Asset Managers Oppose SEC Novel ETF Label Proposal

The United States Securities and Exchange Commission is reviewing a proposal to label specific exchange-traded funds as novel ETFs. The regulator initiated the review after several asset managers attempted to launch funds linked to prediction markets.

Asset managers, exchanges, and brokerage firms have submitted letters opposing the label, arguing that the term novel lacks a precise definition. Rafferty Asset Management warned that any definition based on current asset classes would be obsolete upon arrival and could penalize future product innovations. Nasdaq suggested that the regulator focus on structural characteristics rather than asset-class labels.

Industry critics warn that altering the current launch process, which typically allows ETFs to launch automatically 75 days after filing, could jeopardize the growth of the 12 trillion dollar U.S. ETF market. Conversely, the advocacy group Better Markets argues that funds linked to prediction markets should not be treated as equivalent to traditional ETFs that invest in securities.