SEC Delays Solana ETF Over Security Concerns

The launch of Solana (SOL) ETFs has encountered a major obstacle due to the U.S. Securities and Exchange Commission (SEC) continuing to classify SOL as a potential security. This has led to the withdrawal of crucial 19b-4 forms for Solana ETFs from the Chicago Board Options Exchange (Cboe) website, delaying the approval process. With the SEC's concerns still unresolved, it seems unlikely that a Solana ETF will be approved soon.

In June 2023, the SEC identified 12 tokens, including SOL, as securities. This classification has faced pushback from some projects, but it has created significant regulatory challenges. Among the impacts is the removal of VanEck and 21Shares’ 19b-4 forms—essential documents for listing an ETF—from the Cboe website. These forms are necessary for initiating the approval process by validating the S-1 registration statements.

According to a source close to the issue, the SEC directly approached potential issuers to voice its concerns about SOL’s security classification. As a result, the SEC and Cboe chose not to file the 19b-4 forms with the Federal Register, effectively stalling the approval process for these ETFs. The removal of these forms from Cboe’s website has raised alarm within the crypto community. While VanEck’s S-1 registration for its Solana ETF is still visible in the SEC’s EDGAR system, 21Shares’ S-1 registration has been removed from search results, though it remains accessible via direct link.

This development highlights the SEC’s ongoing caution toward Solana and similar assets. Unlike Bitcoin (BTC) and Ethereum (ETH), which have approved ETFs, Solana’s path to approval appears much more uncertain. Experts predict that a Solana ETF might not be approved until 2025, if at all. Nate Geraci, President of the ETF Store, commented, “Solana ETF not happening anytime soon under the current administration.”

The SEC has not yet issued a formal notice on this matter. This delay aligns with recent comments from SEC Commissioner Hester Peirce, also known as ‘crypto mom,’ who stated that the SEC requires more convincing before approving a Solana ETF. This reflects the agency’s strict view on what qualifies as a security.

The SEC’s stance dates back to June 2023, when it classified 12 tokens, including SOL, as securities in lawsuits against crypto exchanges. The SEC argues that these tokens have been sold as investment contracts, making them securities. This reasoning has become the SEC’s standard approach to determining security status in the crypto space.

In its filings, the SEC provided detailed arguments—spanning 53 pages—explaining why each of the 12 crypto assets, including SOL, is considered a security. This approach, often described as “regulation by enforcement,” has drawn criticism within the crypto industry. The ongoing issues with Solana illustrate the challenges the industry faces under current regulations.

As the U.S. struggles with these regulatory challenges, some believe the country is falling behind in the race to issue Solana ETFs. David Tawil, co-founder and president of ProChain Capital, remarked, “Canada will win again with a SOL ETF,” reflecting a growing concern that other nations might outpace the U.S. in adopting crypto innovations. This could result in the U.S. losing its competitive edge in the rapidly growing crypto market.

In summary, the SEC’s concerns about Solana’s status as a security have significantly delayed the potential approval of Solana ETFs. The ongoing regulatory uncertainty and the SEC’s cautious approach suggest that a Solana ETF in the U.S. is unlikely in the near future. As the regulatory environment continues to evolve, the crypto community will be watching closely to see how these developments impact the future of crypto investment products in the U.S.