Here's what could prompt the SEC to reject Solana ETF spot proposals

On Thursday, June 27, investment company VanEck took an important step by filing for the spot ETF Solana with the US Securities and Exchange Commission (SEC).

The move has sparked market speculation about the approval timeline, with VanEck's filing highlighting several notable risks.

Unlike Bitcoin и Ethereum , spot Solana VanEck's ETF is unique in that there is no Solana futures trading in the US. In addition, VanEck's filing cites a specific risk associated with concentrated ownership of SOL tokens. As of November 2023, Solana's 100 largest wallets hold almost a third of all SOL tokens in circulation. This concentration could result in large sales or distributions by these holders, potentially adversely affecting the market price.

Decentralization of tokens is critical for both investors and regulators. This concentrated ownership may not sit well with the Securities and Exchange Commission, posing a potential obstacle to approval of the VanEck Solana ETF.

Securities and Exchange Commissioner Carolyn Crenshaw previously expressed similar concerns about Bitcoin, where 16% of all circulating BTC is held by the 107 largest wallets. By comparison, the 100 largest Ethereum wallets hold 19% of the asset's supply.

Despite these concerns, Matthew Siegel, VanEck's head of digital research, downplayed the issue, stating that the Solana blockchain is inherently decentralized.

VanEck also highlighted the risks associated with Solana's unique Proof of History (PoH) consensus mechanism. Although PoH allows Solana to process transactions faster than a blockchain like Ethereum, it has also led to several lengthy network outages. This issue may be a factor for the SEC to consider in deciding whether to approve the Solana ETF in place.