The battle to bring a Solana ETF to the United States is intensifying. Seven asset managers are currently engaged in a cutthroat competition to get the first blessing from the Securities and Exchange Commission (SEC). 21Shares, Bitwise, Fidelity, Franklin Templeton, Grayscale, VanEck, and more recently, Canary Capital have all filed or amended S-1 forms for Solana-based ETFs. This announcement is yet another indicator of robust institutional interest in the cryptocurrency. Despite the promise this technology holds, the road to approval is still a convoluted one, plagued with regulatory oversight and technical obstacles.

Each of those latest S-1 filings contain staking language, one of the most notable features of the Solana network. Staking means your SOL tokens are being used to validate transactions on the blockchain in return for rewards. This is a big deal, as staking has been included in the ETF proposals. This action fulfills a public request by Ether ETF applicants, who have expressed a desire to offer staking in their funds. This creates a multitude of other key issues regarding investor protection, the definition of fund categories, and the overall regulatory landscape for crypto ETFs.

Bloomberg ETF analyst James Seyffart thinks the SEC might approve Solana ETFs with staking any day now. Additionally, he speculates we could see approval for Ether ETFs with staking around the same time. This would simplify the process and set a marker for any future crypto ETFs that include staking. While the SEC’s approach is still somewhat gun-shy, the agency has issued a number of concerns that applicants must overcome.

SEC's Scrutiny: Staking and Redemption Procedures

The agency is closely reviewing what staking means for investor protection and fund categorization. Now the agency is requesting robust empirical evidence about how staking facilities affect competition and consumer welfare. They want to know how your funds plan to show up for the process. This particular scrutiny does, in fact, apply to in-kind redemptions, which would enable ETF holders to redeem their ETF shares for SOL tokens directly. The SEC seems to be seeking clarity on the processes by which in-kind redemptions would be handled, and more broadly, how they would be conducted. These are all new elements that Bitcoin ETFs fail to consider. Maybe Ethereum staking will offer a new revenue stream. Unlike Ethereum’s proof-of-stake cryptocurrencies, Bitcoin staking is not used this way.

Applicants will need to explain their plans for in-kind redemptions. They must come clean with the nitty gritty about their staking operations to win the SEC over on staking concerns. This means clearly explaining some of the risks involved, what security features are in place and how the staking rewards will work. The SEC should work to establish a robust regulatory precedent for a crypto ETF. Their rigorous but risk-aware approach seeks to balance investor protection with finding new innovative opportunities.

The addition of staking language to the S-1 statements has introduced a new complex step to the approval process. Investors can take immediate advantage of staking rewards to increase their ROI. That also raises questions about how staked assets would be handled within an ETF wrapper, as it relates to operational and regulatory challenges. The current Solana and Ether ETF push is very different from the Bitcoin ETFs, which have already received approval. That distinction is one of the main forces moving the discussion.

Potential Delays and Timelines

The SEC’s new demands, and the associated need for amended S-1 responses, could further push approval into a protracted timeline. Other references suggest that approval could occur in as little as three to five weeks from the date of filing. According to Bloomberg ETF analyst James Seyffart, the more likely timeframe would be Q4 2025. The SEC has committed to responding within 30 days of receipt of the completed filings. It will issue feedback on the refreshed submissions during that same timeframe.

The vast majority of these final deadlines for SEC decisions will run out in October. The next few months will be telling for all Solana ETFs. The next few months will test whether Solana, and crypto at large, can meet the SEC's demands while maintaining market appeal.

  1. Initial S-1 filing by the asset manager.
  2. SEC review and feedback within 30 days.
  3. Revised S-1 filing by the asset manager.
  4. Potential further SEC feedback and revisions.

Regulatory pressure paired with shrewd decisions by issuers have furthered Solana’s path to ETF approval. Substantial technical challenges remain. The approval process addresses important issues, such as in-kind redemptions and staking procedures. These processes are vital to confirming blockchain transactions.

If approved, Solana ETFs would likely add a major boost to the crypto market.

Implications of Approval

The SEC's decision is not guaranteed, and the agency's concerns about staking and investor protection must be adequately addressed. Solana ETFs will only be a success if issuers can learn the regulatory gauntlet. Beyond this, they need to develop a compelling investment product with broad appeal to institutional and retail investors alike.

  • Increased Institutional Capital: A Solana ETF would open the door to a new wave of institutional investment, potentially driving up the price of SOL and solidifying its position as a top-tier blockchain asset.
  • Mainstream Adoption: ETFs make crypto investments more accessible to a wider range of investors, including those who may be hesitant to buy and hold digital assets directly.
  • Validation of Solana: Approval would signal a major step forward for Solana, demonstrating its maturity and legitimacy as an investment asset.

However, the SEC's decision is not guaranteed, and the agency's concerns about staking and investor protection must be adequately addressed. The success of Solana ETFs will depend on the ability of issuers to navigate the regulatory landscape and provide a compelling investment product that meets the needs of both institutional and retail investors.