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The Securities and Exchange Commission (SEC) is navigating a complex landscape of industry feedback following its request for comments on novel exchange-traded products (ETPs). The deadline for submissions on Monday has revealed a wide spectrum of opinions from crypto firms, asset managers, and consumer advocates, highlighting deep divisions on how to regulate emerging financial instruments and underscoring the central tension between fostering innovation and ensuring investor protection.

The SEC issued its request for comment in June, seeking input on whether existing rules adequately protect investors and if registration procedures need to adapt for new types of ETPs that extend beyond traditional exchange-traded funds (ETFs). These novel products can include those involving crypto assets, private assets, event contracts, and leveraged strategies.

Calls for Innovation and Regulatory Parity

Various industry participants are advocating for regulatory parity and innovation. The Crypto Council for Innovation (CCI), for instance, urged the SEC to extend regulatory efficiencies available to ETFs registered under the Investment Company Act of 1940 to other ETPs. According to CCI, this would promote regulatory parity, foster innovation, and expand investor choice. CCI also advised against updating the definition of an investment company, suggesting it could create uncertainty without clear investor benefits.

Andreessen Horowitz (a16z) emphasized that novel ETPs should not be treated as a single category, as they present different market structure, valuation, liquidity, and investor protection considerations. A16z stated that crypto ETPs already operate under established exchange listing standards and disclosure requirements, differentiating them from products holding illiquid private assets or employing less-tested strategies. The firm also called for better coordination between fund registration and exchange listing reviews, proposing standardized schedules and shorter review periods for certain products.

Chainalysis recommended that instead of restricting listing standards for blockchain-based novel ETPs, the SEC should clarify through guidance that exchanges listing such products employ monitoring systems meeting defined standards. Chainalysis suggested that public blockchains could support real-time surveillance, independently verifiable portfolio data, and machine-readable disclosures, with exchanges documenting their analytical deployment and coverage through periodic reporting.

Kalshi, which offers event contracts that pay a fixed amount based on a specified outcome, argued that when investors seek pooled exposure to these contracts, a registered fund is an appropriate vehicle. Kalshi acknowledged that some event contracts may have less market depth than conventional futures but stated these differences do not warrant categorical exclusion. The firm believes existing fund rules, tailored disclosures, and coordination with the Commodity Futures Trading Commission (CFTC) could address risks related to valuation, liquidity, leverage, and market surveillance.

Investor Protection Concerns

Consumer advocates like Public Citizen expressed significant concerns. Public Citizen warned that event-contract ETFs would place gambling-like products within a vehicle that retail investors associate with long-term investing. The organization noted that retail investors rely on ETFs as a familiar and trustworthy format, expecting them to represent investments tied to productive economic activity, and may not understand that these products do not compound or behave like diversified index funds.

Procedural Considerations

Other entities also weighed in on procedural matters. Grayscale opposed new portfolio restrictions for established digital-asset products and supported optional confidential consultations before public filings. Conversely, Charles Schwab opposed a fully confidential process, proposing that any resulting filing be made public for at least 75 days before taking effect.

The SEC faces the challenge of synthesizing these divergent industry perspectives into a coherent regulatory framework. Uncertainty remains regarding whether existing rules adequately protect investors in novel ETPs, whether registration procedures should change, and how to balance the industry’s push for innovation with the imperative of investor protection. The historical context of the first U.S. Bitcoin futures ETF trading in October 2021 and the approval of spot Bitcoin ETFs in January 2024 provides a backdrop for this evolving regulatory discussion.

Why This Matters

The materials describe a narrow update: Various entities, including crypto firms, asset managers, and consumer advocates, responded to the SEC’s request for comment on regulating new types of exchange-traded products (ETPs) that go beyond traditional ETFs, such as those involving crypto, private assets, event contracts, and leveraged strategies. Whether existing SEC rules adequately protect investors in novel ETPs.

