SEC Is Reportedly Readying To Shoot Down Solana ETF Applications
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Prospective spot Solana exchange-traded fund (ETF) issuers reportedly will not get the nod from the U.S. Securities and Exchange Commission (SEC) during Biden’s term in office.
On Nov. 5, Eleanor Terrett, a journalist for Fox Business, reported that the SEC told two spot Solana ETF hopefuls that it will reject their applications.
Terrett said the SEC will not approve any new crypto ETFs under the Biden administration, meaning applicants have no chance of receiving approval until after the incoming Trump administration enters the Oval Office in January.
“I’ve confirmed that the SEC has notified at least two of the five prospective issuers that it will reject their 19b4 filings for the SOL spot ETFs,” Terrett tweeted. “The consensus here, I’m told, is that the SEC won’t entertain any new crypto ETFs under the current administration.”
The news comes as spot crypto ETF applications have piled up in recent months.
On Dec. 3, Grayscale filed to convert its Solana Trust into a spot ETF. The move followed applications from rival asset issuers VanEck, 21Shares, Bitwise, and Canary Capital. On Oct. 15, Grayscale also filed to convert its Digital Large Cap Fund, which invests in Bitcoin, Ethereum, Solana, Ripple, and Cardano, into a spot ETF.
On Dec. 2, WisdomTree applied for a spot XRP ETF, following filings from 21Shares, Bitwise, and Canary Capital.
XRP ETF optimism
Prospective XRP ETF issuers were likely buoyed by recent court rulings finding that XRP does not comprise a security.
In July 2023. Judge Analisa Torres, ruled that digital assets do not inherently comprise securities — regardless of whether their primary distribution took the form of a securities investment contract — during proceedings for the SEC’s lawsuit against Ripple Labs. Torres later determined that Ripple Labs had violated securities laws through its sales of XRP to institutions.
While the SEC appealed Torres’ ruling in October, the agency made no attempt to dispute the court’s finding that XRP is not a security.
The SEC would not approve spot ETFs investing in assets found to comprise unlicensed securities.
Is Solana a security?
Solana’s regulatory classification is less clear, with the SEC naming SOL as a security in lawsuits targeting Coinbase, Binance, and Kraken.
However, in a memorandum to its complaint against Binance published in September, the SEC doubled down on its assertion that SOL and nine other cryptocurrencies comprise securities.
“[The assets’] promotions and economic realities have not changed in any meaningful way [since they] were offered and sold as securities during the ICOs… such that they continue to be offered and sold as investment contracts,” the SEC said.
Lack of regulated futures
While many onlookers anticipate that the crypto-friendly disposition of the incoming Trump administration could bolster the chances of new crypto ETFs entering the market, both XRP and SOL are unlikely to satisfy other key criteria laid out by the SEC when approving Bitcoin and Ethereum ETFs earlier this year.
The SEC highlighted the high correlation between spot markets and regulated futures markets for BTC and ETH as evidence that the assets are not vulnerable to market manipulation. The SEC added that the surveillance underpinning the Chicago Mercantile Exchange’s futures markets provide additional protection against manipulation.
There are no regulated futures products for XRP or SOL in the United States.
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