S-1/A: Grayscale Solana Trust Eyes NYSE Arca Listing, Staking

Grayscale Solana Trust (SOL) is amending its S-1 filing to list as an ETF on NYSE Arca and implement a SOL staking program, aiming to enhance investor access and yield.

Summary

• Grayscale Solana Trust (SOL) is converting to Grayscale Solana Trust ETF and intends to list its shares on NYSE Arca under the symbol GSOL, moving from OTCQX.
• The Trust's investment objective is to reflect the value of SOL held, including SOL earned from staking, less expenses and liabilities.
• Shares are currently created and redeemed only via 'Cash Orders' through Authorized Participants and Liquidity Providers; 'In-Kind Orders' require future regulatory approval.
• The Trust intends to engage in Provider-Facilitated Staking for all its SOL, except for operational needs, with 23% of gross staking consideration allocated to the Sponsor, Custodian, and Staking Provider.
• As of June 30, 2025, SOL had a circulating supply of approximately 534 million coins and an aggregate market value of approximately $82.7 billion, ranking as the sixth largest digital asset.
• The Trust's net assets increased by 25% to $83.399 million for the three months ended June 30, 2025, driven by SOL price appreciation from $125.23 to $157.80 per SOL.
• For the six months ended June 30, 2025, net assets decreased by 19% to $83.399 million due to SOL price depreciation from $193.69 to $157.80 per SOL.
• The Sponsor's fee is an annual rate of 0.35% of the Trust's NAV Fee Basis Amount, payable in SOL.
• The Trust is an emerging growth company, subject to reduced reporting requirements under the JOBS Act.

Sentiment

Score: 7

Explanation: The filing indicates a strong strategic move towards an ETF listing and the introduction of staking, which are positive for growth and investor appeal. However, significant regulatory uncertainties regarding SOL's security status and the current limitations on in-kind creations/redemptions temper the overall sentiment.

Positives

• The Trust's intent to list on NYSE Arca under GSOL is a significant step towards broader market access and liquidity for investors.
• The implementation of a SOL staking program allows the Trust to generate additional yield (Staking Consideration) from its SOL holdings, enhancing potential returns.
• The Sponsor has satisfied the 'Staking Condition' for the described staking form, indicating readiness for this new revenue stream.
• The Trust maintains a 'Liquidity Sleeve' of unstaked SOL to manage redemption requests, aiming to prevent timing mismatches and ensure liquidity.
• The Sponsor's fee of 0.35% is competitive, and the Sponsor covers most ordinary-course operational expenses, excluding taxes and extraordinary items.
• The use of multiple, geographically distributed secure vaults and multi-signature solutions for private keys enhances the security of the Trust's SOL assets.

Negatives

• The Trust is currently unable to facilitate 'in-kind' creations and redemptions, relying solely on 'Cash Orders,' which may lead to operational inefficiencies and potential premiums/discounts to NAV.
• Regulatory uncertainty surrounding whether SOL is a security poses a significant risk, potentially leading to adverse impacts on SOL's value, liquidity, and the Trust's operations or even termination.
• The extreme volatility of SOL's trading prices, as evidenced by historical fluctuations (e.g., $8.29 to $280.00), could materially adversely affect the value of the Shares.
• The Solana Network has experienced significant disruptions and outages in the past (e.g., 17 hours offline in September 2021), which could negatively impact SOL's price and network reliability.
• Shareholders do not have the protections associated with ownership in a registered investment company or commodity pool, as the Trust is not regulated under the Investment Company Act or CEA.
• Potential conflicts of interest exist due to the Sponsor's affiliates (DCG) having investments in other digital assets and ecosystem companies, including a minority interest in Kraken, an Index constituent.

Risks

• Extreme volatility of SOL trading prices could cause shares to lose all or substantially all value.
• The medium-to-long term value of shares is uncertain due to the recency and evolving nature of blockchain technologies and digital assets.
• Concentrated ownership of SOL (top 100 wallets hold ~28%) could lead to adverse effects from large sales or distributions.
• Validators may suffer losses due to staking (slashing, inactivity leaks), or staking may become unattractive, adversely affecting the Solana Network.
• A temporary or permanent fork or clone of the Solana Network could adversely affect SOL's value and the Trust's operations.
• The largely unregulated nature and lack of transparency of Digital Asset Trading Platforms may lead to fraud, market manipulation, business failures, or security problems.
• The lack of active trading markets for the Shares may result in losses at the time of disposition.
• Regulatory changes or actions by U.S. Congress or federal/state agencies may restrict SOL use or network operations, impacting share value.
• A determination that SOL is a security could lead to extraordinary expenses or termination of the Trust.
• The Trust relies on third-party service providers (Custodian, Prime Broker, etc.), and their replacement or failure could disrupt operations and lead to asset loss.
• Staked SOL tokens will be inaccessible for a variable period, creating liquidity risk for the Trust.
• Beneficial owners of Shares could incur tax liabilities from staking rewards without receiving corresponding distributions from the Trust.

