S-1/A: Grayscale Solana Trust Files S-1/A for NYSE Arca Listing, Reveals Q1 Loss Amid Market Volatility

Grayscale Solana Trust (SOL) has filed an amended registration statement with the SEC, signaling its intent to list on NYSE Arca as an ETF and potentially enable staking, despite reporting a significant net asset decrease in Q1 2025.

Summary

• Grayscale Solana Trust (SOL) is a Delaware statutory trust aiming to provide investors with cost-effective exposure to Solana (SOL) by holding the digital asset.
• The Trust intends to list its Shares on NYSE Arca under the symbol GSOL, transitioning from its current OTCQX quotation.
• Shares are issued and redeemed in 'Baskets' of 10,000 Shares, currently only through 'Cash Orders' due to the lack of 'In-Kind Regulatory Approval' for direct SOL transactions.
• The Trust's investment objective is for the value of its Shares to reflect the value of SOL held, less expenses, but it has historically traded at a substantial premium on OTCQX, averaging 302% and reaching a maximum of 875% between April 2023 and June 2025.
• As of March 31, 2025, net assets decreased by 35% to $66.515 million from $102.631 million at December 31, 2024, primarily due to SOL price depreciation from $193.69 to $125.23.
• The Trust reported a net realized and unrealized loss on investment in SOL of ($36.648 million) for Q1 2025, compared to a gain of $33.071 million in Q1 2024.
• For the full year 2024, net assets increased by 307% to $102.631 million, driven by SOL price appreciation from $104.79 to $193.69.
• The Trust may engage in staking of its SOL holdings to earn 'Staking Consideration' (additional SOL), but this is contingent on satisfying a 'Staking Condition' related to its grantor trust tax status, which has not yet been met.
• If staking is implemented, the Sponsor expects to stake up to 85% of the Trust's SOL, maintaining approximately 15% in a 'Liquidity Sleeve' to manage redemption requests.
• The Sponsor's Fee is 2.5% annually of the Trust's NAV Fee Basis Amount, paid in SOL, and covers most ordinary operational expenses, excluding extraordinary expenses like taxes or litigation costs.
• As of June 30, 2025, SOL had a circulating supply of approximately 534 million coins, an aggregate market value of approximately $82.7 billion, and was the sixth largest digital asset by market capitalization.
• The SEC has previously taken the view that SOL is a security, which poses a significant risk to the Trust, though recent SEC dismissals of lawsuits against major digital asset trading platforms and the launch of a Crypto Task Force indicate evolving regulatory approaches.

Sentiment

Score: 5

Explanation: The filing presents a mixed outlook. While the significant Q1 2025 financial loss and ongoing regulatory uncertainties for SOL are negative, the clear intent to list on NYSE Arca, the potential for staking, and recent positive shifts in the broader crypto regulatory landscape (SEC lawsuit dismissals, Crypto Task Force) provide strong positive catalysts. The long-term viability hinges on regulatory clarity and market acceptance, making the current sentiment neutral with cautious optimism for future developments.

Positives

• The Trust intends to list its Shares on NYSE Arca, which could enhance liquidity and accessibility for investors.
• The Sponsor expects the NYSE Arca listing to enable an effective arbitrage mechanism, helping to keep the Shares' value closely linked to the Index Price.
• The potential for the Trust to engage in staking of its SOL holdings could generate additional SOL, enhancing returns if the 'Staking Condition' is met.
• Robust security protocols are in place for SOL custody, including cold storage, multiple encrypted private key shards, and geographical distribution of vaults, designed to protect assets from unauthorized access or transfer.
• The Sponsor assumes most ordinary-course operational and periodic expenses of the Trust, reducing the direct cost burden on shareholders.
• Recent SEC dismissals of lawsuits against major digital asset trading platforms (Binance, Coinbase, Kraken, Cumberland DRW, LLC) and termination of an inquiry into SOL may signal a more favorable regulatory environment for digital assets.
• The SEC has launched a 'Crypto Task Force' dedicated to developing a comprehensive and clear regulatory framework for digital assets, which could lead to greater clarity and stability.
• The CFTC has determined SOL to be a non-security commodity, and CME launched SOL futures products in February 2025, indicating growing institutional engagement and regulatory acceptance in the commodities space.

