SEC Throws Cold Water on Ethereum and Solana ETF Dreams – Regulatory Roadblock or Temporary Setback?

The U.S. Securities and Exchange Commission just slammed the brakes on crypto’s ETF hype train—again. This time, Ethereum and Solana take the hit as regulators flag ’legal issues’ that could delay approvals indefinitely.

Wall Street’s latest attempt to repackage crypto for the masses hits another snag. The SEC’s move signals deeper scrutiny for altcoin-based products, leaving traders wondering if these ETFs will ever see daylight—or if they’re just another casualty of the regulator’s ’slow no’ strategy.

Funny how these ’legal issues’ always seem to surface right when institutional money starts circling. Maybe Gary Gensler’s team just needs more time to figure out how to tax it properly.

SEC flags REX’s staking filing

In a letter to ETF Opportunities, the legal firm handling REX’s applications, the regulator said, 

“We are also concerned that the Funds may have improperly filed their registration statement on FORM N-1A and that disclosures in the registration statement regarding the Funds’ status as investment companies may be potentially misleading.” 

Here, it’s worth noting that the typical lengthy ETF process (involving 19b-4 filing) happens under the Securities Exchange Act of 1934. 

Reacting to the SEC’s letter, Seyffart quipped, 

“SEC seems to be arguing that these products likely don’t qualify for 6c-11 and therefore cannot list as structured.”

Seyffart added that the 6c-11 provision under the Investment Act of 1940 streamlines the ETF application and launch. 

For his part, ETF Stores’ Nate Geraci remained confident that the products WOULD be approved before the end of the year. 

“Never a dull moment in crypto ETF land. All this can be solved by the SEC approving spot sol ETFs & allowing staking in both eth & sol ETFs. Think both will happen later this year anyways.”

Meanwhile, Greg Collett, general counsel at REX Financial, noted that they can satisfy the SEC’s question on the ‘investment company.’ 

Last week, the regulator clarified that most staking services like SOL and ETH don’t qualify as a security offering. This raised the odds for the likely approval of ETF staking for SOL and ETH. 

Now, market focus will turn to Grayscale ETH ETF staking (filed under the 1934 Act). Its final SEC decision deadline was on June 1st. 

That said, ETH traded at $2.4K, at press time, up by 35% in the past 30 trading days, and market sentiment was at ‘greed’ level.

For SOL, the altcoin exchanged hands at $153, at press time, after rallying 4% in the past month, but market sentiment was at a ‘neutral level.’