S-1: Osprey Solana Trust S-1: CBOE Listing & SOL Performance

Osprey Solana Trust files S-1 for Cboe BZX Exchange listing, aiming to provide Solana exposure while navigating market volatility and regulatory uncertainties.

Summary

• Osprey Solana Trust (the Trust) is a Delaware statutory trust providing exposure to Solana (SOL) value, less expenses.
• The Trust is currently quoted on the OTC Market under the ticker symbol OSOL and intends to list its Shares on Cboe BZX Exchange, Inc. (CBOE) under the symbol [OSOL] after the registration statement becomes effective.
• Shares are issued and redeemed in Baskets of 10,000 or integral multiples thereof, continuously offered at the net asset value (NAV) per Share.
• The Trust engages in staking substantially all its SOL holdings, with all Staking Rewards paid to the Sponsor.
• Net assets increased to $31,483,940 as of June 30, 2025, representing a 25% increase for the three months ended June 30, 2025, but an 18% decrease for the six months ended June 30, 2025.
• Net assets increased by 90% to $38,601,764 in 2024 and by 1,520% to $20,276,489 in 2023.
• The price of SOL increased from $125.23 per SOL as of March 31, 2025, to $157.80 per SOL as of June 30, 2025.
• The price of SOL declined from $193.69 per SOL as of December 31, 2024, to $157.80 per SOL as of June 30, 2025.
• The Trust is an emerging growth company, subject to reduced public company reporting requirements.
• The Sponsor's management fee is an annualized []% of the Trust's NAV, accrued daily and paid monthly in U.S. dollars. Historically, it was 2.5% paid in SOL.

Sentiment

Score: 4

Explanation: While the Trust aims for a CBOE listing and has seen significant historical growth in net assets, recent performance (first half of 2025) shows a decline in net assets and SOL price. The numerous and substantial risks associated with digital asset volatility, regulatory uncertainty (especially regarding SOL's security status), and conflicts of interest, coupled with the Sponsor receiving all staking rewards, present significant headwinds and concerns for investors.

Positives

• The Trust intends to list on CBOE, which could enhance liquidity and broaden investor access to SOL exposure.
• Net assets demonstrated significant growth in previous periods, increasing by 1,520% in 2023 and 90% in 2024.
• The Trust employs robust security protocols for SOL custody, including cold storage and multi-signature requirements, designed to protect assets from unauthorized access.
• The Sponsor's management team possesses extensive experience in financial industry innovations and exchange-traded products.
• Coinbase Custody, the SOL Custodian, has agreed to fully compensate the Trust for any losses incurred due to 'slashing' penalties from staking activities.

Negatives

• Net assets decreased by 18% for the six months ended June 30, 2025, primarily driven by a decline in the price of SOL.
• The Trust's investment objective of tracking the price of SOL has not been met to date while trading on OTC Markets.
• Shares may trade at a premium or discount to the Net Asset Value (NAV), and historically have traded at a premium on OTCQX, which can lead to losses for investors if the premium decreases.
• All staking rewards earned by the Trust are paid solely to the Sponsor, creating a potential conflict of interest with shareholders.
• The Trust irrevocably abandons Incidental Rights and IR Virtual Currency (e.g., from forks or airdrops), meaning shareholders do not receive any benefits from these events.
• The value of SOL is subject to extreme volatility, which could lead to substantial losses for the Shares.
• There is significant regulatory uncertainty regarding SOL's classification as a security, with the SEC having previously taken the position that SOL is a security.
• The market for the Shares may experience less liquidity or wider spreads compared to other spot SOL exchange-traded products, if and when such products are approved.

