The U.S. Securities and Exchange Commission (SEC) is reportedly preparing to reject applications for spot Solana exchange-traded funds (ETFs), according to Fox Business journalist Eleanor Terrett.
This decision, if confirmed, would mark another setback for the cryptocurrency industry’s efforts to gain mainstream acceptance through regulated investment products.
Terrett’s sources, according to her X post from Dec. 6, also indicate that the SEC is unlikely to approve any new crypto ETFs under the current administration.
SCOOP: I’ve confirmed that the @SECGov has notified at least two of the five prospective issuers that it will reject their 19b4 filings for the $SOL spot ETFs.
The consensus here, I’m told, is that the SEC won’t entertain any new #crypto ETFs under the current administration.
— Eleanor Terrett (@EleanorTerrett) December 6, 2024
So far, five asset managers have submitted applications for a spot Solana ETF: VanEck and 21Shares were the first to file in June, followed by Canary Capital in October, then Bitwise in November, and most recently Grayscale in early December.
SEC’s Cautious Approach to Crypto
The SEC’s reluctance to approve Solana ETFs is rooted in its ongoing concerns about the regulatory status of cryptocurrencies. This August, the commission rejected applications from Cboe BZX for two spot Solana ETFs, primarily due to worries about Solana potentially being classified as a security.
Under Chair Gary Gensler, the SEC has navigated the complex world of crypto assets with a cautious approach, especially regarding investment products linked to assets that might be considered securities.
This cautious stance is evident in the SEC’s lawsuits against Binance where Solana’s native token SOL was classified as a security along with nine other cryptocurrencies including Cardano (ADA), Polygon (MATIC), Filecoin (FIL) or Cosmos (ATOM).
Instead of standing down and pausing crypto litigation with new leadership just weeks away, Gensler's SEC filed an 81-page brief in the Binance case yesterday, recycling the same failed arguments—including the absurd (and unsupported) claim that crypto has no inherent value.…
— Stuart Alderoty (@s_alderoty) December 5, 2024
In addition, the SEC also filed a lawsuit against Coinbase in June 2023, claiming that 13 tokens offered by this cryptocurrency exchange were securities.
The SEC made its most sweeping move against cryptocurrencies to date in February 2023 when it charged Terraform Labs with fraud. This action led to 16 crypto assets being classified as securities. Among those were Terra Luna Classic (LUNC), Terra Classic USD (USTC), Mirror Protocol (MIR), and an estimated 13 Mirrored Assets (mAssets), which were designed to mimic the price of stocks such as Apple and Tesla.
Potential Shifts in SEC Policy
Despite the setback, the future may not be entirely bleak for spot Solana and other crypto ETFs as well as for the ongoing lawsuits.
Gary Gensler will step down on January 20, with Paul Atkins nominated as his successor. This transition has sparked speculation about potential changes in the SEC’s approach to crypto ETFs, especially given Atkins’ reputation for being more open to digital assets.
Brad Garlinghouse, CEO of Ripple, expressed his approval of Paul Atkins’ nomination to lead the SEC. He stated that Atkins’ leadership would bring a much-needed dose of common sense to the agency.
Garlinghouse also added that, along with Hester Peirce and Mark Uyeda, it was time to swiftly and definitively end the current restrictive era on crypto, ”restoring freedom of choice, economic growth, and innovation.”
An outstanding choice – Paul Atkins at the helm of the SEC will bring common sense back to the agency. Along with Hester Peirce and Mark Uyeda, it’s time to swiftly and definitively end the prohibition era on crypto, restoring freedom of choice, economic growth, and innovation. https://t.co/w8Rqrnubyj
— Brad Garlinghouse (@bgarlinghouse) December 4, 2024
However, Atkins’ appointment requires Senate confirmation and any major policy shifts are likely to be a tangled web of negotiation and compromise.
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