In mid-July 2024, just before the Ethereum ETF emerged, asset giants VanEck and 21Shares filed for the Solana ETF. However, Solana ETF demand faces downsides as analysts and experts speculate that the ETF won’t be live until 2026. Meanwhile, HBAR and Litecoin became strong contenders to Solana after asset managers filed for their ETFs.

This major development and filings have sparked curiosity among investors: Which ETF is likely to get approved first and attract investor interest? In this article, we’ll dive deeper into the prospects of Solana, HBAR, and Litecoin ETFs, analyzing their chances of regulatory approval and potential impact on the market.

Challenges Facing Crypto Spot ETF Approval by the SEC

The approval of crypto spot ETFs, including those tied to assets like Solana, faces numerous regulatory and market hurdles. While the growing interest from institutional investors and asset managers signals a strong demand for such products, the path to approval remains fraught with complexities.

Lengthy Review Process

One of the primary challenges is the SEC’s extended review timeline for ETF applications, which typically spans 240 to 260 days. This prolonged process creates uncertainty for projects like Solana, especially in today’s stringent regulatory environment. Even under a more crypto-friendly administration, such as during President Trump’s tenure, delays would likely persist due to bureaucratic hurdles and the need for thorough evaluations of new financial products.

Legal Challenges

Ongoing legal battles between the SEC and various cryptocurrency exchanges pose another significant obstacle. These disputes complicate efforts to classify Solana under a commodities ETF framework, a critical step for approval. If unresolved, these legal conflicts could not only delay the approval process but also negatively impact Solana’s future regulatory prospects.

Political Conditions and Challenges

The political landscape heavily influences how regulators approach cryptocurrency. While some experts are optimistic that changes in administration could foster a more favorable environment for crypto assets like Solana, significant shifts are unlikely in the short term. The confirmation of new SEC leadership could take months, meaning existing policies will likely continue to dictate regulatory decisions for now.

Market Sentiment and Speculation

Despite these challenges, market sentiment remains cautiously optimistic. Platforms like Polymarket indicate that many believe Solana ETFs could gain approval by 2025, fueled by growing interest from asset managers and shifting market conditions. However, this optimism is tempered by the recognition of ongoing regulatory and legal hurdles that could delay the timeline.

Regulatory Uncertainty Delays Solana ETF Approval by the SEC

The approval of a Solana-based ETF by the SEC faces significant delays due to regulatory, legal, and market challenges. The primary issue is the SEC's uncertainty over whether Solana (SOL) should be classified as a security. If deemed a security, Solana would face stricter regulations, complicating its approval and delaying related ETFs that depend on it as an underlying asset.

This regulatory ambiguity creates a ripple effect, stalling progress for Solana-based ETFs and frustrating market participants. Adding to the challenge, past allegations of Solana being offered as an unregistered security have heightened scrutiny, prompting the SEC to proceed cautiously.

In response to these unresolved issues, the SEC has paused discussions and withdrawn filings related to Solana ETFs. Until these obstacles are addressed, Solana’s regulatory approval—and the broader adoption of cryptocurrency-based ETFs—will remain uncertain.

Canary Capital’s ETF Filings Spark Momentum for HBAR and Litecoin

In December 2024, Canary Capital, a boutique investment and management firm, submitted an S-1 filing for an HBAR exchange-traded fund (ETF), aiming to provide investors with greater exposure to the asset. This filing followed the firm's previous registration statements for ETFs focused on XRP, Litecoin, and Solana. The HBAR price experienced bullish momentum in mid-January, driven by speculation surrounding these ETF filings and its partnership with Real-World Asset (RWA) initiatives.

Similarly, the price of Litecoin surged more than 25% during the week when Grayscale applied for a Litecoin spot ETF. Following this, CoinShares also filed for a Litecoin ETF. On January 16, Nasdaq submitted a 19b-4 Form to list and trade a spot Litecoin (LTC) ETF on behalf of Canary Capital.

A Potential Greenlight for Litecoin ETF

Compared to HBAR, crypto analysts are more inclined to believe that the U.S. Securities and Exchange Commission (SEC) will approve the Litecoin ETF first, largely due to its close resemblance to Bitcoin, which has already been embraced by the SEC.

One of the supporters is Eric Balchunas, a Bloomberg analyst, and he was backed by James Seyffart, his coworker. Seyffart suggested that the Litecoin ETF may attract more SEC attention than Solana's, with approval potentially occurring within the next few weeks. This growing confidence highlights the strong potential for the Litecoin ETF to pave the way for broader crypto asset adoption in traditional markets.

SEC Approval Outlook for Litecoin, HBAR, and Solana ETFs

The market dynamics suggest that a Litecoin ETF stands the highest chance of SEC approval. This optimism stems from Litecoin’s mechanism, which closely resembles Bitcoin—a cryptocurrency already embraced in the ETF market. Additionally, Grayscale’s recent filing for a Litecoin ETF further enhances its prospects, as the asset management giant’s involvement could lend credibility and momentum to the approval process.

In contrast, the outlook for an HBAR ETF appears far less promising. The SEC has not actively considered any filings for an HBAR-based ETF, and the absence of a regulated reference or established futures market significantly hampers progress. These factors indicate that regulatory approval for an HBAR ETF could face prolonged delays.

Solana ETFs face even greater challenges due to regulatory classification issues, legal complexities, and shifting political dynamics. The SEC recently withdrew filings related to Solana ETFs, and CME dismissed rumors of a Solana futures market as an “error.” While progress is possible; overcoming these hurdles will take time, delaying the launch of Solana-based financial products.

Conclusion: Litecoin Leads the Race for ETF Approval

ETFs offer investors a regulated avenue to gain exposure to cryptocurrencies, making them an attractive option in the evolving financial landscape. However, Solana and HBAR ETFs face significant hurdles, primarily due to regulatory ambiguity, a lack of established futures markets, and ongoing legal challenges. These obstacles put them at a disadvantage compared to Litecoin, which benefits from its similarities to Bitcoin and its established credibility in the crypto market.

Litecoin’s faster transaction speeds and resemblance to Bitcoin’s mechanics position it as the strongest contender for SEC approval. Analysts predict that a Litecoin ETF could receive approval as early as 2025, potentially paving the way for broader adoption of cryptocurrency-based ETFs in traditional markets. While Solana and HBAR ETFs may eventually progress, their paths to approval remain longer and more uncertain.

Litecoin, Solana, HBAR ETFs: Which Will Gain SEC Approval First?