S-1/A: Grayscale Solana Trust S-1/A: ETF Listing & Staking Update

Grayscale Solana Trust files S-1/A amendment, detailing plans to list as an ETF on NYSE Arca, introduce cash creations/redemptions, and enable SOL staking, pending regulatory approvals.

Summary

• Grayscale Solana Trust (SOL) is a Delaware statutory trust that intends to rename to Grayscale Solana Trust ETF and list its shares on NYSE Arca under the symbol GSOL.
• The Trust's investment objective is for the value of its Shares to reflect the value of SOL held, less expenses and liabilities, with Shares designed to provide cost-effective exposure to SOL.
• Currently, the Trust only supports cash orders for creations and redemptions, facilitated by Liquidity Providers; in-kind transactions require specific regulatory approval.
• The Trust aims to engage in staking of its SOL holdings to earn additional SOL (Staking Consideration), but this is contingent on satisfying the 'Staking Condition' related to U.S. federal income tax grantor trust status, which is not yet met.
• If staking is enabled, the Sponsor anticipates staking up to approximately 85% of the Trust's SOL, retaining the remainder in a 'Liquidity Sleeve' to manage redemption requests.
• Key service providers include Coinbase Custody Trust Company, LLC (Custodian) and Anchorage Digital Bank N.A. (Additional Custodian), with robust security protocols for SOL holdings.
• As of June 30, 2025, SOL had a circulating supply of approximately 534 million coins, a 24-hour trading volume of approximately $2.8 billion, and an aggregate market value of approximately $82.7 billion.
• SOL was the sixth largest digital asset by market capitalization as of September 22, 2025.
• The Index Price, used for NAV calculation, will transition from CoinDesk Solana Price Index (SLX) to CoinDesk SOL CCIXber Reference Rate on October 1, 2025.
• For the six months ended June 30, 2025, net assets decreased by 19% to $83,399 thousand, primarily due to SOL price depreciation from $193.69 to $157.80 per SOL.
• For the year ended December 31, 2024, net assets increased by 307% to $102,631 thousand, driven by SOL price appreciation from $104.79 to $193.69 per SOL.

Sentiment

Score: 4

Explanation: The filing presents a mixed bag. While the intent to list on NYSE Arca and potentially enable staking are positive for accessibility and potential yield, the significant decline in net assets and SOL price in the first half of 2025, coupled with ongoing regulatory uncertainties (especially regarding SOL's security status and staking approval), and the operational limitations of cash-only creations/redemptions, create a cautious outlook. The numerous risk factors highlighted also contribute to a moderately negative sentiment.

Positives

• Intention to list Shares on NYSE Arca under GSOL, potentially increasing liquidity and accessibility for investors.
• The arbitrage mechanism (creations/redemptions) is designed to keep Share value closely linked to SOL's Index Price.
• Potential to engage in SOL staking to earn additional SOL (Staking Consideration), if regulatory conditions are met, which could enhance returns.
• Robust security protocols for SOL custody, including cold storage, multiple encrypted private key shards, and geographical distribution of vaults, designed to mitigate theft risk.
• Addition of Anchorage Digital Bank N.A. as an alternative custodian, enhancing risk management and custody diversification.
• The Sponsor assumes most ordinary-course operational expenses, reducing direct costs for the Trust.
• The Trust is an 'emerging growth company,' allowing for reduced reporting requirements.

Negatives

• Current inability to facilitate in-kind creations and redemptions, which could lead to Shares trading at substantial premiums or discounts to NAV.
• Staking is currently prohibited as the 'Staking Condition' (grantor trust tax status) has not been met, potentially putting the Trust at a comparative disadvantage.
• Significant risks associated with SOL's extreme price volatility and the evolving, largely unregulated digital asset industry.
• Potential for SOL to be deemed a security by the SEC, which could severely impact its value and potentially lead to the Trust's termination.
• Reliance on third-party service providers (custodians, prime brokers, liquidity providers) introduces operational and insolvency risks.
• The amount of Trust assets per Share will decline over time due to the Sponsor's Fee and other expenses paid in SOL.
• Shareholders will not receive benefits from forks or airdrops, as the Trust irrevocably abandons these 'Incidental Rights' and 'IR Virtual Currency.'
• Potential conflicts of interest between the Sponsor/its affiliates and the Trust, as the Sponsor may favor its own interests.
• Limited history of the Index and potential for price volatility or manipulation on Digital Asset Trading Platforms.
• Risk of illiquid markets for Shares, exacerbating losses or increasing variability between NAV and market price.
• Shareholders have limited voting rights and restricted ability to bring derivative actions.
• The Trust's reliance on cash orders for creations/redemptions is a novel, untested product that could be impacted by operational inefficiencies.

