SEC Seeks Public Comment on 'Novel ETFs' Amid Prediction Market ETF Approval Delays
The U.S. Securities and Exchange Commission (SEC) is seeking public comment on novel exchange-traded funds (ETFs) as it faces delays in approving prediction market ETFs. In a press release, the SEC announced a request for comment on ETFs that invest in innovative asset classes or employ novel investment strategies, aiming to facilitate innovation while protecting investors and maintaining fair markets.
The SEC noted that market participants have questioned whether novel ETFs investing in non-securities assets qualify as investment companies under the Investment Company Act, raising issues about registration and regulation. The Commission also questioned the applicability of the ‘Subjective Test’ and generic listing standards, which allow registration statements to take effect after 75 days.
This request comes as asset managers like Roundhill, Bitwise, and GraniteShares seek approval for ETFs tracking prediction market platforms such as Polymarket. The SEC is also inviting comments on competitive pressures that may incentivize rushed filings or a flood of unlaunched ETFs, suggesting potential rule amendments like minimum registration fees or nonpublic filing periods.
The SEC is concurrently evaluating rules for tokenized securities and, along with the CFTC, has requested comments on a harmonized framework for crypto perpetuals.