SEC Seeks Public Comment on Novel Exchange-Traded Funds
By Deborah Fuhr, ETFGI, 2 July 2026 - The U.S. Securities and Exchange Commission (SEC) has initiated a broad review of “Novel ETFs,” seeking public comment on how ETFs investing in innovative asset classes or employing new investment strategies should be regulated.
The U.S. ETF industry has experienced remarkable growth, with assets increasing 186.8%, from $5.3 trillion invested in 2,241 ETFs at the end of 2020 to $15.2 trillion invested in 5,107 ETFs by the end of May 2026. Over the same period, the number of ETFs available to investors increased 127.9%, highlighting the industry's rapid expansion and continued innovation. (source ETFGI reports. Note date is covering only ETFs that are unit investment trusts or investment companies under the US Investment Company Act of 1940).
The SEC is focusing on ETFs that invest in or provide exposure to:
Crypto assets and crypto-linked investments
Event contracts and prediction markets
Single-stock ETFs
Leveraged and inverse products
Options-based and defined-outcome strategies
Private asset exposures
Other innovative or non-traditional investment structures
The goal is to determine whether the existing regulatory framework remains appropriate as ETF sponsors continue to push product innovation into new areas.
The SEC's consultation addresses three fundamental issues:
1. Investment Company Status
The Commission is examining whether certain ETFs that primarily invest in non-security assets, such as cryptocurrencies, commodities, or event contracts, should qualify as investment companies under the Investment Company Act of 1940.
2. Suitability of Rule 6c-11
The SEC is considering whether the ETF Rule (Rule 6c-11) should be amended to address risks posed by novel products, including concerns around liquidity, arbitrage efficiency, valuation, investor protection, and market surveillance.
3. ETF Registration Process
The Commission is also evaluating whether novel ETFs should be subject to enhanced regulatory review before being launched, potentially creating a different approval process for more complex products.
The SEC's action reflects growing concern that ETF innovation is moving faster than the regulatory framework originally designed for traditional index-tracking products.
For ETF sponsors, the review could be one of the most significant regulatory developments since the adoption of Rule 6c-11 in 2019.
Potential outcomes include:
New guidance on crypto and alternative exposure ETFs
Enhanced scrutiny of leveraged and options-based products
Additional disclosure requirements
Changes to generic listing standards
Longer review periods for certain ETF launches
Greater regulatory clarity for emerging ETF structures
While the SEC is not proposing new rules at this stage, the consultation is widely expected to inform future guidance, rulemaking, and registration review practices.
Read the SEC PR: https://www.sec.gov/newsroom/press-releases/2026-60-sec-seeks-public-comment-novel-exchange-traded-funds
For further information about this press release, or to discuss ETFGI’s research subscription services, consulting solutions, ETFGI’s annual Global ETFs Insights Summits, or ETF TV, please contact Deborah Fuhr at deborah.fuhr@etfgi.com.
Disclaimer: This article is published by, and remains the copyright of, ETFGI LLP ("ETFGI") or its licensors. The information and data in this article is for information purposes only. ETFGI makes no warranties or representations regarding the accuracy or completeness of the information contained on this article.
ETFGI does not offer investment advice or make recommendations regarding investments and nothing in the article shall be deemed to constitute financial or investment advice in any way and shall not constitute a regulated activity for the purposes of the Financial Services and Markets Act 2000. Further, nothing in this article shall constitute or be deemed to constitute an invitation or inducement to any person to engage in investment activity. Should you undertake any such activity based on information contained in this article, you do so entirely at your own risk and ETFGI shall have no liability whatsoever for any loss, damage, costs or expenses incurred or suffered by you as a result.
ETFGI LLP is a limited liability partnership registered in England and Wales with registered number OC372221. Our registered office is at 7th Floor, York House, 23 Kingsway, London WC2B 6UJ, United Kingdom.