Risks

• Extreme volatility of SOL trading prices, potentially leading to substantial loss of Share value.
• Uncertain medium-to-long term value of Shares due to the nascent and evolving nature of blockchain technologies and digital assets.
• Dependence on the acceptance of digital assets like SOL, which is a new and rapidly evolving industry.
• Concentrated ownership of SOL, where large sales by holders could adversely affect market price.
• Recent extreme volatility and disruption in digital asset markets, loss of confidence, negative publicity, and market-wide liquidity declines (e.g., FTX, Celsius, Voyager, Three Arrows Capital bankruptcies).
• Largely unregulated nature and lack of transparency of Digital Asset Trading Platforms, leading to potential fraud, market manipulation, business failures, security failures, or operational problems.
• Risk of validators suffering losses due to Staking (e.g., slashing, inactivity leaks) or Staking proving unattractive, which could adversely affect the Solana Network.
• Temporary or permanent forks or clones of the Solana Network could adversely affect Share value.
• Lack of active trading markets for Shares, potentially resulting in losses upon disposition.
• Illiquid markets may exacerbate losses or increase the variability between the Trust's NAV and its market price.
• Less liquidity or wider spreads for Shares compared to other spot SOL ETPs if approved.
• Limited history of the Index and potential for its failure to accurately reflect SOL price.
• Competition from other digital assets (Bitcoin, Ether, Polkadot, Avalanche, Cardano) and central bank digital currencies (CBDCs).
• Liquidity of Shares may be affected if Authorized Participants cease obligations or Liquidity Engager fails to engage Liquidity Providers.
• Suspension or unavailability of the Trust's redemption program may cause Shares to trade at a discount.
• Determination that SOL is a security could adversely affect its value, lead to extraordinary expenses, or terminate the Trust.
• Regulatory changes or actions by U.S. Congress or agencies (SEC, CFTC, FinCEN, IRS) may restrict SOL use or network operations.
• Changes in SEC policies could adversely impact Share value.
• Regulatory changes or other events in foreign jurisdictions (e.g., China, South Korea, UK, EU MiCA) may affect SOL value.
• Authorized Participant, Trust, or Sponsor could be regulated as a money service business or money transmitter, leading to expenses and decreased liquidity.
• 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.
• Potential conflicts of interest among the Sponsor, its affiliates, and the Trust.
• Discontinuance of Sponsor's services could be detrimental.
• Custodian resignation or removal without replacement could trigger early termination.
• Inaccessibility of staked SOL tokens for a variable period, creating liquidity risks.
• Dependence on third parties for Staking Arrangements.
• Uncertain regulatory landscape surrounding Staking.
• Potential tax liabilities for beneficial owners of Shares from Staking without corresponding distributions.
• Reliance on third-party service providers for essential functions, with replacement challenges.
• No guarantee of continued active trading market for Shares.
• The Trust is an emerging growth company, and reduced disclosure requirements may make the Shares less attractive to investors.
• Shareholders do not have the protections associated with ownership of shares in an investment company registered under the Investment Company Act or the protections afforded by the CEA.
• Security threats to the Trust's Vault Balance or Settlement Balance could result in the halting of Trust operations, including the creation and redemption of Baskets, and a loss of Trust assets or damage to the reputation of the Trust.
• SOL transactions are irrevocable and stolen or incorrectly transferred SOL may be irretrievable.
• 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 Trust's 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 Trust's 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.
• The value of the Shares will be adversely affected if the Trust is required to indemnify the Sponsor, the Trustee, the Transfer Agent or the Custodian under the Trust Documents.
• 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 Trust's holdings and/or significantly disrupt its affairs.
• Coinbase Global serves as the SOL custodian and prime execution agent for several competing exchange-traded SOL products, which could adversely affect the Trust's operations and ultimately the value of the Shares.
• Certain of the Authorized Participants engaged by the Trust may serve in a similar capacity for competing exchange-traded SOL products if approved, which could adversely affect the arbitrage mechanism, the Trust's operations, the performance of the Trust and ultimately the value of 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.

Future Outlook

The Trust intends to list its Shares on NYSE Arca under the symbol GSOL, aiming to provide investors with a cost-effective and convenient way to gain investment exposure to SOL. The Sponsor expects the arbitrage mechanism to function effectively upon listing, keeping the Share value closely linked to the Index Price. The Trust also anticipates engaging in SOL staking to earn additional SOL, pending the satisfaction of the Staking Condition, which could enhance returns. The SEC has launched a Crypto Task Force to develop a comprehensive regulatory framework for digital assets, which could bring more clarity to the industry.