Negatives

• The Trust has not met its investment objective, and its Shares have historically traded at a substantial premium to NAV on OTCQX (average 302%, max 875% from April 2023 to June 2025), posing a significant risk of loss if this premium diminishes.
• The Trust is currently unable to facilitate in-kind creations and redemptions, relying solely on cash orders, which could lead to operational inefficiencies, impaired liquidity, and wider bid/ask spreads.
• Staking is currently prohibited as the 'Staking Condition' (grantor trust tax status) has not been met, potentially placing the Trust at a comparative disadvantage to direct SOL investments or other vehicles that can stake.
• SOL's trading prices have experienced extreme volatility, which could lead to material adverse effects on the value of the Shares, with potential for substantial loss.
• The digital asset markets are largely unregulated and lack transparency, making them susceptible to fraud, market manipulation (e.g., wash-trading, front-running), business failures, and security breaches.
• Concentrated ownership of SOL (top 100 wallets hold ~37%) creates a risk that large sales by these holders could adversely affect the market price.
• The Solana Network has experienced significant disruptions and outages (e.g., a 17-hour outage in September 2021), which could negatively impact SOL's value and network utility.
• Staking introduces risks such as 'slashing' penalties for validators and periods of inaccessibility for staked SOL tokens, posing liquidity risks to the Trust.
• The Trust is highly dependent on third-party service providers (Custodian, Prime Broker, Authorized Participants, Liquidity Providers), and disruptions or failures of these providers could adversely impact operations and asset security.
• There is a lack of full insurance coverage for the Trust's SOL holdings, and the Custodian's liability is limited (e.g., $100 million per cold storage address), exposing the Trust and shareholders to potential losses.
• The Trust's structure limits shareholder voting rights and restricts derivative actions (requiring 10% collective ownership by non-affiliated shareholders), giving almost all control to the Sponsor.
• Extraordinary, non-recurring expenses (e.g., taxes, litigation costs exceeding $600,000 annually) are borne by the Trust, requiring the sale of SOL and reducing the amount of SOL per Share.
• Shareholders may incur tax liabilities from the Trust's sale of SOL to pay expenses, without receiving corresponding cash distributions, potentially requiring other sources of funds to cover tax obligations.
• The U.S. federal income tax treatment of digital assets and staking remains uncertain, and future guidance could have adverse tax consequences for shareholders.
• Potential conflicts of interest exist between the Sponsor and its affiliates (e.g., DCG's minority interest in Kraken, other Grayscale products), which could lead to decisions favoring their own interests over the Trust's.
• The SEC has previously taken the view that SOL is a security, and a final determination to that effect could lead to significant adverse impacts on SOL's value, trading, and potentially the termination of the Trust.
• Competition from other digital assets, central bank digital currencies (CBDCs), and other investment vehicles (including other spot SOL exchange-traded products) could negatively impact SOL's price and the Trust's market position.
• The Trust's 'emerging growth company' status allows for reduced disclosure requirements, which some investors may find less attractive, potentially affecting market activity and share price volatility.

