Ethereum and Solana ETFs Hit the Regulatory Brick Wall—What a Surprise! 🚧

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Ethereum and Solana ETFs Hit the Regulatory Brick Wall—What a Surprise! 🚧

The SEC, ever the guardian of investor virtue, has thoughtfully cast doubt over the rather avant-garde proposals by REX Shares and Osprey Funds. Perhaps they suspect these ETFs are little more than financial fig leaves—fascinating, yet fundamentally questionable.

In a thrilling twist of regulatory fate, Solana (SOL) and Ethereum (ETH) exchange-traded funds have encountered a formidable obstacle: the stern, unyielding gatekeeper known as the SEC. Dated May 30, the filing heralded with the subtlety of a marching band, signaled a host of legal qualms about these so-called investment vehicles.

Among the select few are the REX-Osprey ETH and SOL ETFs—so bold in their legal audacity that the SEC raised eyebrows and questions, especially concerning whether these funds qualify as “investment companies.” One has to wonder, does the SEC ever tire of asking questions? 🤔

The grand criterion appears to be whether the funds actually invest in securities—currently, there’s some dispute about whether they do or are merely pretending to. Specifically, if securities account for less than 40% of assets, the regulatory alarm bells toll loudly. In circumstances where this apparent breach occurs, the filings risk being as misleading as a chocolate teapot.

Adding to the delightful chaos, the SEC also scrutinized compliance with Rule 6c-11, the esteemed rulebook governing ETF listing standards. They requested that REX and Osprey revise their filings—because evidently, what’s life without a little paperwork to spice things up? 📄✨

Issues with REX-Osprey Ethereum and Solana ETFs

These ETFs are no typical Wall Street fare. Bloomberg’s James Seyffart, with his customary flair, notes that the funds have employed an array of “clever workarounds”—a euphemism for creative legal gymnastics—to slip past regulation.

BIG NEWS: @REXShares just filed an effective prospectus for Solana and Ethereum staking ETFs to list here in the US. Don’t know launch date but could be within the next few weeks. These are 40-act funds with a unique structure and do not go through the 19b-4 process — James Seyffart (@JSeyff), May 30, 2025

For starters, the funds are set up as C corporations—an unusual choice for ETFs—possibly as a jolly way to dodge the “securities” categorization. Moreover, the use of Cayman Islands subsidiaries adds a splash of international flair and a dash of regulatory hide-and-seek.

While these bold maneuvers allowed the funds to come into effect on May 30 sans SEC approval via the 19b-4 route, the universe of exchanges remains unimpressed. As of June 2, not a single exchange has dared list these financial spectacles. Oh, the suspense! 😅

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2025-06-02 16:04