Solana ETFs: How a 2025 launch could play out
2025-01-18
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President-elect Donald Trump is on the verge of taking office and all signs point to his administration revolutionizing the U.S. government’s stance on crypto.
Less cracking down and more collaboration are the expectations across the crypto sphere, which is why many business leaders from the world of digital assets are headed to Washington, D.C., in the coming days to meet with policymakers and celebrate the inauguration of the first openly pro-crypto president in history.
Tangible gains for initiatives benefitting the digital assets industry are predicted to be coming down the pike once after Trump has taken his place in the Oval Office. One of the biggest looming questions is will the new administration facilitate the launch of spot exchange-traded funds which track the price of Solana, the highly-popular cryptocurrency with a market cap north of $100 billion. Spot Bitcoin and Ethereum ETFs launched last year to much fanfare.
Solana ETF applications
Solana’s price jumped and optimism soared in November on news that the U.S. Securities and Exchange Commission was "engaging" on S-1 applications. But, as JPMorgan analysts recently noted, the SEC applications submitted by VanEck, 21Shares, Bitwise, WisdomTree and Canary Canary were rejected, with the researchers pointing out that the would-be issuers “can resubmit applications under the new SEC administration for review again."
"The SEC essentially refused to acknowledge the most recent Solana ETF filings," Bloomberg Analyst James Seyffart told The Block. 
The Solana ETF applicants filed all the necessary 19b-4 forms but, according to one potential issuer, who asked to remain anonymous: “All of them were pulled at the request of the SEC,” they said in an interview. 
Applicants file 19b-4 forms when proposing a rule change. These forms were filed as part of the approval process which led to spot bitcoin and ether ETFs launching last year.
Timeline
From a procedural standpoint, it's well understood that work must still be done before Solana ETFs can launch. However, that hasn't stopped people from speculating.
Among many optimistic ETF watchers, the optimistic consensus appears to be that by the end of the year, Solana ETFs will gain the necessary approval. At the end of last year, ETF Store President Nate Geraci agreed with the hypothesis that approval is likely to come by the end of 2025.
Trying to be as precise as possible, one high-level executive at a potential Solana ETF issuer said it should take at least 240 days. "The soonest is most likely 240 days post new applications being submitted,” the person said. "I’d be shocked if it was sooner than 240 days, 240 days is the regulatory limit that they have to come back to ETF issuers once we’ve applied for the product."
"By the end of 2025 is optimistic, it's possible, but it's very optimistic," said Canary Capital’s Steven McClurg. "The reason being is, when there is a change of leadership, things aren’t happening right away. Crypto, by the way, isn’t top of mind [for the SEC]. I mean, it's top of mind for us, for the industry but it’s not top of mind for the SEC."
SEC revamp
While Trump might prioritize crypto on Day One, with legislators following suit and introducing jump legislation that fosters innovation, on the Solana ETF front, what happens with SEC is key.
With Chair Gary Gensler on his way out and long-time crypto advocate Paul Atkins likely expected to take over, the future has never been brighter from a regulatory perspective. Atkins "recognizes that digital assets and other innovations are crucial to Making America Greater than Ever Before," Trump said when announcing that he would nominate Atkins to run the SEC.
"The expectation is that the new administration, the federal administration and the U.S. SEC, and the SEC's leadership will be more crypto-friendly," said Vivian Fang, a finance professor at Indiana University. "Now does it necessarily translate to the approval of a Solana ETF, I don't know. I don't think anybody knows, but I think that the chance will be greater."
How long will it take to gauge exactly how crypto friendly this new Atkins-led SEC intends to be could happen right away or take some time, depending on who you listen to.
JPMorgan analysts suggested this week that, while new leadership at the agency should positively impact new ETF applications, it could be months before a new SEC chair is in place.
 "With a new federal administration to be inaugurated in a few days and a new, more crypto-friendly SEC chair being confirmed in the next 3 to 6 months, there is an incremental optimism for more crypto ETPs to be approved and overall engagement between TradFi and crypto to improve," they said.
"Even with a new SEC chair, you still have a lot of the same people on the staff of the SEC in the Division of Trading and Markets," said an executive at a potential issuer of a Solana ETF.
"The first couple of months, what I'm looking for mainly is tonality,” said another executive at a separate would-be issuer. "Realistically, they're going to come in and take some time to basically assess … what changes they can make from a treatment of the asset class perspective. That's going to be a bit more slow-moving than people expect."
How the SEC eventually classifies Solana figures to have a major impact on how quickly an ETF could launch. Deeming SOL a security could send the ETF application process sideways as it would change the application process significantly, according to various experts familiar with the bureaucracy involved in launching the bitcoin and ether ETFs in 2024.
Classifying Solana
"The elephant in the room is classification," said Bitwise Chief Commercial Officer Katherine Dowling. "With all other digital assets beyond bitcoin and Ethereum we still have that classification hurdle and that's what's been gumming up the works."
Ongoing litigation brought by the SEC against crypto platforms could add complexity to the agency’s sign-off on proposed crypto ETFs, said Teresa Goody Guillén, former litigation counsel at the SEC, in an interview with The Block, in speaking about crypto ETFs generally. In many of those cases, the agency has said certain cryptocurrencies are securities, which could delay and affect the ETFs tied to those tokens.
Sponsors vying for future crypto ETFs are likely to classify tokens as commodities in their SEC filings. In that case, to approve an ETF as filed, the SEC would need to approve that commodity classification, Goody Guillén said.
"The burden of proof here has to be on the issuers of these ETFs, including ourselves, to demonstrate to the staff of the SEC that Solana is not a security," said McClurg.
This week news surfaced supporting the idea that change at the SEC could be swifter than some imagine. According to Reuters, SEC Commissioners Hester Peirce and Mark Uyeda could get a jump on shifting the regulator’s views on crypto as soon as next week.
One outstanding issue is the fact that the SEC, under Gensler, launched lawsuits in which they argued, for example, that Coinbase had broken the law by allowing customers to buy Solana, an unregistered security. 
"It’s hard for me to imagine that they're just going to dismiss lawsuits,” said Bobby Zagotta, CEO of the U.S. division of veteran exchange Bitstamp. "But we should know in short order what the posture is towards these lawsuits. And if there is a settlement path that would make sense."
If a new SEC doesn’t settle existing lawsuits or make a definitive decision on Solana, the next best route would be through legislation, according to several people familiar with the process.
"The SEC would probably be an easier path to get to that place quicker. But I think a more powerful one would definitely be a congressional ruling,” said an executive at a potential issuer. “We’re pushing on both fronts.”
Flows and performance
Assuming Solana ETFs are approved, some have already started projecting both how they might perform when compared to the spot Bitcoin and Ethereum products and how the launch of new SOL-based instruments could impact the cryptocurrency’s price.
"There's a market cap component to this that's going to be really important in dictating how much is adopted by us or global clients," said one potential issuer. "But the second thing here is also then it becomes all about the platform and about the technology itself. So if Solana scales and continues growing and becomes a killer Layer 1 with a lot of use cases and value propositions then we're going to end up seeing a lot more flows."
JPMorgan analysts projected that Solana ETFs could bring in between $2.7 billion and $5.2 billion, cumulatively, during their first months of trading.
"An ETF issuance would act as an accelerator of a given trend," said Chris Chung, founder of the Solana swap platform Titan. "A higher SOL price would improve liquidity and result in more volume on Solana DEXes. It would also garner more attention for potential users to come trade onchain.”
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