Crypto firms urge SEC to speed ETF reviews and allow confidential draft filings

Grayscale and allies seek confidential filings and faster SEC reviews

Crypto companies including Grayscale, 21Shares, and a16z are asking the U.S. Securities and Exchange Commission to change how it reviews applications for new exchange-traded funds, or ETFs. An ETF is a type of investment fund that trades on stock exchanges and can hold assets like crypto.

The firms want the SEC to allow sponsors to file draft registration documents confidentially before making them public. They also want the regulator to shorten review timelines and commit to responding within 45 days.

The request comes as the SEC is reviewing how it handles "novel" funds, which include new types of crypto products. Comments on the proposed changes were due on Aug. 31, though the regulator has continued to accept submissions past that date.

Key points from the filings

• Grayscale and 21Shares argue that confidential filing could stop competitors from copying public drafts immediately.
• a16z said modern electronic filings and templated disclosures should allow for faster reviews, but added that speed should not mean a weaker review.
• Jane Street warned that rushing ETF launches could lead to incomplete registrations and less time to consult market makers.
• Charles Schwab opposed fully confidential processes, suggesting filings become public at least 75 days before a fund launches.
• Multicoin Capital and Jito Labs asked the SEC to allow staking receipt tokens in spot crypto ETFs.
• The NYSE requested clearer timelines when novel products reach exchanges.

Competitors copying public filings

Grayscale stated that an optional confidential process would reduce the incentive for rival firms to submit similar or duplicative filings. If a draft is public, competitors can quickly see what is being proposed and file their own almost identical versions.

21Shares made a similar request, pointing out how fast competitors can copy public filings. The SEC had previously asked whether artificial intelligence might be behind several novel ETF applications being submitted in rapid succession that are "largely identical." Both firms believe confidential drafts could slow down this copying behavior.

Jane Street and Schwab voice concerns

In contrast to the push for speed, Jane Street cautioned that pressure to get an ETF to market quickly can result in rushed registrations. This leaves less time for sponsors to get feedback from market makers on fund structure and liquidity. Market makers are firms that provide liquidity by buying and selling assets to keep markets flowing.

Jane Street also proposed requiring ETFs to launch with at least two authorized participants. Authorized participants are large financial firms that facilitate the creation and redemption of ETF shares, helping to keep the fund's price aligned with its underlying assets.

Charles Schwab opposed making the filing process fully confidential. Schwab argued that if the SEC holds confidential discussions with a sponsor, the filing should become public at least 75 days before the fund takes effect. This would give investors and the market time to evaluate the product before it launches.

Broader requests on staking and exchange timelines

Other crypto firms used the SEC review to ask for changes beyond filing timelines. Multicoin Capital wants qualifying staking receipt tokens to be allowed in spot crypto ETFs. These tokens represent crypto assets that have been staked to earn rewards. Multicoin suggested these tokens could make up substantially all of a fund's digital asset holdings.

Jito Labs, the Jito Foundation, and the Solana Policy Institute supported this in a joint response, asking the SEC to establish rules for spot crypto products to use staking receipt tokens.

The NYSE asked for more predictable timelines when novel products reach exchanges. It noted that SEC staff can currently ask an exchange to delay a listing while an issue is considered, even without giving a firm timeline. This can happen even when another exchange may still be able to proceed with the listing.

What is confirmed

The primary source confirms that Grayscale, 21Shares, a16z, Jane Street, Schwab, Multicoin Capital, Jito Labs, and the NYSE submitted comments to the SEC regarding ETF review processes. The source confirms the specific requests made by each firm, including confidential filings, 45-day response times, staking token allowances, and exchange timeline clarity. It is confirmed that the comment deadline was Aug. 31 and that the SEC has accepted late submissions.

What is still unclear

The source does not state when the SEC will act on these comments or set a timeline for further action. It is also unclear whether the SEC agrees with the firms' requests or plans to adopt any of the proposed changes.

Why this matters for crypto investors

Changes to the SEC's ETF review process could affect how quickly new crypto investment products reach the market. Faster reviews and confidential filings might encourage more firms to launch innovative products, but critics warn that rushing could compromise investor protection. The outcome will shape the landscape for future crypto ETFs and related financial products.

Sources

• The Block