Crypto Firms Rush for Solana ETFs, Hoping Election Swings Approval

Two investment firms, VanEck and 21Shares, are looking to create a new type of investment product called a "Solana ETF" that would allow people to easily invest in the popular cryptocurrency Solana (SOL).

The problem? The government agency that approves these products (the SEC) hasn't been keen on approving any Solana ETFs so far. They're worried about protecting investors.

Here's the interesting part: both companies submitted their applications right before a major election where the winner might be more open to cryptocurrencies. It seems like they're betting on a new administration being more likely to approve their applications.

So far, only Bitcoin ETFs have been approved in the US, and even applications for Ethereum ETFs (similar products for Ethereum) are still waiting for the final go-ahead. Solana seems like the next logical step since it's one of the biggest cryptocurrencies around, but there's a hurdle.

The current SEC requires a well-established market for regulated derivatives (financial contracts) tied to the cryptocurrency before they'll approve an ETF. Bitcoin and Ethereum already have this through futures contracts offered by CME Group.

However, with a potential change in government and a new SEC chair, these requirements might change. Experts believe these applications are a gamble on a new administration being more crypto-friendly and potentially rewriting the rules for Solana ETFs.

There's another wrinkle: deadlines. The SEC has a specific timeframe (240 days) to respond to a certain application (form 19b-4) after it's submitted. If VanEck files this form by today, the deadline would fall in February 2025, right when a new administration might be taking office. This deadline could give their application a better shot at approval.

Right now, predictions suggest the former administration has a higher chance of winning the election. The current SEC has been strict about approving crypto-related products, and the process can take years.

A new administration would likely replace the current SEC Chair and potentially change their priorities towards cryptocurrencies. This could pave the way for approving Solana ETFs, but it's not guaranteed.

An expert from an investment firm says that for Solana ETFs to be approved, the government would either need to create clear regulations for cryptocurrencies or agree that Solana isn't a security (an investment) but a commodity (like gold). Additionally, the SEC would need to feel comfortable with how unregulated cryptocurrency exchanges handle transactions.

Since these changes seem unlikely under the current administration, the applications from VanEck and 21Shares appear to be a bet on a more crypto-friendly future.