VanEck files to launch first-ever spot Solana ETF fully backed by liquid staking tokens

VanEck has filed with the US Securities and Exchange Commission (SEC) to launch the first-ever spot Solana exchange-traded fund (ETF) fully backed by liquid staking tokens. The JitoSol ETF is in partnership with Jito Labs.

According to a Form S-1 filed by VanEck Digital Assets on August 22, the proposed JitoSOL ETF aims to track JitoSOL’s price. This represents ownership of staked SOL tokens plus accumulated staking rewards.

The fund will be structured to expose investors to SOL and staking yields through traditional brokerage accounts.  It follows the SEC’s recent guidance stating that certain liquid staking activities are not securities transactions and therefore do not require registration.

The future risks attached to JitoSOL 

JitoSOL may be subject to community-determined penalties for validator misbehavior, or slashing, on the underlying SOL. If the Trust’s JitoSOL is affected by such slashing losses on the underlying SOL, the stored SOL may not get as many staking rewards. This could cause the price of JitoSOL to go down.

As earlier reported by Cryptopolitan, Marinade Finance slashed and restaked 340,000 SOL, removing validators from its list. The process is not entirely detailed to mainstream finance regulators, and the SEC will have to research the conditions of staking and slashing.

Also, because JitoSOL is based on protocol-based liquid staking activities, the Trust expects to earn certain staking rewards through its ownership of JitoSOL. These rewards may be counted as income for US federal income tax purposes. 

There will always be only one JitoSOL Custodian and one additional JitoSOL custodian in possession of and in charge of the private keys for any JitoSOL. Some risks come with staking on the Solana Network because SOL is given to validators.  

The sponsor of the ETF may sometimes sell JitoSOL to cover two things: to provide cash to participants who are redeeming their shares, and to pay for certain expenses that the sponsor itself doesn’t cover. These sales may be handled with the help of liquidity providers or the custodian holding the JitoSOL. The ETF’s JitoSOL will be kept with a third-party custodian, which carries insurance protection.

However, this insurance may not fully cover all potential losses. If the Trust’s JitoSOL were lost or stolen, there’s a chance that neither the Trust, its custodians, nor any related parties would be legally responsible for reimbursing investors. In addition, the Transfer Agent will manage and process the creation and redemption of share “baskets” (large blocks of ETF shares).

VanEck’s S-1 filing joins other 7 issuers

According to Jito Labs, the filing has taken 8 months working with the SEC to design a clear framework for bringing staking-based products into the traditional financial market.

Also, the clarification was issued under the SEC’s Project Crypto initiative, which seeks to modernize rules around activities like staking, custody, and token distribution. The effort could pave the way for approval of crypto-linked products, including Ethereum ETFs that incorporate staking.

This is important because regulators have often been cautious about staking, especially liquid staking, because it comes with extra risks. The filing shows that there may be a path forward for ETFs that include staking mechanisms.

Still, besides VanEck’s S-1 filing, at least seven other issuers are actively pursuing spot Solana ETFs. This includes major firms like Grayscale, VanEck, Bitwise, Canary, Franklin Templeton, Fidelity, and CoinShares.

All await SEC approval with a key decision window opening by October 2025. According to industry experts, approval odds are as high as 95% for standard spot Solana ETFs. Also, recent amendments to filings and high approval probability show optimism, but staked or LST-linked proposals may face additional scrutiny. 

The smartest crypto minds already read our newsletter. Want in? Join them.