Management Comments

• The Sponsor believes that the security procedures in place for the Trust, including, but not limited to, offline storage, or cold storage, for a substantial portion of the Trust's 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 it is generally more efficient, and therefore less costly, for spot commodity exchange-traded products to utilize in-kind orders rather than cash orders, because there are fewer steps in the process and therefore there is less operational risk involved when an Authorized Participant can manage the buying and selling of the underlying asset itself, rather than depend on an unaffiliated party such as the issuer or sponsor of the exchange-traded product.
• The Sponsor expects that it will stake up to approximately 85% of the Trust's SOL at all times, with the remainder of the Trust's SOL remaining unstaked in order to address the various exceptions and other considerations described herein.
• 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.
• The Sponsor believes the Index Provider's selection process for Constituent Trading Platforms as well as the methodology of the Index Prices algorithm provides a more accurate picture of SOL price movements than a simple average of Digital Asset Trading Platform spot prices, and that the weighting of SOL prices on the Constituent Trading Platforms limits the inclusion of data that is influenced by temporary price dislocations that may result from technical problems, limited liquidity or fraudulent activity elsewhere in the SOL spot market.

Industry Context

The digital asset industry is characterized by rapid evolution, extreme volatility, and increasing regulatory scrutiny, particularly following significant market disruptions like the FTX bankruptcy. The emergence of central bank digital currencies (CBDCs) and competing smart contract platforms (e.g., Ethereum, Polkadot, Avalanche, Cardano) intensifies competition for SOL. Regulatory bodies, including the SEC, are actively working to establish comprehensive frameworks for digital assets, which introduces both potential clarity and significant uncertainty regarding asset classification and operational requirements. The trend towards proof-of-stake consensus mechanisms, adopted by Solana and Ethereum, is notable but also brings new risks such as slashing and liquidity management challenges during staking.

Comparison to Industry Standards

• Custody: The Trust utilizes Coinbase Custody Trust Company, LLC and Anchorage Digital Bank N.A. for cold storage of private keys, employing multiple layers of security. This approach is considered robust and aligns with, or in some aspects exceeds, institutional standards for digital asset custody, with Coinbase Global being a leading provider.
• Arbitrage Mechanism: The Trust's current reliance on cash-only creations and redemptions is a novel and less tested approach compared to the in-kind mechanisms typically used by established spot commodity ETPs (e.g., gold and silver ETFs). This difference could lead to less efficient arbitrage and potentially wider premiums or discounts to NAV.
• Staking: The plan to stake up to 85% of SOL holdings, once the 'Staking Condition' is met, is a competitive feature for proof-of-stake assets, aiming to generate additional yield. However, the current prohibition on staking due to regulatory uncertainty places the Trust at a disadvantage compared to direct SOL holders or other vehicles that can already stake.
• Fees: The 2.5% annual Sponsor's Fee is a key competitive factor, and the filing acknowledges that competing products may offer substantially lower fees, which could impact the Trust's attractiveness.
• Market Capitalization & Trading Volume: SOL's position as the sixth largest digital asset by market capitalization and its significant trading volume indicate a liquid market, though it remains smaller than top digital assets like Bitcoin and Ether.
• Regulatory Compliance: The Trust's commitment to complying with SEC and other regulatory requirements, including AML/KYC, is standard for regulated financial products. However, the ongoing uncertainty regarding SOL's security classification and staking regulations presents a unique challenge compared to traditional financial instruments.
• Solana Network Performance: The Solana Network's reported transaction speed of approximately 4,000 transactions per second positions it as a high-throughput blockchain, suitable for DApps and DeFi, which is a competitive advantage over some older networks, though past network disruptions are a concern.

Management Changes

Corporate Governance

Legal Proceedings

• Osprey Funds, LLC vs. Sponsor: A lawsuit alleging violations of the Connecticut Unfair Trade Practices Act (CUTPA) related to advertising 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 on March 19, 2025. Osprey filed a notice of appeal on March 31, 2025, but later withdrew the action and appeal on May 12, 2025.
• Genesis Global Capital, LLC and Genesis Asia Pacific Pte. Ltd. vs. Digital Currency Group, Inc. and affiliates (including GSO): A complaint filed on May 19, 2025, in the SDNY Bankruptcy Court, alleging preferential transfers to GSI (predecessor to GSO) during the preference period. GSO believes this lawsuit is without merit and intends to vigorously defend against it. The Sponsor does not expect this proceeding to have a material adverse effect on the Trust's business, financial condition, or results of operations.

