VanEck, the New York City-based investment management firm, has recently filed to launch an exchange-traded fund (ETF) tracking the price of Solana's native token, SOL. Despite this ambitious move, many analysts remain doubtful about the current administration's willingness to approve the fund.

This filing marks the first attempt to introduce a SOL ETF in the United States. Following the U.S. Securities and Exchange Commission’s (SEC) recent approval of Ethereum-based funds, analysts expected this development, yet few believe it will succeed initially. Haseeb Qureshi, a partner at Dragonfly Capital, expressed skepticism, suggesting that this effort is more about laying the groundwork and gaining goodwill rather than expecting immediate approval. He pointed out that the SEC has previously declared SOL as a security, a stance unlikely to change under the current administration.

James Seyffart, Bloomberg Intelligence’s ETF expert, echoed these sentiments on X, predicting that the fund might only have a chance of approval in 2025, contingent on a new administration in the White House and at the SEC. He emphasized that even with new leadership, approval is not guaranteed.

The primary legal challenge for a SOL ETF lies in the SEC's historical approach to crypto-based ETFs. The SEC has long been concerned about the potential for market manipulation and has explicitly labeled SOL as an unregistered security. This classification was notably highlighted a year ago when the SEC sued Binance for trading Solana and other cryptocurrencies without proper registration. The SEC’s stance is based on the Howey Test, which determines whether an asset qualifies as an investment contract under securities laws from the early 1930s.

Crypto legal experts often dispute the SEC’s application of the Howey Test to cryptocurrencies. They argue that comparing decentralized tokens to corporate equity is flawed. Industry lobbyists, such as Coin Center, advocate for considering factors like a blockchain's decentralization and a token's distribution in regulatory assessments. While Solana may be less decentralized than Ethereum, as blockchain sleuth Ogle noted, it’s not a binary issue. Solana developer and Helius co-founder Mert Mumtaz highlighted that Solana remains highly decentralized by most metrics and serves critical functions within its ecosystem.

Additionally, the SEC has previously raised concerns about the market surveillance standards related to spot crypto markets. This issue delayed the approval of the first spot Bitcoin ETF for a decade until a panel of judges deemed the SEC’s reasoning “arbitrary and capricious.” Analysts like Qureshi and Variant Fund Chief Legal Officer Jake Chervinsky believe that without a developed futures market for Solana, meeting the SEC's market surveillance requirements will be challenging.

Columbia Business School associate professor Austin Campbell also doubts the approval of VanEck’s SOL ETF, suggesting the filing strategy is more about positioning the firm advantageously for future opportunities. Other analysts, including Seyffart, question whether other firms will follow VanEck’s lead, as they did after BlackRock's spot Bitcoin ETF filing in mid-2023. VanEck recently announced a fee waiver for its Ethereum ETF to become the leading provider of crypto ETFs.

Despite these legal and regulatory hurdles, many legal commentators remain optimistic about the eventual approval of various ETFs, potentially contingent on a change in administration. The topic of cryptocurrency has gained traction in political circles, with some predicting that former President Donald Trump’s support for the industry could boost his popularity. A DCG-funded survey found that one in five voters considers crypto a key election issue.

Scott Johnsson, general partner at Van Buren Capital, remarked that VanEck’s filing could negatively impact President Biden, given the perception of his administration as anti-crypto. He described the move as a smart tactic to challenge the SEC’s approach to crypto regulation.

University of Kentucky law professor Brian Frye suggested that the eventual approval of Solana ETFs seems inevitable if the market conditions hold, given the regulatory similarities between Ethereum and Solana. However, he acknowledged that the process might take time due to the current SEC leadership’s general lack of enthusiasm for crypto and these ETFs specifically. Frye concluded that, ultimately, the SEC may have no other choice but to approve these ETFs, despite its reservations.