Risks

• Extreme volatility of trading prices that many digital assets, including SOL, have experienced in recent periods and may continue to experience, could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value.
• The medium-to-long term value of the Shares is subject to a number of factors relating to the capabilities and development of blockchain technologies and to the fundamental investment characteristics of digital assets.
• The value of the Shares is dependent on the acceptance of digital assets, such as SOL, which represent a new and rapidly evolving industry.
• Digital assets may have concentrated ownership and large sales or distributions by holders of such digital assets could have an adverse effect on the market price of such digital assets.
• Recent developments in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity.
• The largely unregulated nature and lack of transparency surrounding the operations of Digital Asset Trading Platforms may adversely affect the value of digital assets and, consequently, the value of the Shares.
• The value of the Shares relates directly to the value of SOL held by the Trust, the value of which may be highly volatile and subject to fluctuations.
• The Shares may trade at a price that is at, above or below the Trusts NAV per Share as a result of the non-current trading hours between NYSE Arca and the Digital Asset Trading Platform Market.
• Shareholders may suffer a loss on their investment if the Shares trade above or below the Trusts NAV per Share.
• Validators may suffer losses due to Staking, or Staking may prove unattractive to validators, which could adversely affect the Solana Network.
• A temporary or permanent fork or a clone could adversely affect the value of the Shares.
• The lack of active trading markets for the Shares may result in losses on investors investments at the time of disposition of Shares.
• Possible illiquid markets may exacerbate losses or increase the variability between the Trusts NAV and its market price.
• The possibility that there may be less liquidity or wider spreads in the market for the Shares as compared to the shares of other spot SOL exchange-traded products, if and when the listing of such products has been approved.
• The limited history of the Index.
• Competition from the emergence or growth of other digital assets could have a negative impact on the price of SOL and adversely affect the value of the Shares.
• The liquidity of the Shares may be affected if Authorized Participants cease to perform their obligations under the Participant Agreements or the Liquidity Engager is unable to engage Liquidity Providers.
• Any suspension or other unavailability of the Trusts redemption program may cause the Shares to trade at a discount to the NAV per Share.
• A determination that SOL or any other digital asset is a security may adversely affect the value of SOL and the value of the Shares, and result in potentially extraordinary, nonrecurring expenses to, or termination of, the Trust.
• Regulatory changes or actions by the U.S. Congress or any U.S. federal or state agencies may affect the value of the Shares or restrict the use of SOL, validating activity or the operation of the Solana Network or the Digital Asset Markets in a manner that adversely affects the value of the Shares.
• Changes in the policies of the U.S. Securities and Exchange Commission (the SEC) could adversely impact the value of the Shares.
• Regulatory changes or other events in foreign jurisdictions may affect the value of the Shares or restrict the use of one or more digital assets, validating activity or the operation of their networks or the Digital Asset Trading Platform Market in a manner that adversely affects the value of the Shares.
• An Authorized Participant, the Trust or the Sponsor could be subject to regulation as a money service business or money transmitter, which could result in extraordinary expenses to the Authorized Participant, the Trust or the Sponsor and also result in decreased liquidity for the Shares.
• Regulatory changes or interpretations could obligate the Trust or the Sponsor to register and comply with new regulations, resulting in potentially extraordinary, nonrecurring expenses to the Trust.
• Conflicts of interest may arise among the Sponsor or its affiliates and the Trust.
• The Sponsors services may be discontinued, which could be detrimental to the Trust.
• The lack of ability to facilitate in-kind creations and redemptions of Shares could have adverse consequences for the Trust.
• If the Custodian resigns or is removed by the Sponsor, or otherwise, without replacement, it could trigger early termination of the Trust.
• To the extent the Staking Condition is not satisfied, the lack of ability to participate in Staking could have adverse consequences for the Trust.
• Staking introduces a risk of loss of SOL, which could adversely affect the value of the Shares.
• Staked SOL tokens will be inaccessible for a variable period of time, determined by a range of factors, which could result in certain liquidity risk to the Trust.
• The Trust will be dependent on third parties to effectively execute the Trusts Staking Arrangements.
