SEC Requests Comment on Novel Crypto and Event Contract ETFs, New Bill Targets Accredited Investor Definition and Prediction Markets Litigation Advances in Two States

As the nation marked the 250th anniversary of American independence on July 4, federal policymakers closed out the week with a set of digital asset developments spanning the SEC, Congress and the courts. On June 30, the SEC issued a request for comment on exchange-traded funds that seek to invest in innovative asset classes, including crypto assets and event contracts, or that engage in novel investment strategies.

On Capitol Hill, the Informed Investor Access Act (H.R. 9574) was introduced, which would amend Section 2(a)(15) of the Securities Act of 1933 to add an “accredited investor” category for individuals who receive personalized investment advice or recommendations from a registered investment adviser or a registered broker-dealer in connection with the applicable transaction.

In the courts, the contest between state gaming regulators and prediction market platforms advanced in Massachusetts and Rhode Island, sharpening the federal-state jurisdictional question over CFTC-regulated event contracts. Separately, a tokenization firm became the first company to debut its shares simultaneously on a national securities exchange and on public blockchains.

Regulatory Updates

SEC Seeks Comment on Novel ETFs, Including Crypto and Event Contract Funds

• On June 30, the SEC issued a request for comment on exchange-traded funds that seek to invest in innovative asset classes, including crypto assets and event contracts, or that engage in novel investment strategies. SEC Chairman Paul Atkins stated that the request seeks input on how the U.S. ETF market can continue to grow and innovate while serving investors effectively.
• The release asks whether a novel ETF whose principal strategy is to invest in assets that are not securities should nonetheless register and be regulated as an investment company under the Investment Company Act, and whether the Commission should continue to apply its long-standing five-factor test in that analysis.
• The release also asks whether Rule 6c-11 should be amended to add portfolio conditions for novel ETFs, and whether the 75-day and 60-day automatic effectiveness periods under Rule 485 should be extended or subject to tolling and Commission-initiated delay. The comment period closes 60 days after publication in the Federal Register, which occurred on July 2.

Congressional Updates

Housing Bill With CBDC Ban Awaits President’s Signature

• On June 29, Speaker of the House Mike Johnson (R-LA) sent the 21st Century ROAD to Housing Act (H.R. 6644) to the White House for official signature. The President has stated that he will not yet sign the measure while pressing Congress to advance separate elections legislation, but he has not issued a veto. The legislation would prohibit the Federal Reserve Board or a Reserve Bank from issuing a central bank digital currency or a substantially similar digital asset through Dec. 31, 2030. 

Representative Introduces Bill to Expand the Accredited Investor Definition

• On July 2, Rep. Troy Downing (R-MT) introduced the Informed Investor Access Act (H.R. 9574), which would amend Section 2(a)(15) of the Securities Act of 1933 to add a category of accredited investor for individuals who receive personalized investment advice or recommendations from a registered investment adviser or registered broker-dealer in connection with the applicable transaction.
• The bill defines investment advice consistent with the Investment Advisers Act of 1940 and recommendation consistent with Regulation Best Interest. Supporters have noted that an advice-based pathway could ease the accredited-purchaser verification burden associated with Rule 506(c) offerings.
• Reps. Mike Lawler (R-NY) and Tim Moore (R-NC) are original cosponsors of the bill. The bill was referred to the House Committee on Financial Services.

Additional Updates

Prediction Markets Litigation Advances in Massachusetts and Rhode Island

• On June 30, a Massachusetts Superior Court justice granted Massachusetts leave to amend its complaint against a prediction markets platform to add seven counts under the state consumer protection and sports betting statutes, including allegations that the platform offered and advertised sports wagering to underage users.
• In Rhode Island, a coalition of tribal gaming organizations filed an amicus brief supporting the state in litigation in which the platform and the CFTC contend that the Commodity Exchange Act confers exclusive federal jurisdiction over sports-related event contracts.

Tokenization Firm Debuts Shares on a National Exchange and On Chain

• On July 2, a digital asset tokenization firm began trading on the New York Stock Exchange and concurrently issued tokenized versions of its shares on public blockchains, which it described as the “first newly public company to bring its own stock onchain at the start of its life as a public company.”
• The firm structured the tokens as issuer-sponsored securities, rather than as wrapper tokens backed one-to-one by shares held in custody.