- Galaxy Digital recently analyzed VanEck’s filing for a spot Solana (SOL) ETF in the U.S.
- VanEck’s application is currently lacking significant operational specifics.
- One key point in the filing is that a small number of wallets control a large portion of Solana’s circulation.
Discover the latest insights on VanEck’s spot Solana ETF filing, examining the potential regulatory challenges and future outlook for this cryptocurrency investment vehicle.
VanEck’s Spot Solana ETF Filing: Key Details
On June 28, Galaxy Digital, a leading crypto financial services firm headed by Mike Novogratz, provided a detailed examination of VanEck’s recent submission to launch a spot Solana (SOL) exchange-traded fund (ETF) in the U.S. The analysis, presented in Galaxy Digital’s blog, revealed that VanEck had filed an S-1 with the Securities and Exchange Commission (SEC) aiming to create a trust product to track the price of SOL by holding the underlying asset.
Missing Operational Details in VanEck’s Filing
Galaxy Digital pointed out that VanEck’s filing lacked crucial operational details such as the appointment of a custodian, administrator, cash custodian, authorized participants, or declaration of sponsor fees. The absence of these elements suggests that additional amendments will be necessary to complete the filing process. Notably, the proposed trust will not engage in staking its assets, reducing potential staking risks but also potentially limiting returns from staking rewards.
Ownership Concentration and Risk Disclosures
The analysis also highlighted several risk factors disclosed in the S-1 filing. One significant point was the concentrated ownership of Solana, where as of November 29, 2023, just 100 wallets controlled 33% of the circulating SOL. This concentration could potentially lead to market manipulation and volatility. Additionally, VanEck’s filing mentioned that shareholders might not benefit from airdrops or forked assets, and underscored the increased risks associated with validator exits, which could lead to network vulnerabilities.
Regulatory Challenges and Approval Prospects
Galaxy Digital observed that while VanEck had filed the S-1, a subsequent 19b-4 filing had not yet been submitted. This step is critical as it starts the official clock for the SEC to make a determination. Bloomberg’s James Seyffart suggested that if VanEck proceeds with the 19b-4 filing soon, the SEC might make a decision by March 15, 2025, based on standard timelines.
Skepticism About Approval Chances
Galaxy Digital expressed doubts about the ETF’s approval, citing the SEC’s current stance against Coinbase concerning Solana’s status as an unregistered security. Unless there is a significant shift in the SEC’s regulatory approach, the firm believes the ETF application might face rejection. The analysis reflects on the SEC’s historical criteria for approving spot-crypto exchange-traded products, which typically requires a series of regulatory progressions starting with regulated futures.
Future Regulatory Pathways
Galaxy Digital discussed the precedent set by Bitcoin and Ethereum spot ETP applications, which overcame significant regulatory hurdles due to the eventual establishment of a “regulated market of sufficient size with surveillance sharing agreements.” However, the lack of established SOL futures and ongoing legal challenges classify Solana as an unregistered security, complicating the approval process. The firm noted that recent legislation like the FIT21 Act might eventually clarify the categorization of assets as commodities versus securities, potentially impacting future filings.
Conclusion
In conclusion, Galaxy Digital acknowledged VanEck’s proactive history in filing for Bitcoin and Ethereum ETPs, suggesting that the firm might be positioning itself for favorable regulatory changes possibly influenced by future elections. With the current regulatory environment, the approval of a spot Solana ETF appears challenging but not entirely out of reach depending on forthcoming legislative and regulatory developments.
