The SEC Pauses Solana ETF Approval Process After Discussions on Its Security Classification

As noted by Colin Wu, the U.S. Securities and Exchange Commission (SEC) has paused the approval process for Solana-based exchange-traded funds (ETFs).

The U.S. Securities and Exchange Commission (SEC) has paused the approval process for exchange-traded funds (ETFs) linked to Solana (SOL) following discussions with potential issuers on whether the digital asset should be classified as a security, a designation that has faced regulatory hurdles in the past.

As a result, filings to initiate the approval process were withdrawn by Cboe BZX, stalling any immediate prospects for Solana ETFs.

According to The Block, the U.S. SEC discussed concerns with ETF issuers that Solana might be classified as a security. The SEC subsequently agreed with Cboe not to submit the relevant 19b-4 form to avoid initiating the approval process. VanEck's S-1 registration…

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The decision comes after ETFs for Ethereum and Bitcoin were approved, highlighting the challenges faced by Solana in obtaining approval under the current administration. Market observers had anticipated this delay, considering the SEC’s stance that Solana may be a security.

For instance, Nate Geraci, president of The ETF Store, and James Seyffart, a prominent ETF expert, previously suggested that approval for Solana ETFs is unlikely during the Biden administration.

Geraci indicated that the administration’s stance could impact any new developments, with Seyffart noting the first possible chance for a Solana ETF might not arise until 2025 or later.

Filings Removal Halts Approval ProcessThe removal of the 19b-4 filings for Solana ETFs has effectively frozen the approval process. According to sources familiar with the matter, these filings are crucial for obtaining regulatory clearance and initiating the countdown for the SEC’s formal review.

By withdrawing the forms, Cboe BZX and the SEC have avoided starting any clock toward a decision. Market participants noticed the absence of these filings over the weekend, as related documents no longer appear on either the Cboe website or the Federal Register.

Meanwhile, VanEck’s S-1 registration statement for its Solana ETF is still available on the SEC’s EDGAR system, though other filings from issuers, like 21Shares, are less accessible. Despite the paused filings, some issuers are expected to regroup and make another attempt at securing approval.

To achieve this, they must navigate complex listing requirements, including the establishment of a Commodity Futures Trading Commission (CFTC)-regulated market for Solana, which currently poses a hurdle.

VanEck Proposes Solana ETF Notably, VanEck, known for its Bitcoin and Ethereum ETFs, officially submitted an application for a Solana ETF in July. The firm highlighted Solana's blockchain advantages in scalability, low transaction costs, and speed.

By comparing it to Ethereum, VanEck positions Solana as a strong candidate for a commodity-based classification, arguing that SOL shares characteristics with Bitcoin and Ethereum, which are not considered securities.

However, experts like Seyffart suggest that while demand for a Solana ETF is expected to grow, it will take several years and might depend on a new regulatory landscape.

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