Media: SEC allowed SOL to be recognized as a security and rejected applications to launch an ETF

What’s new? The US Securities and Exchange Commission (SEC) has raised concerns that the Solana native blockchain token (SOL) may fall under the definition of a security. According to The Block's sources, officials said this at a meeting with potential issuers of SOL-based exchange-traded funds (ETFs), including investment firms VanEck and 21Shares.

The Block material

What else is known? Sources note that after the meeting, the SEC rejected the Form 19b-4 applications filed by the Cboe BZX stock exchange to list the new products, and they were not registered in the Federal Register. Registering the applications in the registry would have meant setting a clear deadline for the SEC to rule on them.

To be successfully launched, exchange-traded products must receive approvals of Form 19b-4 trading rule change filings from the stock exchanges and Form S-1 new securities registration statements filed by the issuers themselves. In the case of S-1s, however, the regulator has no deadline for issuance.

According to the sources, the SEC's position was not unexpected for issuers, given that the regulator had previously called the SOL coin a security in lawsuits against cryptocurrency companies, including the Coinbase exchange. Thus, among other things, the SEC accused Coinbase of unregistered offerings of securities in the form of crypto assets, which included SOL.

Issuers are expected to make further updated filings with a stronger argument that SOL is not a security.

Earlier, the SEC approved spot ETFs based on major cryptocurrencies. Bitcoin funds began trading on U.S. stock exchanges on January 11, while Ethereum-ETFs were launched on July 23. VanEck and 21Shares are among the issuers of such products.

VanEck offers the HODL and ETHV funds, which have raised $582 million and $60,1 million, respectively, since they began trading. 21Shares issues ARKB and CETH funds in conjunction with ARK Invest, with inflows of $2,45 billion and $11 million, respectively. All of these products are traded on Cboe.

While funds based on major cryptocurrencies have been successfully launched, many experts expected altcoin-based ETFs to face difficulties in SEC review. ETF Store president Nate Geraci believes that SOL-ETFs will not get approval under the current administration of President Joe Biden. Bloomberg analyst James Seyffart also admitted that such funds could be launched in 2025 if there is a change in the SEC chairman.

The current head of the SEC, Gary Gensler, is known for his negative attitude to the crypto industry; under his leadership, the regulator has filed numerous lawsuits against industry firms and refused to provide guidance for their work at the request of Coinbase.

Gesler himself allowed that all blockchain tokens with the Proof of Stake (PoS) consensus algorithm could be considered securities. This includes SOL. For the same reason, ETH-ETF issuers had to remove from their applications the clause stating that cryptocurrencies of clients under their management would be staked.

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In June, Coinbase became a custodian partner for North America's first SOL-based ETP. The product was launched by 3iQ on the Toronto Stock Exchange (TSX). In early August, Brazil's regulator approved the launch of the SOL-ETF on Latin America's largest stock exchange, B3.

SOL is the fifth largest cryptocurrency by market capitalization with a market value of $68,3 billion and is traded at $146,51, adding 3,8% overnight. Weekly growth was 1,2%, and the asset's value has risen 44% since the beginning of the year.