The U.S. Securities and Exchange Commission has opened a public consultation on how to regulate exchange-traded funds tied to digital assets and emerging products such as prediction market funds, signaling a broader review of a fast-evolving corner of the ETF market.
Sec seeks input on evolving etf structures
In a request for comment, the agency asked how its current framework for approving “novel ETFs” should be refined and whether new registration requirements are needed. Feedback is due within 60 days.
The move follows rapid growth in cryptocurrency ETFs over the past year, as new products expanded beyond early Bitcoin and Ethereum offerings.
Expanding crypto etf landscape under Atkins
SEC Chair Paul Atkins, who took office in April 2025, said the review aims to ensure the U.S. ETF market can keep expanding while staying aligned with trader protection laws.
During his tenure, ETFs tracking assets such as Solana (SOL) and Dogecoin (DOGE) have launched, building on approvals initiated under former Chair Gary Gensler. Attention is now shifting toward more complex products, including ETFs linked to prediction markets tied to political and economic outcomes.
Prediction market etfs remain on hold
The SEC has not approved any prediction market ETFs and has delayed multiple applications. The consultation asks whether a standardized approval pathway for ETFs meeting certain criteria could make oversight more efficient for these newer structures.
This marks the first formal review of funds tied to event-based outcomes rather than traditional asset pricing, an area expected to grow significantly, with some projections pointing to a $1 trillion market by 2030.
Market pullback adds urgency to review
The consultation comes as U.S. spot crypto ETFs show signs of cooling demand. Total net assets have dropped to $72.82 billion from a peak of $107.8 billion in mid-May. This month alone saw record net outflows of $4.06 billion, the largest since these funds launched in January 2024.
The pullback highlights a shift in trader sentiment and adds urgency to regulatory clarity around these products.
Industry faces pivotal 60-day window
For market participants, the review presents two possible paths: clearer, faster approval processes for new ETFs or stricter rules that could slow product launches.
Submissions from asset managers and financial firms over the next two months are expected to shape how the SEC approaches future ETF regulation, particularly in areas where innovation and oversight may clash.
Atkins has indicated the agency’s goal is not to halt innovation but to build a more durable regulatory framework, suggesting any upcoming rules will aim to balance growth with stronger safeguards as the ETF market continues to evolve.
As ETF rules evolve, understand their structure and impact in crypto—start with our guide on ETFs and how they work.
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