• The regulatory landscape surrounding Staking is uncertain.
• If the Staking Condition is satisfied, beneficial owners of Shares could incur tax liabilities without receiving corresponding distributions from the Trust.
• The Trust relies on third-party service providers to perform certain functions essential to the affairs of the Trust and the replacement of such service providers could pose a challenge to the safekeeping of the Trusts SOL and to the operations of the Trust.
• There is no guarantee that an active trading market for the Shares will continue to develop.
• SOL transactions are irrevocable and stolen or incorrectly transferred SOL may be irretrievable. As a result, any incorrectly executed SOL transactions could adversely affect the value of the Shares.
• The lack of full insurance and shareholders limited rights of legal recourse against the Trust, Trustee, Sponsor, Transfer Agent and Custodial Entities expose the Trust and its shareholders to the risk of loss of the Trusts SOL for which no person or entity is liable.
• The Trust may be required, or the Sponsor may deem it appropriate, to terminate and liquidate at a time that is disadvantageous to shareholders.
• The Trust Agreement includes provisions that limit shareholders voting rights and restrict shareholders right to bring a derivative action.
• The Sponsor is solely responsible for determining the value of the NAV and NAV per Share and any errors, discontinuance or changes in such valuation calculations may have an adverse effect on the value of the Shares.
• Extraordinary expenses resulting from unanticipated events may become payable by the Trust, adversely affecting the value of the Shares.
• The Trusts delivery or sale of SOL to pay expenses or other operations of the Trust could result in shareholders incurring tax liability without an associated distribution from the Trust.
• Intellectual property rights claims may adversely affect the Trust and the value of the Shares.
• Pandemics, epidemics and other natural and man-made disasters could negatively impact the value of the Trusts holdings and/or significantly disrupt its affairs.
• The SEC may approve applications under Rule 19b-4 of the Exchange Act to list competing digital assets as exchange-traded products, which could reduce demand for, and the price of, SOL and adversely impact the value of the Shares.
• Competition from central bank digital currencies (CBDCs) and emerging payments initiatives involving financial institutions could adversely affect the price of SOL and other digital assets.
• Prices of SOL may be affected due to stablecoins (including Tether and USDC), the activities of stablecoin issuers and their regulatory treatment.
• Failure of funds that hold digital assets or that have exposure to digital assets through derivatives to receive SEC approval to list their shares on exchanges could adversely affect the value of the Shares.
• The inability of Authorized Participants and market makers to hedge their SOL exposure may adversely affect the liquidity of Shares and the value of an investment in the Shares.
• Arbitrage transactions intended to keep the price of the Shares closely linked to the price of SOL may be problematic if the process for the purchase and redemption of Baskets encounters difficulties, which may adversely affect an investment in the Shares.
• SOLs initial manner of sale closely resembles that of certain digital assets found to be securities, and a determination that SOL is a security may adversely affect the value of SOL and an investment in the Shares, and result in potentially extraordinary, nonrecurring expenses to, or termination of, the Trust.
• Competing industries may have more influence with policymakers than the digital asset industry, which could lead to the adoption of laws and regulations that are harmful to the digital asset industry.
• The treatment of the Trust for U.S. federal income tax purposes is uncertain.
• The treatment of digital assets for U.S. federal income tax purposes is uncertain.
• Future developments regarding the treatment of digital assets for U.S. federal income tax purposes could adversely affect the value of the Shares.
• Future developments in the treatment of digital assets for tax purposes other than U.S. federal income tax purposes could adversely affect the value of the Shares.
• The tax treatment of SOL and transactions involving SOL for state and local tax purposes is not settled.
• A U.S. tax-exempt shareholder may recognize unrelated business taxable income as a consequence of an investment in Shares.
• Non-U.S. Holders may be subject to U.S. federal withholding tax on income derived from forks, airdrops and similar occurrences.
• Coinbase Global serves as the SOL custodian and prime execution agent for several competing exchange-traded SOL products, which could adversely affect the Trusts operations and ultimately the value of the Shares.
• Certain of the Authorized Participants engaged by the Trust serve in a similar capacity for several competing exchange-traded SOL products, which could adversely affect the arbitrage mechanism, the Trusts operations, the performance of the Trust and ultimately the value of the Shares.

