Solana’s Road to ETF Approval

The discussion about which altcoin might next secure exchange-traded funds (ETFs) approval has intensified; among the candidates, Solana (SOL) stands out, given its significant market presence and strong following

Solana, the fifth largest cryptocurrency with a market capitalization exceeding $66 billion, is frequently called an “Ethereum killer.” As a result of its popularity and reputation, it is an ideal candidate for ETF approval. Nevertheless, this sanction necessitates surmounting substantial challenges.

Obstacles to Solana’s ETF Approval

The absence of a regulated futures contract market is a significant obstacle for Solana. Unlike Bitcoin and Ethereum, which have futures products listed on major US exchanges such as CME and CBOE, Solana has not yet attained this milestone.

In late May, rumors were that the Chicago Mercantile Exchange (CME) had declined to list a Solana futures fund. According to James Seyffart, an analyst at Bloomberg ETFs, the absence of a regulated futures market is a significant impediment that could require years to resolve.

“Based on current precedent/needs it will happen within a few years of getting a CFTC regulated futures market. But congress and market structure bills like FIT21 could make it happen quicker,” Seyffart noted.

The sanction of the Commodity Futures Trading Commission (CFTC), which regulates futures markets, is an additional substantial obstacle.

In addition, the US Securities and Exchange Commission (SEC) classified Solana as a security in its litigation against Kraken and Coinbase. This classification impedes the approval of ETFs, as the SEC has not designated Bitcoin or Ethereum as securities.

Industry professionals continue to harbor reservations.
Several industry experts are skeptical about the probability of Solana and other cryptocurrency ETFs.

For example, Nikolaos Panigirtzoglou, JPMorgan’s managing director and global market strategist, expressed skepticism regarding the approval of Solana ETFs, citing the SEC’s ambiguous position on the status of various crypto assets.

“We doubt. The decision by the SEC to approve ETH ETFs is already stretched given the ambiguity about whether Ethereum should be classified as security or not. We don’t think the SEC would go even further by approving Solana or other token ETFs given the SEC has stronger (relative to Ethereum) opinion that tokens outside bitcoin and Ethereum should be classified as securities,” Panigirtzoglou said.

In contrast, the SEC’s approval of a Solana ETF by the end of 2024 is only predicted to occur in 6% of wagers placed on Polymarket. In the interim, no significant US firms have formally pursued certification of the Solana ETF with the SEC.

The GrayScale Solana Trust and 21Shares’ Solana Staking ETP (ASOL), listed on European stock exchanges, are the only current Solana-based financial instruments in the United States.

“I think that Solana is going to outperform Ethereum moving forward. So far, I think that has been true, but I don’t hear any talk of a Solana ETF in the US,” Anthony Pompliano, an investor at Pomp Investments, said.

Significant regulatory challenges persist, even though adopting Bitcoin and Ethereum ETFs has fueled speculation regarding a Solana-based ETF. However, the Solana community remains optimistic about the possibility of a positive outcome in the immediate future.