WASHINGTON, July 1 -- The rules the Securities and Exchange Commission uses to govern exchange-traded funds were written in 2019. The industry they were meant to oversee now holds more than $16 trillion in assets, lists over 4,600 products, and includes funds tied to bitcoin, Solana, and electoral prediction markets that did not exist when regulators last updated the framework. On June 30, the SEC formally acknowledged the gap.

The agency opened a 60-day public comment period on a potential overhaul of its ETF regulations, seeking input on how to handle four categories of products that are testing the limits of current rules: crypto-asset funds, event-contract ETFs linked to prediction markets, single-stock strategy ETFs, and high-levera...