VanEck, the New York City-based investment management firm moving deeper into crypto, has filed to launch an exchange-traded fund tracking the price of Solana’s native token, SOL -2.66% . However, some are skeptical that the current administration will approve it.

This latest filing represents the first attempt at launching a SOL ETF in the U.S. Many analysts have said such a move was inevitable after the U.S. Securities and Exchange Commission recently gave the green light to Ethereum-based funds, but few suspect it will be successful at first go. 

“There's no way this gets done; I suspect it's buying goodwill and laying the groundwork to get the ball rolling,” Haseeb Qureshi, a partner at investment firm Dragonfly Capital, told The Block. “But SEC has explicitly stated they believe SOL is a security. This administration will not walk this back.”

This was echoed by Bloomberg Intelligence’s ETF expert James Seyffart who said on X that the fund “only has a shot to launch sometime in 2025 if we have a new admin in the White House and SEC. Even then not guaranteed.”

Historically hamstrung

Beyond the U.S. securities watchdog’s historical attempts to hamstring crypto-based ETFs due to concerns over the potential for market manipulation, the biggest legal roadblock standing in the way of a SOL ETF is that the SEC’s Enforcement Division has stated explicitly that SOL is an unregistered security. That notably happened a year ago, when the agency sued Binance for having a market in solana and 11 other cryptocurrencies. 

The agency based this opinion on securities laws passed in the early 1930s and the Howey test, which determines when something constitutes an “investment contract.” Essentially, under Howey, if a person invests money in a common enterprise and expects to profit from the labor of others, the SEC can declare an asset to be a security. 

Many crypto legal experts challenge this assertion, often claiming that comparing a token that powers a decentralized, globally diffuse ledger to something like corporate equity makes little sense. Industry lobbyists at Coin Center, for instance, have published numerous reports arguing that a blockchain’s technical level of decentralization and permissionless as well as a token’s distribution should factor into the equation.

Blockchain sleuth Ogle noted that while Solana could be considered less decentralized than Ethereum in some regards, it’s not a “binary” question. “From a regulator's POV perhaps it comes down to where on the spectrum they each are (or where they're each going) to determine whether they should be viewed in the same way,” he said. 

“People will say Ethereum is more decentralized than Solana and this is true. But this doesn't mean Solana is centralized. By every observable metric, Solana is in the top 1% of decentralized networks,” Solana developer and c0-founder of Helius, Mert Mumtaz, told The Block. 

“To me SOL is obviously a commodity as a builder since i) you need it for prioritizing transactions ii) getting network bandwidth via stake iii) allocating storage iv) paying network fees etc,” he added.

Market surveillance 

In the past, the SEC has also raised concerns about the market surveillance standards related to spot crypto markets. This was one of the reasons the agency waited a decade after reviewing the first spot bitcoin ETF filing to make an approval, a decision that was mandated by a panel of judges who called the SEC’s reasoning “arbitrary and capricious.”

Qureshi noted that there was a better argument that BTC and ETH-based ETFs met the SEC’s market surveillance requirements because there were developed future markets where these assets traded. 

“They're not going to be able to get the market surveillance standards met without listed futures market,” Qureshi said. 

“I'd guess the SEC will point to the lack of a futures market to justify denial,” Variant Fund Chief Legal Officer Jake Chervinsky said. 

VanEck’s strategy?

Columbia Business School associate professor Austin Campbell also said VanEck’s filing is unlikely to be approved, adding the strategy appears to be “getting on the board early.” Other analysts, including Seyffart, raised the question of whether other firms would fast follow VanEck, as happened after the world’s largest asset manager, BlackRock, submitted its surprise spot bitcoin ETF filing in mid-2023. 

“This seems to me like a medium-term bet given the timelines on these things,” Campbell added. 

It’s worth noting that VanEck disclosed on Wednesday it would waive fees for its Ethereum ETF in a bid to become the “go-to provider for crypto ETFs.”

While legal challenges could potentially stand in the way of VanEck’s filing, many legal commentators are optimistic that a host of ETFs will eventually be approved — even if it requires a change in administration. 

Election issue

Crypto has become a bigger election topic than ever, with many predicting that former President Donald Trump’s recent embrace of the industry could increase his popularity. A DCG-funded survey, for instance, found that one in five voters considers crypto a key election issue.

Scott Johnsson, general partner at Van Buren Capital, said on X VanEck’s filing is likely bad for President Biden “at the margins” because of the widespread perception that his administration is anti-crypto. He added that it was “a smart move” to push the boundaries like this despite the odds of denial if only to raise the question of how the SEC has approached crypto regulation. 

“It sounds like the SEC is going to give final approval to ETH ETFs very soon, so I think eventual approval of Solana ETFs is inevitable (assuming the market holds), because from a regulatory perspective ETH and Solana are basically identical,” University of Kentucky law professor Brian Frye told The Block. 

“However, I think it will take a while, both because the SEC moves slowly and also because the current SEC leadership is decidedly unenthusiastic about crypto in general and approving these ETF specifically,” Frye added, noting that ultimately, the agency “thinks it doesn’t have any other choice.”

CORRECTION: Corrects spelling of Haseeb Qureshi's first name.