Canary Capital has filed an application with the SEC to launch a spot SOL ETF

What’s new? Crypto investment company Canary Capital has filed an application with the US Securities and Exchange Commission (SEC) to launch a spot exchange-traded fund (ETF) based on the native token of the Solana (SOL) blockchain. The company has filed a total of three spot crypto fund applications with the regulator since the beginning of the month.

The company’s application

What else is known? On October 8, Canary Capital filed an application with the SEC to launch a $29,3 billion XRP token-based spot ETF based on the $29,3 billion capitalization of fintech company Ripple. On October 15, documents were filed to launch a spot exchange-traded fund based on the $5,3 billion Litecoin (LTC) token.

All three documents were filed on Form S-1 to register new securities (fund shares). This is a mandatory step in bringing such products to market. The second required component is the filing of a 19b-4 change of trading rules statement from the stock exchange on which the new fund will be listed.

In addition, on October 1, the company successfully launched the first US-based trust for accredited individual and institutional investors based on Hedera’s (HBAR) network native token with a capitalization of $1.8 billion.

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The founder of Canary Capital is Steven McClurg, he also previously founded crypto investment company Valkyrie, where he was head of investments. Valkyrie owns BRRRR, a spot bitcoin fund launched on Nasdaq. It ranks sixth among US BTC ETFs in terms of fund inflows and eighth in terms of assets under management (AUM) with $543 million and $659 million, respectively. In March this year, Valkyrie was bought by Europe’s CoinShares.

It is noted that McClurg launched Canary to drive innovation and meet institutional demand for sophisticated cryptocurrency investment solutions.

As for the new filings, the company may have difficulty bringing the funds to market due to the unclear status of the assets. The SEC approved bitcoin and Ethereum-based spot ETFs in January and July 2024, respectively, repeatedly noting that all other cryptocurrencies may fall under the definition of a security, making it impossible to launch commodity funds based on them.

The approval of bitcoin funds did not go smoothly either. It was preceded by a lawsuit filed by crypto investment company Grayscale, which found that the SEC unreasonably refused to allow the company to convert its trust into a spot BTC ETF.

The admission of Ethereum funds also passed with reservations. In particular, the SEC did not allow ETH tokens purchased for the funds to be staked, although this would have brought investors additional rewards.

In August, the SEC had already rejected all SOL ETF filings made to that point, stating that the asset could be a security. In addition, the asset’s status is one of the subjects of the regulator’s litigation with exchanges Coinbase and Binance. The commission alleges that the platforms offer trading in unregistered securities in the form of tokens, including SOL.

A similar situation with XRP: the status of the asset was the subject of a multi-year trial between the SEC and Ripple, following which the court saw no violations in retail sales of the asset, but imposed a $125 million fine for institutional sales. The SEC then filed an appeal this month asking the court to reconsider the findings.

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As for LTC, it does not appear in the SEC’s lawsuits. Moreover, another market regulator, the Commodity Futures Trading Commission (CFTC), categorized Litecoin as a commodity in its lawsuit against Binance last year.