Future Outlook

The Trust intends to list its Shares on NYSE Arca under the symbol GSOL and aims to operate a redemption program, relying on an exemption or other relief from the SEC under Regulation M. It also plans to establish a program to participate in Solana Network's proof-of-stake validation mechanism to receive Staking Consideration, contingent on satisfying the 'Staking Condition' related to its grantor trust tax status. The Sponsor anticipates staking up to 85% of the Trust's SOL, maintaining a 15% 'Liquidity Sleeve' for redemptions. The Sponsor will continue to seek regulatory approval for in-kind creations and redemptions, which are currently unavailable.

Management Comments

• The Trust's investment objective is for the value of the Shares (based on SOL per Share) to reflect the value of SOL held by the Trust, less the Trust's expenses and other liabilities.
• The Trust does not seek to generate returns beyond tracking the price of SOL and any SOL earned as Staking Consideration (to the extent Staking is implemented).
• The Trust will not utilize leverage, derivatives or any similar arrangements in seeking to meet its investment objective.
• The Sponsor believes that the security procedures in place for the Trust, including offline storage, multiple encrypted private key shards, usernames, passwords and 2-step verification, are reasonably designed to safeguard the Trust's SOL.
• The Sponsor believes that the Index Provider's selection process for Constituent Trading Platforms as well as the methodology of the Index Price's algorithm provides a more accurate picture of SOL price movements than a simple average of Digital Asset Trading Platform spot prices.
• The Sponsor intends to take the position that the Trust is properly treated as a grantor trust for U.S. federal income tax purposes.
• The Sponsor has committed to causing the Trust to irrevocably abandon all Incidental Rights and IR Virtual Currency to which the Trust may become entitled in the future.

Industry Context

The digital asset industry continues to experience extreme volatility and disruption, as evidenced by past failures of prominent participants like FTX, Celsius, and Three Arrows Capital. Regulatory scrutiny has intensified globally, with the SEC bringing enforcement actions against major digital asset trading platforms, though recent dismissals of these lawsuits and the formation of an SEC Crypto Task Force suggest a potential shift towards developing a clearer regulatory framework. The emergence of central bank digital currencies (CBDCs) and new payment initiatives by financial institutions also pose competitive threats. Despite these challenges, the establishment of CFTC-regulated SOL futures markets and growing institutional engagement indicate increasing maturity and acceptance of digital assets like Solana within traditional financial systems.

Comparison to Industry Standards

• Unlike exchange-traded products for traditional spot commodities like gold and silver, which typically employ in-kind creations and redemptions, the Trust currently relies solely on cash orders, which the Sponsor believes is less efficient and carries more operational risk.
• The Trust's current inability to facilitate in-kind creations and redemptions, unlike some recently approved spot digital asset ETPs (e.g., certain Bitcoin and Ether ETPs), could hinder the effectiveness of its arbitrage mechanism and result in wider premiums or discounts.
• The Trust's Sponsor and Custodian (Coinbase Global) also serve several competing exchange-traded SOL products, which could lead to resource allocation challenges or unfavorable commercial terms for the Trust compared to other products.
• The Trust's fee structure and timing of market entry relative to other spot SOL exchange-traded products, if and when approved, will be key competitive factors influencing its ability to maintain scale and attract liquidity.

