-105808, IC-36228, File No. S7-2026-24, and its own DATES line reads 'This request for comment was published in the Federal Register on July 2, 2026. Comments must be received on or before August 31, 2026.' It asks about exchange-traded funds that 'invest in innovative asset classes or engage in novel investment strategies', which Jane Street's letter enumerates from the release as funds 'holding or employing crypto assets, commodity-focused instruments, single-stock strategies, heightened leverage, blockchain-enabled opportunities, private assets, event contracts, and/or a combination of any of these'. Five letters read here, all dated 31 August and all addressed to Vanessa A. Countryman, divide on speed. Grayscale Operating, LLC, which describes itself as 'the world's largest digital asset-focused investment platform', asks the Commission to 'Establish an optional, confidential Novel ETF pre-filing consultation process with a 45-day staff response commitment, an expedited effectiveness incentive for responsive filings, and aggregate annual public reporting for accountability', and says 'a confidential draft registration statement period for Novel ETFs would provide immense benefit to the market'. Andreessen Horowitz, which puts its crypto committed capital at more than $9.8bn, asks the Commission to preserve the statutory definition of investment company, to align the Securities Act, Investment Company Act and Rule 19b-4 tracks, and to 'avoid treating all Novel ETFs as a single category'. Against them, Charles Schwab and Co. and its asset management affiliate write that 'Schwab does not support a fully confidential filing process', and that where staff do engage confidentially 'the associated filing should become public for at least 75 days before the product becomes effective, so that broker-dealers and other market participants have adequate time to review the product and to develop appropriate educational and risk materials'. Jane Street Group, a registered market maker in most US-listed ETFs and lead market maker in roughly 20 per cent of them, writes that 'Requiring ETFs to launch with at least two APs would help ensure that all liquidity providers can create and redeem freely', that 'ETFs listing with only one AP run a greater risk of the ETF price diverging from its intrinsic value', and that a framework 'that generally incentivizes issuers to file quickly may lead to situations where the issuer has not investigated all of the needs of an efficiently structured ETF'. The fifth letter is Kalshi's, filed for Kalshi Inc. with KalshiEX LLC and the clearing house Kalshi Klear LLC, and no report read here mentions it. It asks the Commission to confirm that a fund holding non-securities may still be an investment company under the subjective test, to keep the Tonopah factors as a facts-and-circumstances inquiry 'and decline to convert the Subjective Test into an asset-percentage test', to 'Preserve Rule 6c-11 as an asset-neutral structural framework, without asset-class exclusions, minimum securities holdings, or Novel-ETF-specific diversification, concentration, or issuer limits', and to handle event contract questions 'through existing Investment Company Act requirements, tailored disclosure, exchange listing standards, and coordination with the CFTC'. It states that Kalshi has submitted more than 85 per cent of all event contracts certified with the CFTC, and it argues that 'Novel ETFs should be able to give investors access to innovative asset classes, including event contracts, perpetual futures, and other asset classes the Release identifies'. The Block reports that 21Shares made a request similar to Grayscale's, that Multicoin Capital and a group including Jito Labs, the Jito Foundation and the Solana Policy Institute asked for rules allowing staking receipt tokens to be held as substantial positions, and that the New York Stock Exchange asked for more predictable timelines; those letters were not read here.

Why it matters

The wrapper is where the fight over crypto market structure has moved, and this file is the clearest statement yet of who wants what. An exchange-traded fund is the cheapest distribution any asset can get in the United States, because it reaches a brokerage account without the account holder ever touching a wallet, an exchange or a chain; whoever sets the speed at which one can be launched sets how fast a new asset class reaches retail. The issuers are asking for two things that go together, confidentiality and a clock, and the reason they give for confidentiality is not investor protection but copying: Grayscale says an optional confidential process would reduce the incentive for competitors to file imitative registrations. That is an argument for intellectual property in a product design, made inside a disclosure regime built on the opposite premise. The market makers are asking for the thing the disclosure regime is actually for, which is time to build a book. Jane Street's two-authorised-participant floor is a structural point that has nothing to do with crypto and everything to do with it: a fund that lists with a single AP has one party able to arbitrage the premium, and if that party steps back the fund becomes a closed-end vehicle whose price detaches from what it holds. That failure mode is the one every crypto trust in the last cycle demonstrated at scale. Schwab's 75 days is the same instinct expressed by a distributor rather than a liquidity provider. And Kalshi's letter is the most consequential document in the file for this beat, because it is a request to make event contracts an institutional asset class. If a registered fund may hold them, prediction market exposure arrives in retirement accounts without anybody opening an account at a designated contract market, which is precisely the distribution route that state gambling regulators, including the Michigan court that enjoined the same company on 1 September, have no reach over. The same firm is arguing in one forum that it is exclusively federal and asking in another for a wrapper that puts its contracts inside a fund the states cannot touch at all.

What is not settled

The Commission has not said what it will do and has announced no rulemaking; a request for comment carries no obligation to act on anything in it. The deadline is one of the few settled facts and the reports do not agree on it: The Block gives 31 August, which is what the release says and what every letter read here is dated, and Decrypt gives 2 September and calls it a Monday, when 2 September 2026 was a Wednesday. This desk read five of the letters and cannot say how many were filed in total, because the Commission's comment file page assembles its list in the browser and the desk could not enumerate it from the served markup. Whether a fund holding event contracts can satisfy the subjective test is a genuine legal question that Kalshi's letter argues and nobody in the file answers. Nothing in the letters read here addresses what a confidential process would mean for the exchange listing application that has to run beside a registration, which is where the generic listing standards adopted in 2025 already cut the review, and Crowdfund Insider's account of that reduction from 240 days to about 75 was not checked against a primary. And no letter read here takes a position on perpetual futures in a fund beyond Kalshi's single clause, which is the gap worth watching given that the classification of a perpetual is itself before a federal court.