Future Outlook

The Trust intends to issue Shares on an ongoing basis and list them on NYSE Arca under the symbol GSOL. It plans to operate a redemption program, relying on an SEC exemption. The Sponsor expects an effective arbitrage mechanism upon NYSE Arca listing, leading to net creation of Shares if trading at a premium and net redemption if at a discount. The Trust will engage in staking all its SOL, with a dynamic 'Liquidity Sleeve' to manage redemption requests. Future modifications to staking forms are possible if the 'Staking Condition' is met. The Sponsor may also explore other financing arrangements to manage SOL liquidity constraints.

Management Comments

• The Sponsor believes that the security procedures in place for the Trust, including offline storage for a substantial portion of SOL, multiple encrypted private key shards, usernames, passwords, and 2-step verification, are reasonably designed to safeguard the Trust's SOL.
• The Sponsor believes that momentum pricing of SOL has resulted, and may continue to result, in speculation regarding future appreciation in the value of SOL, inflating and making the Index Price more volatile.
• The Sponsor believes that it is generally more efficient, and therefore less costly, for spot commodity exchange-traded products to utilize in-kind orders rather than cash orders, due to fewer steps and less operational risk.
• The Sponsor has committed to causing the Trust to irrevocably abandon any Incidental Rights and IR Virtual Currency to which the Trust may become entitled in the future.
• The Sponsor believes the Index Provider's selection process for Constituent Trading Platforms and the Index's algorithm provide a more accurate picture of SOL price movements than a simple average of Digital Asset Trading Platform spot prices.

Industry Context

The digital asset industry is rapidly evolving, with significant volatility and increased regulatory scrutiny following events like the FTX collapse. The U.S. government, under President Trump's executive order, is working towards a federal regulatory framework for digital assets, including potential legislation for self-custody and CFTC authority over spot markets. The SEC has also launched a Crypto Task Force to develop clear rules for digital assets. The emergence of central bank digital currencies (CBDCs) and private blockchain initiatives by financial institutions poses competition to existing digital assets like SOL. The Trust faces competition from other spot SOL exchange-traded products, some of which have already received SEC approval, and its success will depend on its timing, fee structure, and ability to attract liquidity.

Comparison to Industry Standards

• The Trust's current cash-only creation/redemption mechanism is a novel approach for spot commodity ETPs, as products like gold and silver ETFs typically use in-kind transactions, which are generally considered more efficient and less costly.
• The Trust's fee structure (0.35% annual Sponsors Fee) will be a competitive factor against other spot SOL exchange-traded products, if and when approved, which may offer lower fees.
• The Trust's reliance on Coinbase Custody Trust Company, LLC as its primary custodian, a fiduciary under New York Banking Law and a qualified custodian under the Investment Advisers Act, aligns with institutional standards for digital asset custody.
• The Trust's use of cold storage, geographically distributed private key shards, and multi-signature security procedures for SOL custody are consistent with industry-leading practices for safeguarding digital assets, similar to those employed by other major digital asset custodians.
• The Solana Network's Proof-of-History (PoH) timestamping mechanism is a newer technology compared to established Proof-of-Work (e.g., Bitcoin) or Proof-of-Stake (e.g., Ethereum post-Merge) blockchains, and its long-term functionality and adoption are still being tested at scale.
• The SEC's previous stance that SOL is a security, as alleged in complaints against Binance, Coinbase, and Kraken (though later dismissed), highlights a significant regulatory risk that differentiates SOL from digital assets like Bitcoin and Ether, which the SEC has implicitly or explicitly indicated are not securities.

Management Changes

Corporate Governance

Legal Proceedings

• Osprey Funds, LLC filed a lawsuit against the Sponsor in Connecticut Superior Court on January 30, 2023, alleging violations of the Connecticut Unfair Trade Practices Act (CUTPA). The Sponsor's motion for summary judgment was granted on February 7, 2025, and Osprey withdrew the action and appeal on May 12, 2025.
• Genesis Global Capital, LLC and Genesis Asia Pacific Pte. Ltd. filed a complaint in the United States Bankruptcy Court for the Southern District of New York on May 19, 2025, against Digital Currency Group, Inc. (DCG) and affiliates, including GSO, alleging preferential transfers. GSO believes this lawsuit is without merit and intends to vigorously defend against it.
• The SEC brought charges against Binance, Coinbase, and Kraken in June and November 2023, alleging they operated unregistered securities exchanges and that SOL and other digital assets are securities. These lawsuits were dismissed via court-approved joint stipulations between February and May 2025.
• The SEC filed settled enforcement actions against Mango Labs, LLC, Mango DAO, and Blockworks Foundation in September 2024, and an enforcement action against Cumberland DRW, LLC in October 2024, describing SOL as a crypto asset offered and sold as a security. The Cumberland Enforcement Action was dismissed in March 2025.