Management Changes

Corporate Governance

Legal Proceedings

• Osprey Funds, LLC filed a lawsuit against the Sponsor in Connecticut Superior Court alleging violations of the Connecticut Unfair Trade Practices Act (CUTPA) related to advertising and promotion of Grayscale Bitcoin Trust ETF. The Sponsor's motion for summary judgment was granted on February 7, 2025, and Osprey's subsequent motion for reargument was denied. 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 against Digital Currency Group, Inc. (DCG) and certain affiliates, including Grayscale Operating, LLC (GSO), alleging preferential transfers. GSO believes the lawsuit is without merit and intends to vigorously defend against it.
• The SEC brought enforcement actions against major Digital Asset Trading Platforms (Binance, Coinbase, Kraken) alleging operation of unregistered securities exchanges and asserting that SOL and other digital assets are securities. While the SEC has entered into court-approved joint stipulations to dismiss the lawsuits against Binance, Coinbase, and Kraken in February and May 2025, the SEC also filed enforcement actions against Mango Labs, LLC and Cumberland DRW, LLC in September and October 2024, respectively, describing SOL as a crypto asset offered and sold as a security (Cumberland action 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 also holds a minority interest (less than 1.0%) in Kraken, one of the Digital Asset Trading Platforms included in the Index.
• Grayscale Securities, LLC, an affiliate of the Sponsor, is the only Authorized Participant for the Trust.
• Genesis Global Trading, Inc., a wholly owned subsidiary of DCG, served as a Liquidity Provider from October 3, 2022, to September 12, 2023.
• The Sponsor and its affiliates have potential conflicts of interest in allocating resources among different clients and business ventures, and may favor their own interests over those of the Trust and its shareholders.
• Affiliates of the Sponsor have substantial direct investments in SOL and other digital assets, which they manage without regard to the Trust's interests, potentially affecting the Index Price and Share value.
• The Sponsor may engage other affiliated service providers, who receive fees for services to the Trust, potentially disincentivizing the Sponsor from replacing them.

Stakeholder Impact

• Shareholders: Face significant price volatility of SOL, risk of Shares trading at a premium/discount to NAV, potential tax liabilities without corresponding distributions, and limited voting/derivative rights. Benefit from cost-effective exposure to SOL and potential arbitrage opportunities upon NYSE Arca listing.
• Employees: Sponsor's professional staff manage the Trust, potentially diverting resources from other ventures.
• Customers (Investors): Provided a convenient way to gain investment exposure to SOL without direct management of digital assets, but subject to the risks inherent in the digital asset market.
• Service Providers (Custodian, Transfer Agent, Liquidity Providers, Marketing Agent): Receive fees for their services, but also bear operational responsibilities and potential liabilities, with limitations on their liability.
• Regulators: Continue to scrutinize the digital asset industry, with ongoing efforts to establish clear regulatory frameworks, which could lead to new requirements or restrictions impacting the Trust's operations and the value of SOL.

Next Steps

• Obtain SEC approval for the 19b-4 application to list Shares on NYSE Arca.
• Seek 'In-Kind Regulatory Approval' to enable in-kind creations and redemptions of Shares.
• Satisfy the 'Staking Condition' to permit the Trust to engage in staking activities and earn Staking Consideration.
• Implement a 'Staking Policy' to describe the frequency and conditions of Staking Consideration distributions to beneficiaries.
• Continue to monitor and respond to evolving regulatory developments regarding digital assets and staking.

Key Dates

Recommendation

The Trust's S-1/A filing indicates a pivotal moment with the intent to list on NYSE Arca, which could significantly improve liquidity and reduce the historical premium/discount volatility. The potential for staking also offers a new revenue stream. However, the substantial Q1 2025 loss, the ongoing uncertainty regarding SOL's security status, and the current inability for in-kind creations/redemptions present notable headwinds. While regulatory clarity is improving, the digital asset market remains highly volatile. A 'hold' recommendation is appropriate as investors should await the outcome of the NYSE Arca listing and further regulatory developments, particularly regarding staking and in-kind transactions, before making a more definitive investment decision. The long-term potential is there, but short-term risks and operational limitations warrant caution.

Keywords

Solana, SOL, Grayscale, ETF, Digital Asset, Cryptocurrency, SEC Filing, S-1/A, NYSE Arca, Staking, Proof-of-Stake, Crypto Regulation, Investment Trust, Spot ETF, Coinbase Custody, Digital Currency Group