The Securities and Exchange Commission (SEC) recently issued a request for public comment on exchange-traded funds (ETFs) that invest in innovative asset classes or pursue novel investment strategies. The request follows significant growth in the ETF industry, which expanded from approximately $4 trillion in assets in 2019 to more than $12 trillion at the end of 2025.
The SEC’s action does not propose new rules or impose new regulatory requirements. Instead, it reflects the Commission’s effort to assess whether existing regulatory frameworks still address the risks and operational considerations presented by increasingly sophisticated ETF products.
The comment process may ultimately inform future regulatory initiatives, guidance, or changes to the ETF registration and review process.
Background
ETFs historically have been developed within a regulatory framework built around traditional securities portfolios. In recent years, however, sponsors have sought to launch ETFs with exposure to emerging asset classes and increasingly complex investment strategies.
The SEC indicated that it is interested in whether existing regulatory requirements appropriately address the characteristics of innovative ETFs and whether changes may be warranted to promote consistency, transparency, and efficiency in the review and approval process.
SEC Chair Paul Atkins emphasized the importance of a regulatory framework that supports innovation while continuing to serve investors effectively.
Areas of SEC Focus
The SEC’s request for comment includes a broad range of questions for fund sponsors, advisers, investors, exchanges, and other market participants. Among other topics, the Commission is seeking input on the following areas:
Status of Novel ETFs Under the Investment Company Act
The SEC is evaluating questions concerning whether certain innovative ETF structures fit within the existing investment company framework and how federal securities laws should apply to products that invest in emerging asset classes or pursue atypical strategies.
For example, the SEC is seeking comment on whether ETFs whose principal investment strategy involves assets that are not securities should nonetheless qualify as “investment companies” under the Investment Company Act and whether those products should be allowed to register and operate as investment companies.
Investor Protection Considerations
The request explores whether novel ETFs present unique risks for investor protection, secondary-market trading, market surveillance, and other operational issues.
The SEC is also seeking feedback on whether additional safeguards or disclosure requirements may be appropriate for certain categories of ETFs, including non-investment company exchange-traded products (ETPs), such as exchange-traded commodity trusts.
Effectiveness of the Registration and Review Process
The SEC is seeking comment on whether the existing registration process for innovative ETF products operates efficiently and transparently.
The Commission is also asking whether modifications could improve consistency for sponsors bringing novel products to market.
Balancing Innovation and Regulatory Oversight
A recurring theme throughout the request is how the SEC should balance continued ETF innovation with its core investor protection and market integrity objectives.
The Commission specifically seeks views on how to encourage product development without compromising regulatory safeguards.
Why It Matters
Although the SEC has not proposed substantive regulatory changes, the request for comment may be an early step toward shaping the next generation of ETF regulation.
Sponsors developing ETFs involving crypto assets, commodity-focused instruments, single-stock strategies, significant derivative usage, heightened leverage, blockchain-enabled opportunities, private assets, event contracts, or similar products should closely monitor the SEC’s review.
The comment process gives market participants an opportunity to influence how the SEC approaches emerging ETF structures. Depending on the feedback received, the SEC could ultimately pursue interpretive guidance, changes to its review practices, or future rulemaking initiatives affecting novel ETF products.
Next Steps
Comments are due within 60 days after the request’s publication in the Federal Register on July 2, 2026. Fund sponsors, advisers, and other interested parties may wish to review the SEC’s request and consider submitting comments addressing the issues raised by the SEC.
Your Alston & Bird Investment Funds Group is ready to help with any questions concerning novel ETFs.
If you have any questions, or would like additional information, please contact one of the attorneys on our Investment Funds team.
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