Bitwise Joins Race For Spot Solana ETF Approval

Bitwise, a digital asset manager with $5 billion in assets under management (AUM), is the latest tradfi firm seeking to launch a spot exchange-traded fund (ETF) investing in Solana.

On Nov. 20, Bitwise registered the "Bitwise Solana ETF" entity in Delaware. The filing indicates the company’s intent to launch a spot Solana exchange-traded fund (ETF).

While the filing is an important step, Bitwise will still need to submit a prospectus (S-1) and a rule change application (19b-4) to the United States Securities and Exchange Commission (SEC) before formally entering the ETF race.

“Anyone can register a trust name in Delaware,” said Matthew Sigel, head of digital asset research at VanEck. “To bring an ETF to market, the issuers must file a prospectus (S-1) and the listing exchange must file a rule change (19b-4).”

The filing didn’t specify which stock exchange would host the Solana ETF. However, Bitwise’s other spot ETFs, including Bitcoin and Ethereum funds, trade on the New York Stock Exchange (NYSE) Arca.

If approved, the Solana ETF would track the price movements of Solana, currently the fourth-largest cryptocurrency with a $116.5 billion market cap after growing 340% over the past 12 months.

Bitwise recently filed for a spot XRP ETF. On Oct. 1, Perhaps indicating a pattern, the company registered the ETF entity in Delaware on Sept. 30 and submitted its S-1 filing to the SEC on Oct. 2.

Competing for Approval

Bitwise joins a growing list of firms seeking approval for a Solana ETF.

On June 27, VanEck filed with the SEC for a spot Solana ETF, which would be listed on the Cboe BZX exchange if approved.

“The Trust provides direct exposure to SOL, and the shares of the Trust are valued on a daily basis using prices drawn from a carefully evaluated group of trading platforms,” VanEck’s filing stated.

Similarly, 21Shares submitted its Solana ETF application on June 28, and Canary Capital filed on Oct. 30.

Regulatory hurdles

The SEC has only approved spot ETFs investing in Bitcoin and Ethereum so far.

In June 2023, the SEC filed lawsuits against crypto exchanges Binance.US and Coinbase, charging them with trading crypto asset securities, including Solana. Although the Solana Foundation disputed this classification, the SEC’s assertion that SOL is a security could pose a significant barrier to the funds’ approval.

Further, there are no regulated futures products tracking SOL in the U.S. — which were cited by the SEC as significant considerations in approving the other crypto ETFs.

However, analysts speculate that the incoming Trump administration may improve the chances of Solana ETF applications receiving regulatory approval, given that Trump ran on a pro-crypto platform.

“Early thoughts are that this only has a shot to launch sometime in 2025 if we have a new admin in the White House and SEC,” said James Seyffart, ETF analyst at Bloomberg Intelligence. “Even then not guaranteed.”

Ryan Lee, Chief Analyst at Bitget Research, told The Defiant THAT the SEC’s inconsistent application of the Howey Test and its criteria for 'sufficient decentralization' create uncertainty whether Solana qualifies as a security. “This makes the path to an ETF approval rocky for Solana,” Lee said.

For approval, Solana ETFs must meet several criteria, including sufficient liquidity, decentralization, resistance to price manipulation, and regulatory clarity about the asset’s classification.

On Aug. 8, Brazil’s Securities and Exchange Commission (CVM) approved the nation’s first spot Solana exchange-traded fund (ETF).