Alex Thorn, Head of Research at Galaxy Digital, recently provided an evaluation on the filings for spot Solana Exchange Traded Products (ETPs) by investment firms VanEck and 21Shares. These filings, made with the US Securities and Exchange Commission (SEC) on June 28, represent an aggressive move to integrate Solana (SOL) into the structured framework of regulated financial markets, akin to those established for Bitcoin and Ethereum.
The proposal by VanEck, as outlined of their S-1 document, goals to launch a commodity-based trust that can hold Solana directly, thus allowing the ETP to trace the asset’s market price closely. Unlike some crypto ETPs, this product is not going to engage in staking the held assets.
Following the announcement, the market responded positively, with SOL’s price marking an approximate 8% increase. Nonetheless, the filing continues to be in its early stages, lacking in detailed operational structures similar to custodian, money custodian, and authorized participants. These elements are typically addressed in later amendments because the product matures toward final approval.
Why The Odds For A Spot Solana ETF Are Slim
As of the most recent updates, VanEck has not yet filed the requisite 19b-4 form, which triggers the SEC’s formal review process. In response to Bloomberg’s analyst James Seyffart, the standard review period, once initiated, extends as much as 240 days. Thus, if VanEck files soon, the ultimate determination may very well be expected around March 15, 2025. This process involves several regulatory checkpoints and public comment periods that are standard to the approval workflow for brand new financial products.
The SEC currently views Solana as an unregistered security, based on ongoing litigation against major cryptocurrency exchange Coinbase. This classification complicates the approval process for a Solana-based ETP. Provided that the Securities & Exchange Commission is currently alleging in its case against Coinbase that Solana is an unregistered security, absent a considerable change in posture from the SEC, it is probably going that this application can be rejected,” stated Thorn.
Historically, the SEC has adopted a cautious approach towards crypto ETPs. The method for approval generally follows a sequential path starting with regulated futures markets, then ETPs based on those futures, and ultimately, US-based spot ETPs. Bitcoin and Ethereum ETPs have navigated this pathway with various degrees of resistance and success.
Significantly, the SEC’s prior refusal to approve Bitcoin ETPs was based on concerns over market size and surveillance. The turning point got here with a DC Circuit Court of Appeals ruling in August 2023, which supported the sufficiency of futures market surveillance. This ruling facilitated the approval of Bitcoin spot ETPs, which commenced in January 2024, followed by Ethereum ETPs in May 2024.
The Odds Could Change Quickly
The recently passed FIT21 Act within the US House, which delineates the regulatory boundaries between the SEC and the Commodity Futures Trading Commission (CFTC), could play a vital role in future cryptocurrency regulation. This laws clarifies which digital assets ought to be treated as commodities and which as securities. Such legislative clarity could pave the best way for future approvals of digital currency ETPs, including Solana. “That form of clarity could also materially affect or improve the chances of ETP approval for underlying digital currencies beyond Bitcoin and Ether,” Thorn noted.
Overall, the trail forward for Solana ETPs is fraught with regulatory hurdles and uncertainties. Alex Thorn of Galaxy Digital summarizes, “VanEck has a history of filing early: within the last round of Bitcoin ETPs, they were the fourth filer (filed at some point after BlackRock), they usually were the primary to file for a spot Ethereum ETP. That’s commendable – perhaps here they’re betting on the end result of the election.”
At press time, SOL traded at $147.54.
Featured image from ByteTree, chart from TradingView.com