Related Party Transactions

• Digital Currency Group, Inc. (DCG) is the sole equity holder and indirect parent company of the Sponsor. DCG also holds a minority interest (less than 1.0%) in Kraken, one of the Digital Asset Trading Platforms included in the Index.
• The Sponsor (Grayscale Investments Sponsors, LLC) is affiliated with Grayscale Securities, LLC, which acts as an Authorized Participant for the Trust.
• CoinDesk Indices, Inc. (Index Provider) was formerly an indirect parent company of DCG until November 20, 2023, making it a related party during that period.
• Genesis Global Trading, Inc., a wholly owned subsidiary of DCG, served as a Liquidity Provider from October 3, 2022, to September 12, 2023, and filed a certificate of dissolution in August 2024.
• As of June 30, 2025, 286,658 Shares of the Trust were held by related parties of the Trust.
• As of December 31, 2024, 297,606 Shares of the Trust were held by related parties of the Trust.

Stakeholder Impact

• Shareholders: May experience increased liquidity and accessibility if the Trust lists on NYSE Arca. They are exposed to SOL price volatility and potential losses. They may benefit from staking rewards if enabled, but could incur tax liabilities without corresponding distributions. Their interest in the Trust's assets will gradually decrease due to fees. They have limited voting rights and restricted derivative action rights. They will not receive benefits from forks or airdrops.
• Sponsor (Grayscale Investments Sponsors, LLC): Receives a 2.5% annual Sponsor's Fee and a potential Sponsor's Staking Fee. It assumes most ordinary-course expenses. The Sponsor manages the Trust's operations and strategic decisions, but faces potential conflicts of interest due to its affiliations and other business ventures.
• Authorized Participants: Facilitate the creation and redemption of Baskets. They can leverage arbitrage opportunities but are exposed to risks from cash-only orders and potential hedging difficulties. They are subject to regulatory compliance and may be deemed statutory underwriters.
• Liquidity Providers: Facilitate the purchase and sale of SOL for cash orders and bear price differential risks in Variable Fee Cash Orders.
• Custodians (Coinbase Custody, Anchorage Digital): Responsible for safeguarding the Trust's SOL, subject to specific liability limits. They receive fees from the Sponsor and face risks related to security breaches, insolvency, and regulatory changes.
• Solana Network: Increased institutional interest and investment through the Trust could benefit the network. Staking by the Trust, if enabled, would contribute to network security and decentralization. The network's stability and protocol changes directly impact the Trust's assets.
• Regulators (SEC, CFTC, FinCEN, IRS): Their ongoing efforts to establish regulatory frameworks for digital assets, including potential enforcement actions or new classifications (e.g., SOL as a security), could significantly impact the Trust and the broader digital asset industry.

Next Steps

• The Sponsor intends to rename the Trust to Grayscale Solana Trust ETF and file a Certificate of Amendment with the Delaware Secretary of State.
• The Trust intends to list the Shares on NYSE Arca under the symbol GSOL.
• NYSE Arca may seek regulatory approval to amend its listing rules to permit in-kind creations and redemptions.
• Subject to the 'Staking Condition' being satisfied, the Sponsor may cause the Trust to stake a portion of its SOL holdings.
• The Sponsor expects to implement a Staking Policy prior to engaging in Staking.
• The Index will change from CoinDesk Solana Price Index (SLX) to CoinDesk SOL CCIXber Reference Rate as of October 1, 2025.
• The Trust will continue to file periodic reports (Form 10-K, 10-Q, 8-K) with the SEC.
• The SEC's Crypto Task Force is dedicated to developing a comprehensive regulatory framework for digital assets, including final rules on security status, registered offerings, custody, lending, and staking.
• Chairman Atkins announced 'Project Crypto' to modernize securities rules for digital assets and draft clear rules for crypto asset distributions, custody, and trading.

Key Dates

Recommendation

The Grayscale Solana Trust (SOL) S-1/A filing presents a complex investment landscape. While the planned NYSE Arca listing and the potential for SOL staking offer avenues for increased investor access and yield, significant headwinds remain. The Trust's net assets declined in the first half of 2025, reflecting SOL price depreciation. Crucially, the inability to conduct in-kind creations/redemptions and the current prohibition on staking due to regulatory hurdles introduce operational inefficiencies and limit potential returns compared to direct SOL holdings. The persistent regulatory uncertainty surrounding SOL's classification as a security poses a fundamental risk that could severely impact its value and the Trust's viability. Given these factors, a 'hold' recommendation is appropriate. Investors should monitor regulatory developments, particularly regarding staking and in-kind redemptions, and the SEC's stance on SOL's security status. The current operational limitations and regulatory risks outweigh the immediate benefits of the planned listing, suggesting caution rather than a strong buy, but the long-term potential of Solana and Grayscale's efforts prevent a sell recommendation.

Keywords

Solana, SOL, Grayscale, ETF, Digital Asset, Cryptocurrency, Blockchain, Investment Trust, SEC Filing, NYSE Arca, Staking, Crypto Custody, Financial Services, Asset Management, Spot ETP, Digital Currency Group, Regulation, Risk Management