Broader Context

Source materials place the factual news in this context: The SEC issued the request for comment in June, asking whether existing rules adequately protect investors and whether registration procedures should change to accommodate new products.

Norway Considers Stricter Smart Glasses Rules, Potential Public Facial Recognition Ban

Norway is preparing to implement tighter regulations on smart glasses and is exploring a ban on facial recognition technology in public spaces, according to Digitalisation Minister Karianne Tung. The announcement came on August 25.

Tung stated that artificial intelligence is increasingly being integrated with the cameras and microphones found in smart glasses, earbuds, and caps. She emphasized Norway’s commitment to preventing such devices from being used for surveillance of individuals in public areas.

To address these concerns, Tung announced the formation of an expert group that will advise the government on safeguarding consumers from the evolving technology. In the interim, she urged both public and private organizations to establish their own internal guidelines while new legislation is being developed. No specific timeline for these measures has been provided.

Finn Lützow-Holm Myrstad, head of digital policy at the Norwegian Consumer Council, expressed support for the government’s initiative. However, he suggested that retailers should suspend sales of smart glasses until the legal framework is finalized.

Myrstad highlighted that Meta’s facial recognition technology is already developed and awaiting deployment. He cautioned that a ban on this feature would not prevent users from covertly recording individuals, underscoring the “enormous” potential for misuse.

An investigation by ABC News in January revealed instances where women were secretly filmed using Ray-Ban Meta glasses after being approached in public, with the footage subsequently shared on TikTok. In February, Swedish newspapers reported that Nairobi-based contractors tasked with training Meta’s AI had reviewed recordings of people undressing, using restrooms, and engaging in sexual activity.

In April, the ACLU and 75 other organizations called on Meta to discontinue facial recognition in its smart glasses, deeming it a boundary society should not cross. Texas Attorney General Ken Paxton launched an investigation in May, and Meta released a patch in July after users discovered methods to circumvent the indicator light signaling recording.

Meta has since patented eyewear capable of recognizing faces and logging user activities. Meanwhile, the privacy-focused search engine DuckDuckGo reported that its intentionally camera-free “Normal F*ing Sunglasses” sold out in less than a week.

Comic Con organizer Monopoly Events and the DEF CON security conference have both prohibited the use of smart glasses at their venues. In July, Police Scotland initiated an investigation into a TikTok user accused of filming people with such a device.

Norway would be among the pioneering nations to enact specific legislation for these types of devices. Tung’s ministry has not yet indicated when the expert group will convene or when a legislative bill might be introduced.

The U.S. Senate is scheduled for a procedural cloture vote on September 15 concerning the CLARITY Act, a proposed framework for cryptocurrency market structure. This vote requires a 60-vote threshold, a target that appears challenging given current political divisions and legislative disputes.

The CLARITY Act aims to establish a regulatory framework for digital assets, addressing jurisdictional ambiguities between the SEC and CFTC. However, securing the 60 votes needed for cloture is uncertain. With Republicans holding 53 seats, at least seven Democrats would need to join them to advance the legislation.

Industry participants interpret the delay in scheduling this vote, which was initially planned before the August recess, as a potential indicator of diminishing bipartisan support. Two key disputes are reportedly hindering progress: one concerning whether stablecoins should be allowed to pay interest or yield, which has raised concerns among banking interests about deposit flight, and another involving ethics provisions related to President Donald Trump’s family businesses, which has made some Democrats hesitant.

The vote’s proximity to the midterm elections adds another layer of political complexity. Some analysts suggest that the bill’s chances of passage diminish as the elections approach. Former New York Governor Andrew Cuomo has cautioned that a failure of the CLARITY Act before the midterms, coupled with a Democratic House victory, could precipitate a prolonged regulatory conflict between Congress and the administration. A failed cloture vote would likely stall the bill for the remainder of this Congress, leaving the SEC-CFTC jurisdictional split unresolved.

