New Frontiers, Old Rules: SEC Staff Outlines Disclosure Expectations for Crypto Asset ETPs
On July 1, 2025, the SEC’s Division of Corporation Finance issued a comprehensive staff statement clarifying its views on disclosure obligations under the federal securities laws for issuers of crypto asset exchange-traded products (ETPs). While the products themselves represent novel financial structures—trust-based vehicles holding spot crypto or derivatives—the statement emphasizes continuity in legal obligations: crypto ETP issuers must adhere to well-established disclosure requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934.
This release signals the Commission’s evolving comfort with crypto asset vehicles while reinforcing investor protection as a non-negotiable pillar of U.S. securities regulation. Below, we break down the key takeaways.
What Are Crypto Asset ETPs?
Crypto asset ETPs are listed securities that provide public market exposure to crypto through trust structures. These products may hold spot crypto assets (e.g., Bitcoin, Ether) or crypto-linked derivatives. While not registered under the Investment Company Act of 1940, these ETPs remain fully subject to disclosure and anti-fraud obligations under the 1933 and 1934 Acts.
Staff Observations and Disclosure Themes
The statement is part compliance guide, part roadmap. It provides detailed insight into the Division’s expectations across Regulation S-K and S-X, especially for registration statements on Form S-1. Some highlights include:
1. Cover Page and Summary
Plain English must govern all summaries, with clear articulation of the trust’s investment objective, benchmark, and crypto assets held.
Initial offering price and identification of authorized participants (APs) must be presented upfront.
The summary should highlight declining per-share asset holdings due to fees paid in crypto.
2. Risk Factors
Issuers must tailor risk disclosures to reflect the volatility, structural, and cybersecurity vulnerabilities of crypto markets. The Division discourages generic risk language and calls for:
Identification of custody and key management risks
Discussion of forks, airdrops, and validator incentives
Transparency on AP concentration, network attacks, and pricing inconsistencies across platforms
3. Business Description, NAV, and Index Construction
Issuers should explain:
Crypto asset mechanics (staking, burning, consensus models)
Supply and market structure (e.g., halving events, forks)
NAV calculation methods, especially if diverging from GAAP
Index/benchmark methodology, including platform selection and oversight governance
Crucially, any discretion by sponsors to change indexes or methodologies must be disclosed.
4. Service Providers, Custody, and Fees
Transparency is expected around:
Custodian relationships, private key storage (cold, warm, hot wallets), and insurance coverage
Material contracts with APs, brokers, and financing counterparties (with exhibits)
Sponsor compensation models, including whether fees are paid in crypto and fee-sharing arrangements
5. Securities Description and Distribution Mechanics
Issuers must detail:
Voting rights, rights modification thresholds, and notification procedures for trust amendments
Creation and redemption mechanics, including on- vs. off-chain settlement
Risks of arbitrage disruption or redemption suspensions under volatile conditions
6. Management and Conflicts of Interest
Though not subject to traditional executive compensation disclosures, crypto ETPs must identify:
Sponsor executives and individuals with policymaking authority
Pre-clearance policies for trading underlying assets
Conflicts from insiders’ crypto holdings or exposure to competitors
7. Financial Statements and Series-Level Reporting
Multi-series trusts must provide audited financials both at the parent level and for each individual series. Staff interpret Regulation S-X to require this structure, reinforcing investor clarity and comparability.
Why It Matters
This statement is the most extensive staff-level guidance to date on disclosure for crypto asset ETPs. It signals a clear shift: the SEC is now focused on harmonizing crypto products with existing securities law infrastructure, rather than treating them as inherently exceptional. The document should be viewed as a practical manual for current and aspiring issuers, detailing staff expectations on form, content, and specificity.
Market participants should view this not as a compliance burden but as an opportunity to demonstrate maturity, operational transparency, and long-term viability. With spot crypto ETPs gaining traction and more asset managers preparing filings, aligning with these disclosure norms is essential to accessing U.S. public markets.
Next Steps for Issuers
Audit your disclosures: Ensure you are addressing each thematic area flagged in the guidance, particularly risk factors, NAV mechanics, custody, and conflicts.
Update offering documents: Prospectuses, Form S-1s, and S-3s should reflect the updated expectations around benchmark methodology, fee structures, and sponsor roles.
Be ready to file material agreements: The staff is closely reviewing service contracts and expects these to be filed as exhibits where appropriate.
Engage the SEC early: Consider pre-filing meetings, interpretive guidance requests, or no-action letters for novel product structures.
Final Word
The SEC is not rewriting the rules for crypto ETPs. Instead, it is integrating these products into the existing disclosure regime—firmly placing investor protection at the center. For responsible issuers and legal advisors, this presents a clear compliance path, but one that requires technical rigor, deep familiarity with both crypto infrastructure and securities law, and a commitment to full, fair, and tailored disclosure.
Anderson P.C. is available to assist issuers, custodians, sponsors, and APs in navigating this evolving framework with confidence and precision.
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