Crypto and Commodity-Based ETPs Poised to Boom Following SEC’s Approval of Generic Listing Standards | Goodwin

The recent approval by the U.S. Securities and Exchange Commission (SEC) of new generic listing standards for commodity-based exchange-traded products (ETPs), specifically those tied to cryptocurrencies, marks a pivotal moment for both investors and the digital assets market. This decision, announced on September 17, 2025, not only streamlines the process for bringing these financial instruments to market but also signifies a shift in the regulatory landscape, potentially laying the groundwork for a subsequent boom in the availability and variety of crypto and commodity-based ETPs.

Background of the SEC’s Decision

Historically, the SEC has exercised considerable caution regarding the approval of crypto ETPs, citing concerns over market manipulation and investor protection. Prior to this ruling, each ETP required separate SEC approval, complicating the process and stifling growth. A key turning point came with the D.C. Circuit’s ruling in Grayscale Investments, LLC v. SEC, which criticized the SEC for inconsistencies in its treatment of similar financial products—specifically in approving futures-based ETPs while denying spot versions.

This ruling prompted the SEC to reconsider its stringent approach, leading to the current order that establishes generic listing standards. These standards allow qualified crypto ETPs to bypass the lengthy and often arduous approval process that previously delayed their entry into the market.

What Are the New Generic Listing Standards?

The approved generic listing standards primarily impact Commodity-Based Trust Shares, which are designed to track the performance of various underlying commodities, including digital assets. To qualify under the new framework, an ETP must meet specific criteria:

1. Market Membership: The underlying commodity must be trading on a market that is part of the Intermarket Surveillance Group (ISG).
2. Futures Contract Criteria: Alternatively, the commodity should have futures contracts listed on a designated contract market (DCM) with a surveillance sharing agreement in place for at least six months.
3. Existing ETFs Requirement: If an ETP cannot satisfy the above criteria, it must show that at least one ETF providing 40% exposure to the same commodity is already listed.

Additional stipulations include strict limitations on leveraging strategies, mandatory website disclosures of portfolio holdings and performance metrics, and robust liquidity risk management policies.

Significance of the Order

The implications of this order are varied and profound. First, by removing previous barriers, the SEC effectively paves the way for more innovators to enter the market, significantly enhancing investor choice. As fintech companies and traditional financial institutions look to develop and introduce new ETPs, the market for these products can be expected to expand rapidly.

Moreover, this order aligns crypto ETPs more closely with traditional ETFs, which tout well-established regulatory frameworks. This can instill greater confidence among investors wary of the inherent risks associated with digital assets.

Potential Challenges Ahead

While the order undoubtedly opens new avenues for crypto and commodity-based ETPs, certain challenges remain. Although the SEC has streamlined the approval process, new ETPs will still need to navigate the regulatory framework laid out by the SEC and ensure compliance with existing laws. Future administrations or changes in regulatory philosophy could impact how these assets are treated.

Moreover, despite the generally more favorable climate, ETP managers must adequately address continuous scrutiny over market manipulation and fraud, ensuring that their products are genuinely designed to protect investor interests.

Conclusion

In summary, the SEC’s approval of new generic listing standards for crypto and commodity-based ETPs is a watershed moment for the digital asset landscape. By facilitating a simpler path to market for these instruments, the order not only fosters innovation but also enhances investor access to a rapidly evolving market. The potential for a surge in new products presents both opportunities and responsibilities as industry participants work to ensure that this growth occurs within the framework of investor protection and regulatory compliance. As we move forward, the implications of this decision will likely resonate throughout the financial ecosystem, signaling a new era of opportunity in the world of crypto ETPs.

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