The U.S. SEC looks reluctant to approve Solana ETFs, with the regulator undecided on whether or not SOL is a security.

It took years for exchange-traded funds based on Bitcoin’s spot price to hit the U.S. markets — and it was equally messy as issuers tried to get an Ether (ETH) ETF approved.

By the looks of things, the road to launching a Solana (SOL) ETF will be even more arduous, as the Securities and Exchange Commission has already started digging its heels in.

Billions of dollars have flown into crypto ETFs over recent months as investors vie to gain exposure to the price movements of top digital assets without owning them directly.

Buoyed by the success of these products, issuers seem intent on broadening choice by launching funds based on coins with a smaller market cap.

But there’s just one problem: the SEC remains undecided on SOL’s classification as a security, and is evidently blocking applications from proceeding as a result.

The process of securing approval involves a lot of forms and wrangling between issuers and regulators. So what’s happened here? 

Well, the latest drama relates to Cboe Global Markets, which had submitted 19b-4 filings on behalf of two companies hoping to launch Solana ETFs in the U.S.

This is effectively asking the SEC for permission to list exchange-traded funds that would be rolled out by VanEck and 21Shares, who are both already players in the crypto ETF market.

It’s a significant move because it sets the clock ticking, meaning regulators need to respond by a set deadline. (Although, in practice, the SEC has repeatedly kicked the can down the road by delaying decisions until a later date.)

But here’s the kicker: the countdown only begins when 19-4b filings are formally added to the Federal Register, and it looks like Cboe’s request didn’t even get this far, per a report yesterday.

This doesn’t mean Solana ETFs will never see the light of day, but Cboe may need to go back to the drawing board and punch its language up.

What about the issuers?

That brings us to the other part of the puzzle. Cboe can file as many 19-4bs as its heart desires, but a Solana ETF can only see the light of day if an issuer submits an S-1 form — setting out its plans in detail ahead of debuting on a national exchange.

That’s where the U.S. investment management giant VanEck comes into play. Its current offerings include HODL, a spot BTC ETF that’s seventh-largest in the rankings of a crowded market with net assets of over $648 million under management. ETHV, its Ether ETF counterpart, is fifth with a much more modest haul of $58 million.

Despite the SEC’s stubbornness with Cboe, VanEck maintains it’s going nowhere. The fund’s head of digital assets research, Matthew Sigel, declared on X this week:

“Remember that Exchanges like Nasdaq & CBOE file rule changes (19b-4) to list new ETFs. Issuers like VanEck are responsible for the prospectus (S-1). Ours remains in play.”

The status of the 21Shares Solana ETF is unclear by comparison — a sign this issuer might be taking a backseat while the regulatory drama untangles.

What makes SOL different?

At this point, you may be wondering why the SEC would begrudgingly allow BTC and ETH ETFs to hit the market, but not SOL.

Well, after much hand-wringing — which included concerns of “market manipulation” and a courtroom showdown involving Grayscale — the SEC capitulated, and seemingly concluded that Bitcoin and Ether can be considered commodities, not securities. The fact that industry giants such as BlackRock and Fidelity had lined up as issuers of ETF products based on the top two crypto assets would have played a factor too. 

Now back to Solana, which had unfortunately close ties with Sam Bankman-Fried and a number of high-profile outages to its name. The SEC has been on the warpath for some time now, and has accused the likes of Coinbase of acting as an unregistered securities broker by allowing its customers to trade SOL in the first place. Softening its stance on ETF applications has the potential to undermine its position in active litigation elsewhere.

But beyond the legal and the regulatory headaches, there’s another uncomfortable truth that needs addressing: if (or when) a Solana ETF launches, there might not be all that much demand.

Brand recognition helps explain why Bitcoin exchange-traded funds have a total of $48 billion in assets under management, but Ether ETFs are lagging behind on $7.3 billion.

Much of this frenzied activity has been driven by BlackRock and Fidelity, neither of whom have expressed intent to launch a Solana product.

With both players absent, there might be little incentive for the SEC to change its stance.