Historically, the House passed the CLARITY Act with a 294-134 vote in July 2025, including 78 Democratic votes. The Senate Banking Committee later advanced the bill 15-9 in May 2026. Despite these prior steps, passage in the full Senate requires overcoming further procedural hurdles and a subsequent final vote.

The outcome of the September 15th vote carries potential implications. Successful cloture would enable floor debate and amendment consideration, potentially leading to a more defined regulatory environment for crypto markets. Conversely, a failed vote would likely perpetuate regulatory uncertainty, leaving the SEC-CFTC jurisdictional split unaddressed and potentially presenting a divided mandate on digital-asset policy to the next Congress.

Ultimately, the CLARITY Act faces a critical test on September 15. Its potential advancement hinges on the Senate’s ability to navigate complex political negotiations and resolve key legislative disputes, with the outcome poised to shape the regulatory landscape for cryptocurrency markets.

Why This Matters

The materials describe a narrow update: A procedural vote is scheduled in the Senate to allow for debate on the CLARITY Act, a comprehensive crypto market-structure framework. Whether the CLARITY Act will achieve the 60-vote threshold for cloture.

Broader Context

Source materials place the factual news in this context: The CLARITY Act is scheduled for a Senate cloture vote on the motion to proceed in two weeks, on September 15.

George Santos Permanently Banned from Prediction Market Kalshi Over Insider Trading Allegations

Prediction-market exchange Kalshi has issued a lifetime ban to former U.S. Representative George Santos, citing findings by its Compliance Department that there was “reasonable cause to believe” he engaged in insider trading and market manipulation. The ban, effective August 28, 2026, marks the first permanent penalty of its kind for the platform.

Allegations of Trading on Personal Influence

According to an official compliance document, Santos traded on markets related to his attendance at the State of the Union address on February 24. He was reportedly prohibited from participating in these markets due to his potential to influence the underlying event’s outcome. Kalshi stated that Santos executed a series of substantial trades between February 2 and February 25 in contracts whose results hinged on his personal presence.

The exchange claims Santos profited significantly from this activity, earning $17,839.57 from the targeted markets. In addition to the permanent suspension of his access, both direct and indirect, Kalshi’s Compliance Department has levied a penalty of $71,356 against him.

Santos Denounces Kalshi’s Actions

In response to the ban, Santos took to the social media platform X (formerly Twitter) to criticize Kalshi, accusing the exchange of violating its own stated notices and deadlines. He asserted that a notice received on August 7 had granted his side 30 days before any further action, questioning why Kalshi had announced what he termed “frivolous nonsense” before that period had elapsed. Santos further characterized the organization’s approach as “pathetic!” and suggested that “leaking and attention seeking seem to be the M/O of this organization.”

Broader Regulatory Landscape and Legal Challenges

This development follows a settlement Santos reached last month with the Commodity Futures Trading Commission (CFTC), which asserts jurisdiction over prediction markets. Under that agreement, Santos consented to pay $35,000 without admitting or denying the agency’s findings. His counsel, Joseph W. Murray, stated that Santos had cooperated with the CFTC.

Santos, who was expelled from the House of Representatives in 2023 amid federal charges, was sentenced in April 2025 to over seven years in prison after pleading guilty to wire fraud and identity theft. His sentence was commuted by then-President Trump in October of that year, leading to his release after serving less than three months.

Kalshi has previously suspended three U.S. political candidates for betting on election outcomes in which they were directly involved, labeling such actions as “political insider trading.”

Prediction-market platforms are currently facing increased scrutiny from regulators and lawmakers. Last month, Baltimore city officials filed a lawsuit against Kalshi and Polymarket, alleging that their sports prediction contracts constitute unlicensed sports betting and could mislead consumers regarding their legal and regulatory standing.

Separately, Kalshi is engaged in litigation with New York Attorney General Letitia James. The exchange also faced a lawsuit from FlightAware concerning flight-related markets, though that case was withdrawn shortly after its initiation.