- in United States
On September 17, 2025, the Securities and Exchange Commission (SEC) issued an order (the order) approving new generic listing standards for certain commodity-based exchange-traded products (ETPs), including those backed by crypto assets.1 For crypto ETPs that qualify for listing under the generic standards, the order effectively removes the mechanism used by the SEC for many years to block crypto ETPs. Accordingly, following the order, crypto and commodity-based ETPs will have a clearer and faster path to market, which will maximize investor choice and foster innovation.
Background
Section 19(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 19b-4 thereunder specify the process for a national securities exchange to propose a rule change to enable the listing of a product not covered by an existing exchange listing rule. Under Section 19(b), the SEC is required to approve or disapprove the proposed rule change within 240 days of the proposed rule change being published in the Federal Register. In determining whether to approve or disapprove a proposed rule change, the SEC applies the standard under Section 6(b)(5) of the Exchange Act, which requires, in relevant part, that the rules of a national securities exchange be "designed to prevent fraudulent and manipulative acts and practices" and "to protect investors and the public interest."
Before the order, ETPs based on commodities, including digital assets, that were not registered under the Investment Company Act of 1940, as amended (the 1940 Act) lacked applicable generic listing standards and therefore each such ETP required an individual rule change application to be filed by the exchange and approved by the SEC. Historically, the SEC maintained a restrictive approach toward spot crypto-based ETPs, disapproving numerous rule change applications on the grounds that the proposed rules did not meet the standard required under Section 6(b)(5), primarily based on concerns about potential market manipulation. This approach led the SEC to block the listing of any spot crypto ETP until the D.C. Circuit's August 2023 decision in Grayscale Investments, LLC v. SEC.2 In that decision, the court held that the SEC had acted arbitrarily in denying Grayscale's proposed spot bitcoin ETP while approving comparable futures-based products. The decision effectively compelled the SEC to approve rule change applications for, and thus the listing of, spot bitcoin ETPs in January 2024 and spot ether ETPs in May 2024. However, the SEC did not approve rule change applications in respect of other spot crypto ETPs following that court decision.
The order eliminates the need for separate SEC approval for the listing of applicable crypto and commodity-based ETPs. Specifically, the generic listing standards approved in the order eliminate the need for separate SEC approval of an exchange rule change under Section 19(b) and Rule 19b-4 under the Exchange Act for ETPs that satisfy certain conditions. They also better align crypto and commodity-based ETPs with traditional ETFs registered under the 1940 Act and offered pursuant to Rule 6c-11 thereunder (ETFs), which have a streamlined listing process and similarly do not require individual SEC approval for listing.3
Which ETPs Are Impacted by the Order
These generic listing standards apply to a category of ETPs known as Commodity-Based Trust Shares. Commodity-Based Trust Shares represent interests in a trust that holds one or more commodities or commodity-based assets, ranging from gold and silver to agricultural products and digital assets. Commodity-Based Trust Shares must be: issued by a trust or similar entity; designed to track the performance of a commodity, commodity-based asset, or related index; and backed by deposits of commodities, securities, or cash, with redemption rights for holders.
To use the new generic listing standards, a Commodity-Based Trust Share must meet at least one of the following criteria:
- The underlying commodity trades on a market that is a member of the Intermarket Surveillance Group (ISG)4
- The commodity underlies a futures contract listed on a designated contract market (DCM)5 with a surveillance sharing agreement in place for at least six months, or
- An ETF providing at least 40% exposure to the commodity is already listed on a national securities exchange
If the ETP cannot satisfy any of these conditions, it cannot rely on the generic listing standards approved in the order and must instead pursue a Section 19(b) and Rule 19b-4 rule change filing, which requires individual SEC approval.
Additional Requirements Include:
- No Leveraged or Inverse Strategies: ETPs may not seek to deliver returns that are a multiple of an index, or that move in the opposite direction as an index, including inverse multiples.
- Website Disclosure Requirements: ETPs must prominently publish, on a publicly available website, detailed information such as daily portfolio holdings, net asset value, market price, premium/discount data, bid-ask spreads, liquidity risk policies, and current prospectuses.
- Liquidity Risk Management: If an ETP holds less than 85% of its assets in instruments that can be redeemed on a daily basis, it must adopt written liquidity risk management policies designed to prevent material dilution to remaining shareholders.
The Order's Impact
The order removes the key obstacle previously used for years by the SEC to block new spot crypto ETPs. While new crypto ETPs still need to have a registration statement declared effective by the SEC, the SEC is not vested with authority to reject a registration statement on policy grounds in a manner similar to the authority that Section 6(b)(5) of the Exchange Act vests in the SEC to disapprove proposed rule changes filed by an exchange. Accordingly, the order not only seems likely to result in a flood of new crypto ETPs in the short term, but also removes a tool that a future SEC could use to impose similar curbs on future such ETPs. With a streamlined listing process and reduced barriers to access digital asset products, the number of crypto ETPs is likely to boom.
Footnotes
1. The approval applies across three national securities exchanges (Nasdaq Stock Market LLC, Cboe BZX Exchange, Inc., and NYSE Arca, Inc.)
2. Grayscale Investments, LLC v. SEC, 82 F.4th 1239 (D.C. Cir. 2023) (finding the SEC had failed to adequately explain the disparate treatment of like products)
3. See, e.g., NYSE Arca Rule 5.2(j)(3); NASDAQ Rule 5705(b)(3); BATS Exchange Rule 14.11(c).
4. The Intermarket Surveillance Group (ISG) is a cooperative organization of securities and derivatives exchanges that share information to support market surveillance and enforcement. Members include major US exchanges such as the NYSE, Nasdaq, CME Group, and ICE, as well as a number of international exchanges.
5. Designated contract markets (DCMs) are futures exchanges registered with and regulated by the CFTC. Examples include Coinbase Derivatives LLC, which lists futures contracts on numerous crypto assets.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
