The U.S. ETF industry is pressing the Securities and Exchange Commission to avoid an overly broad definition of "novel ETFs," arguing that a wide net could slow product launches and erode a key market advantage even as complex strategies proliferate. The SEC opened the review in June after delaying proposed prediction-market ETFs, seeking input on whether funds that hold innovative assets or use unconventional strategies are adequately covered by existing investor-protection, market-integrity and registration rules. More than 20 participants filed comments around the Aug. 31 deadline, including Charles Schwab, Franklin Templeton, Jane Street, Cboe Global Markets, Grayscale Investments, 21Shares, Andreessen Horowitz and Kalshi. U.S. ETF assets have grown from $4 trillion in 2019 to more than $12 trillion by the end of 2025, a scale Chairman Paul Atkins has highlighted. Products already in the market that could be labeled novel include Direxion's leveraged and inverse ETFs and YieldMax's option-income and derivatives strategies, such as the YieldMax Universe Fund of Option Income ETFs (YMAX). Regulators are examining 3x, 4x and 5x leveraged products as well as single-stock funds and total-return swap structures. Prediction-market proposals from Roundhill, Bitwise and GraniteShares—more than two dozen filings that would tie returns to Kalshi event contracts on outcomes such as elections—helped trigger the review; such funds could lose substantially all value if the underlying outcome goes against them. Industry groups want risk-based oversight rather than a novelty label. Grayscale opposed confining the ETF name to Investment Company Act of 1940 funds and rewriting Rule 6c-11 with portfolio limits, citing its commodity-trust crypto products and an 81-day delay before its five-asset fund began trading. a16z and the Crypto Council for Innovation similarly urged against expanding the 1940 Act framework by interpretation alone. The SEC says it aims to facilitate innovation while protecting investors and keeping markets fair and orderly, and the outcome will shape leveraged, options-based, prediction-market and crypto ETF paths.