Alex Thorne, Head of Research at Galaxy Digital, recently presented analysis Regarding filings by investment firms VanEck and 21Shares for Solana Exchange Traded Products (ETPs) spot. These filings, which were filed with the US Securities and Exchange Commission (SEC) on June 28, represent an aggressive move to integrate Solana (SOL) into the regulatory framework of regulated financial markets, similar to those created for Bitcoin and Ethereum.
VanEck’s proposal, as described in its S-1 document, aims to launch a commodity-based fund that would hold Solana directly, thus allowing the ETF to more closely track the market price of the asset. Unlike some cryptocurrency exchanges, this product will not be involved in placing the assets held.
Following the announcement, the market responded positively, with the SOL price registering an approximate increase of 8%. However, registration is still in its early stages, and lacks detailed operational structures such as custodian, cash custodian, and authorized participants. These aspects are typically addressed in subsequent modifications as the product matures toward final approval.
Why are the odds of getting a Solana ETF slim?
According to the latest update, VanEck has yet to file the required Form 19b-4, which triggers the formal SEC review process. The typical review period, once initiated, is 240 days, according to Bloomberg analyst James Seyfart. So if VanEck files soon, a final decision could be expected around March 15, 2025. This process includes several regulatory checkpoints and public comment periods that are standard for the approval process of new financial products.
“The SEC currently views Solana as an unregistered security, primarily based on an ongoing lawsuit against major cryptocurrency exchange Coinbase. This classification complicates the approval process for a Solana-based ETF. Given that the SEC currently alleges in its lawsuit against Coinbase that Solana is an unregistered security, absent a significant change in the SEC’s position, this application is likely to be denied,” Thorne said.
Historically, the SEC has taken a cautious approach to cryptocurrency ETFs. The approval process generally follows a sequential path that begins with regulated futures markets, then ETFs based on those futures, and finally spot ETFs in the United States. Bitcoin and Ethereum ETFs have followed this path with varying degrees of resistance and success.
It is worth noting that the SEC’s previous refusal to approve Bitcoin ETPs was based on concerns about market size and oversight. The turning point came with an August 2023 ruling by the District of Columbia Court of Appeals, which upheld the adequacy of oversight of the futures market. This ruling facilitated the approval of Bitcoin ETPs, which began in January 2024, followed by Ethereum ETPs in May 2024.
Odds can change quickly
The FIT21 Act recently passed by the US House of Representatives, which defines regulatory boundaries between the SEC and CFTC, may play a crucial role in regulating cryptocurrencies in the future. This legislation clarifies which digital assets must be treated as commodities and which are securities. This legislative clarity may pave the way for future approvals of cryptocurrency exchange-traded trading products, including Solana. “This type of clarity could meaningfully impact or improve the odds of approval for exchange-traded products for underlying cryptocurrencies other than Bitcoin and Ethereum,” Thorne noted.
Overall, the path forward for Solana’s exchange-traded products is fraught with regulatory hurdles and uncertainties. “VanEck has a history of filing early: in the last round of Bitcoin exchange-traded products, it was the fourth company (which filed a day after BlackRock), and was the first to file for Ethereum,” Galaxy Digital’s Alex Thorn summarizes. “Instant ETP and this is commendable – perhaps they are betting on the outcome of the elections.”
At press time, SOL was trading at $147.54.
Featured image by ByteTree, chart by TradingView.com
