SEC Eyes Solana ETF Rejection: Is There Hope For XRP ETFs?

Solana ETF products face the risk of rejection from the current US SEC administration, forcing skepticism on crypto ETFs

Two of the five applicants seeking regulatory approval for spot Solana (SOL) exchange-traded funds (ETFs) might be denied. The U.S. Securities and Exchange Commission (SEC) has reportedly notified them of the decision of a possible rejection of their 19b-4 filing.

SEC’s Stance on Solana ETF

According to Eleanor Terrett, Fox Business journalist, in an X post, the SEC has notified two unnamed applicants that it might reject their application for spot SOL ETF. 

🚨SCOOP: I’ve confirmed that the @SECGov has notified at least two of the five prospective issuers that it will reject their 19b4 filings for the $SOL spot ETFs.

The consensus here, I’m told, is that the SEC won’t entertain any new #crypto ETFs under the current administration.

— Eleanor Terrett (@EleanorTerrett) December 6, 2024

Per her source, it appears the SEC, under the leadership of its Chair, Gary Gensler, has decided not to approve any new cryptocurrency ETF under the current administration.

This update has again put Gensler up for criticism from crypto enthusiasts. They consider the pending rejection an utter disregard for the court’s ruling on the Grayscale lawsuit. 

In a landmark victory in August 2023, the U.S. District of Columbia Court of Appeals ruled against the SEC. It held that it was wrong for the SEC to reject an application from crypto asset manager Grayscale Investments to list an ETF that tracks the price of Bitcoin.

That court ruling later paved the way for approving a spot Bitcoin ETF in January 2024 and Ethereum ETF in July. 

Despite the seeming delays in regulatory approval by the U.S. SEC on Bitcoin and Ethereum, several asset managers have filed ETFs for other assets. These digital assets include Solana and XRP, among others.

With two out of the five applicants already notified of a planned rejection, Terrett suggests it might follow the same pattern for the remaining three. Her assumption lies with the approval pattern adopted by the SEC for spot Bitcoin ETF. All eleven applicants launched on the same day.

XRP Community Braces for Potential Setback

This development has raised concerns among XRP community members on the chances of approval for spot ETF. Following the first application filed by Bitwise in October for an XRP ETF, others have joined the race. These include Canary Capital, 21Shares, and WisdomTree.

If Terrett’s speculation is right and the SEC refuses to approve the other three SOL ETF applicants, XRP might suffer the same fate. This implies that the broader cryptocurrency sector has to wait until after January 20, 2025, to entertain any hopes of a possible green light.

Current SEC Chair Gensler has already decided to quit effective that date. Meanwhile, President-elect Donald Trump has nominated a former SEC Commissioner, Paul Atkins, as Gensler’s successor.

Atkins is widely considered to have a market-friendly stance and might adopt lenient views towards crypto regulations. This forthcoming leadership change at the SEC could usher in a new dispensation in crypto regulation.

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