Related Party Transactions

• Digital Currency Group, Inc. (DCG) is the sole equity holder and indirect parent company of the Sponsor and holds a minority interest (less than 1.0%) in Kraken, one of the Digital Asset Trading Platforms included in the Index.
• The Sponsor and Grayscale Securities, LLC (an Authorized Participant) are affiliates. Grayscale Securities, LLC was the only Authorized Participant from October 3, 2022, and Genesis Global Trading, Inc. (a former DCG subsidiary) acted as Authorized Participant prior to that.
• Jane Street Capital, LLC, an Authorized Participant, is an affiliate of JSCT, LLC, one of the Liquidity Providers.
• The Sponsor's officers may trade SOL for their personal accounts, potentially creating conflicts of interest, though subject to internal policies.
• The Sponsor may engage other affiliated service providers in the future, potentially disincentivizing replacement of existing affiliated providers.
• The Sponsor has historically selected an Index Provider (CoinDesk Indices, Inc.) that was an affiliate (until November 20, 2023), which could raise concerns about influence over market data.

Stakeholder Impact

• Shareholders: Potential for increased liquidity and broader market access through NYSE Arca listing. Opportunity for yield generation through staking. Exposure to significant risks from SOL price volatility, regulatory uncertainty, and operational issues. Limited voting rights and restricted ability to bring derivative actions.
• Authorized Participants: Will continue to facilitate creation and redemption of Baskets, primarily through Cash Orders, with potential for In-Kind Orders if regulatory approval is obtained. May face challenges in hedging SOL exposure and maintaining liquidity.
• Liquidity Providers: Engaged by the Sponsor to facilitate Cash Orders, bearing price differentials in Variable Fee Cash Orders. Their ability to perform is crucial for the Trust's arbitrage mechanism.
• Custodian (Coinbase Custody Trust Company, LLC) and Additional Custodian (Anchorage Digital Bank N.A.): Continue to provide safekeeping for SOL, with specific liabilities and insurance coverage. Their operational stability is critical for the Trust's assets.
• Solana Network: Increased institutional engagement through the Trust's ETF listing and staking activities could enhance demand and utility for SOL. However, network vulnerabilities and scaling challenges remain risks.
• Regulators (SEC, CFTC, FinCEN, etc.): The filing addresses ongoing regulatory scrutiny of digital assets, particularly regarding SOL's classification as a security and staking activities. Regulatory actions could significantly impact the Trust's operations and SOL's value.

Next Steps

• The Sponsor intends to rename the Trust as Grayscale Solana Trust ETF by filing a Certificate of Amendment to the Certificate of Trust with the Delaware Secretary of State.
• The Trust intends to list the Shares on NYSE Arca under the symbol GSOL, following the effectiveness of this registration statement.
• The Sponsor expects to implement a Staking Policy with respect to the Trust prior to the effectiveness of this registration statement and NYSE Arca listing, describing the frequency and conditions of staking distributions.
• NYSE Arca may seek necessary regulatory approval to amend its listing rules to permit the Trust to create and redeem Shares via in-kind transactions (In-Kind Regulatory Approval).
• The Sponsor will continue to monitor for material hard forks or airdrops and notify investors of any material changes to its policy regarding Incidental Rights and IR Virtual Currency.

Key Dates

Recommendation

The Grayscale Solana Trust's move to list as an ETF on NYSE Arca and introduce staking capabilities are significant positive developments that could enhance liquidity, market access, and yield for investors. However, the persistent regulatory uncertainty surrounding SOL's classification as a security, the current reliance on less efficient cash-only creations/redemptions, and the inherent volatility of the digital asset market present substantial risks. While the long-term potential is notable, these unresolved issues warrant a 'hold' recommendation, advising investors to monitor regulatory clarity and the effectiveness of the ETF's arbitrage mechanism and staking program before making further investment decisions.

Keywords

Solana, SOL, Grayscale, ETF, Digital Asset, Cryptocurrency, Staking, SEC Filing, NYSE Arca, Investment Trust, Blockchain, Proof-of-Stake