Grayscale and a16z Tell the SEC: Judge Crypto Funds One by One, Not as One Novel Bucket

Three of the biggest names in crypto investing just told the SEC: do not lump every new crypto fund into one regulatory bucket. Grayscale Investments, venture capital giant a16z and the Crypto Council for Innovation submitted letters on August 31 urging the U.S. Securities and Exchange Commission to judge “novel” exchange traded funds one by one — based on their actual risks — rather than imposing blanket restrictions on an entire category.

By Raj Patel | September 2, 2026

The Hook: A Closed Consultation That Could Reshape Crypto Funds

The letters landed on the final day of a 60-day SEC consultation that opened on June 30. The agency asked for public feedback on how to classify and regulate funds that use new assets or strategies — including crypto assets, commodity instruments, single-stock strategies, heightened leverage, private assets and event contracts. The consultation was exploratory: it did not propose a rule, ban any product, or set a deadline for action. But what the SEC does next will shape which crypto funds can reach your brokerage account — and how quickly.

The Core Conflict: One Framework or Product-by-Product Reviews?

The central dispute is straightforward. The SEC asked whether products holding assets that are not securities — like spot crypto trusts — should automatically be treated as investment companies under the Investment Company Act of 1940. Think of it like this: should every vehicle on the road follow truck rules just because it carries cargo, or should regulators look at whether it is actually a car?

A16z argued the SEC should assess each product according to its economic structure and underlying risks, warning that asset-based labels could group established crypto products with less developed strategies that carry different liquidity, valuation and custody concerns. Grayscale opposed additional portfolio conditions or disclosure requirements that would apply solely because a regulator calls a product “novel,” arguing funds with established compliance records should be evaluated under the rules already governing their legal structure. The Crypto Council for Innovation called for comparable treatment across exchange traded products and warned that broad changes could delay otherwise eligible products.

There was one notable disagreement among allies. A16z proposed reserving the “ETF” label strictly for open-end funds registered under the Investment Company Act. Grayscale disagreed, arguing the label should reflect a product’s economic features rather than its legal paperwork. CCI proposed a middle path: clearer disclosures showing whether a product is a registered investment company, keeping familiar market terminology while giving investors more information.

Why the Legal Wrapper Matters for Your Money

This may sound like semantics, but it affects governance, registration requirements and the investor protections that apply to each structure. Spot crypto products often use commodity-based trust structures rather than registering as traditional funds — which is why the SEC itself typically calls the spot Bitcoin products approved in January 2024 “exchange traded products,” or ETPs, rather than ETFs. The distinction does not determine whether a product can trade on an exchange, but it determines which rulebook governs it — and which protections you can count on as an investor.

Under the 1940 Act’s objective test, an issuer may qualify as an investment company if investment securities exceed 40 percent of its total unconsolidated assets after excluding government securities and cash. All three letter writers opposed changing those established tests to automatically capture products holding non-security assets — a change that could affect commodity trusts and crypto products structured outside the Act.

Market Implications: Faster Listings — or New Delays

The stakes are tangible. The SEC’s September 2025 adoption of generic listing standards for commodity-based trust shares allows qualifying spot crypto products to reach the market without a separate product-specific exchange rule change — reportedly cutting review periods from as long as 240 days to roughly 75 days. A16z urged the agency to go further by coordinating its two separate review tracks — fund documents at the Division of Investment Management and exchange listings at the Division of Trading and Markets — and adopting predictable timelines. Without coordination, an issuer could clear its registration questions and still face uncertainty over whether an exchange can list the product.

Grayscale and CCI also backed an optional confidential prefiling process, letting issuers identify legal concerns with regulators before making public submissions — reducing repeated amendments and avoidable delays. For retail investors, that could mean fewer withdrawn filings like Grayscale’s recent pullback of three proposed altcoin products that never became effective, and a steadier pipeline of new crypto funds.

The Verdict: Recommendations, Not Rules — Yet

Nothing changes today. The letters are recommendations from industry participants, not rules, and the SEC — which noted U.S. ETF assets grew from more than 4 trillion USD in 2019 to over 12 trillion USD at the end of 2025 — has announced no date for a response. SEC Chair Paul Atkins said when opening the review that innovation depends on a “consistent, transparent and efficient regulatory framework.” The agency could now issue guidance, propose amendments, adjust staff review procedures, or do nothing immediate. Watch for the next signal: whether the SEC embraces case-by-case reviews as the industry urges, or moves toward the category-wide approach these three heavyweights just warned against.

The cryptocurrency market remains highly volatile. This article is for informational purposes only and does not constitute financial advice.