Leading investment firms are calling on the U.S. Securities and Exchange Commission (SEC) to reinstate the first-to-file rule in order to safeguard innovation in the cryptocurrency exchange-traded fund (ETF) space and prevent market domination by larger players. The request comes as executives from prominent asset management firms such as VanEck, Canary Capital, and 21Shares penned a joint letter to SEC Chairman Paul Atkins.

The first-to-file rule, which was previously in place but later rescinded, allowed the first company to file for a new ETF to have exclusive rights to launch it. However, with the rule no longer in effect, larger firms have been able to exploit the system by quickly replicating and launching similar products after smaller firms file for them. This has led to concerns that market dominance by these giants could stifle competition and hinder innovation in the crypto ETF space.

In their letter to the SEC, the investment firms highlighted the importance of reinstating the first-to-file rule to ensure a level playing field for all market participants. They argued that the current system allows larger firms to benefit from the groundwork laid by smaller firms without taking on the same level of risk and effort in developing new products.

The executives emphasized that reinstating the rule would not only protect innovation in the crypto ETF sector but also promote healthy competition and diversity in the market. By giving smaller players a fair chance to bring their unique products to market without the risk of being overshadowed by larger competitors, the rule could drive greater creativity and differentiation in the industry.

Furthermore, the firms pointed out that allowing larger players to exploit the current system could ultimately harm investors by limiting their access to a wider range of investment options. By reinstating the first-to-file rule, the SEC has the opportunity to uphold its mandate of protecting investors and promoting fair and efficient markets.

The call to reinstate the first-to-file rule underscores the growing importance of regulatory clarity and fairness in the rapidly evolving crypto market. As digital assets continue to gain mainstream acceptance and investment interest, ensuring a level playing field for all market participants becomes crucial to fostering innovation and preventing market distortions.

In response to the letter from the investment firms, the SEC has yet to make a public statement on the matter. However, the push for reinstating the first-to-file rule highlights the ongoing dialogue between industry stakeholders and regulators on how to best regulate and foster growth in the dynamic world of cryptocurrencies and digital assets.

Source: https://news.bitcoin.com/sec-urged-to-stop-favoring-late-filers-in-crypto-etf-race-for-market-share/