SEC Warns ETF Issuers Over Solana, Raises Securities Concerns

SEC Warns ETF Issuers Over Solana, Raises Securities Concerns

SEC Raises Concerns Over SOL Securities to ETF Issuers The Securities and Exchange Commission (SEC) has reportedly raised concerns over the potential classification of Solana (SOL) as a security to exchange-traded fund (ETF) issuers, according to The Block. This development follows the withdrawal of CBOE's VanEck Solana ETF's 19b-4 filing (notice of a proposed rule change) from the CBOE website. Following discussions, the SEC and CBOE mutually agreed not to file a Form 19b-4 for the Solana ETF with the Federal Register. Sources indicate that the SEC's action aligns with previous court filings where the SEC deemed SOL a security. "The SEC's action didn't come as a surprise to ETF issuers given that the SEC has previously deemed SOL to be a security in several court filings. Going forward, issuers are likely to either refile or amend their 19b-4 filings to argue that SOL is not a security," the sources added. The SEC's concerns over SOL's classification as a security stem from its centralized governance structure and its reliance on a small group of validators. These factors raise questions about whether SOL meets the Howey Test, which the SEC uses to determine if an asset is a security. If SOL were to be classified as a security, it would be subject to stricter regulations and reporting requirements. This could make it more difficult for ETF issuers to offer SOL-based ETFs, as they would need to register with the SEC and meet ongoing compliance requirements. The SEC's concerns over SOL's classification as a security highlight the challenges that regulators face in overseeing the rapidly evolving digital asset market. As the market continues to grow, regulators will likely need to adapt their approach to ensure that investors are protected while allowing for innovation.