Risks

• Extreme volatility of SOL trading prices could have a material adverse effect on the value of the Shares, potentially leading to a loss of all or substantially all of their value.
• The value of the Shares is dependent on the acceptance and development 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 major holders could adversely affect the market price of SOL.
• Recent developments in the digital asset economy (e.g., FTX collapse) have led to extreme volatility, disruption, loss of confidence, and market-wide declines in liquidity.
• The largely unregulated nature and lack of transparency surrounding digital asset trading platforms may adversely affect SOL's value.
• Shares may trade at a price that is at, above, or below the Trust's NAV per Share due to non-current trading hours between CBOE and the 24-hour Digital Asset Trading Platform Market.
• Validators may suffer losses due to staking ('slashing'), or staking may prove unattractive, which could adversely affect the Solana Network.
• A temporary or permanent fork or a clone of the Solana Network 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.
• Possible illiquid markets may exacerbate losses or increase the variability between the Trust's NAV and its market price.
• The Index (CME CF Solana-Dollar Reference Rate New York Variant) has a limited history, and its failure could adversely affect the value of the Shares.
• Competition from the emergence or growth of other digital assets or smart contract platforms could negatively impact SOL's price and the Shares' value.
• Congestion or delay on the Solana Network may delay purchases or sales of SOL by the Trust.
• Competition from central bank digital currencies (CBDCs) and emerging payments initiatives could adversely affect SOL's price.
• Prices of SOL may be affected by stablecoins (e.g., Tether, USDC), their activities, and regulatory treatment.
• The Trust relies on third-party service providers (custodians, prime execution agents, authorized participants), and their replacement or disruption could pose challenges and risk loss of assets.
• The legal rights of customers with respect to digital assets held by third-party custodians in insolvency proceedings are currently uncertain.
• The amount of the Trust's assets represented by each Share will decline over time as the Trust pays the Sponsor's Fee and Extraordinary Expenses.
• Security threats to the Trust's SOL holdings (Vault Balance or Settlement Balance) could result in operational halts, loss of assets, or damage to reputation.
• SOL transactions are irrevocable; stolen or incorrectly transferred SOL may be irretrievable.
• The lack of full insurance and shareholders' limited rights of legal recourse against the Trust and its service providers expose the Trust and its shareholders to the risk of loss.
• The Trust may be required, or the Sponsor may deem it appropriate, to terminate and liquidate at a time that is disadvantageous to shareholders.
• Shareholders have limited voting rights and restricted ability to bring derivative actions.
• The Sponsor is responsible for determining the NAV and NAV per Share, and any errors or changes in valuation calculations may adversely affect the Shares' value.
• Extraordinary expenses resulting from unanticipated events may become payable by the Trust, adversely affecting the Shares' value.
• Shareholders could incur a tax liability without an associated distribution from the Trust due to SOL sales for expenses.
• Intellectual property rights claims may adversely affect the Trust and the value of the Shares.
• Pandemics, epidemics, and other disasters could negatively impact the value of the Trust's holdings and/or disrupt its affairs.
• Shareholders will not receive the benefits of any forks or airdrops, as the Trust irrevocably abandons these rights.
• Coinbase Global (parent of SOL custodian and prime execution agent) serves several competing SOL ETPs, potentially leading to conflicts or inadequate resourcing for the Trust.
• Certain Authorized Participants also serve competing SOL ETPs, which could adversely affect the arbitrage mechanism and the Trust's operations.
• The SEC has previously taken the view that SOL is a security, and a final determination to that effect may adversely affect SOL's value and result in extraordinary expenses or termination of the Trust.
• Regulatory changes or actions by the U.S. Congress or federal/state agencies may affect the Shares' value or restrict SOL's use or the Solana Network's operation.
• If regulators subject an Authorized Participant, the Trust, or the Sponsor to regulation as a money service business or money transmitter, it could result in extraordinary 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.
• The treatment of the Trust for U.S. federal income tax purposes is uncertain, and future developments could adversely affect the Shares' value.
• The U.S. federal income tax treatment of digital assets is uncertain, and future guidance could have adverse tax consequences for shareholders.
• Future developments in the tax treatment of digital assets for state, local, or non-U.S. purposes could adversely affect the Shares' value.
• A U.S. tax-exempt shareholder may recognize unrelated business taxable income (UBTI) from an investment in Shares.
• Non-U.S. Holders may be subject to U.S. federal withholding tax on income derived from forks, airdrops, or similar occurrences.
• Staking introduces a risk of loss of SOL ('slashing'), which could adversely affect the value of the Shares.
• Staked SOL tokens are inaccessible for a variable period of time (unbonding), resulting in liquidity risk for the Trust.
• The regulatory landscape surrounding staking is uncertain, potentially exposing the Trust and its shareholders to unforeseen regulatory risks or enforcement actions.
• Potential conflicts of interest may arise among the Sponsor or its affiliates and the Trust, as the Sponsor has no fiduciary duties beyond those in the Trust Agreement.
• Shareholders cannot be assured of the Sponsor's continued services, and discontinuance could be detrimental to the Trust.
• If the SOL Custodian resigns or is removed without replacement, it would trigger early termination of the Trust.
• Shareholders may be adversely affected by the lack of independent advisers representing investors in the Trust.
• The Trust's status as an emerging growth company and its reduced disclosure requirements may make the Shares less attractive to investors.

Future Outlook

The Trust intends to list Shares on Cboe BZX Exchange, Inc. (CBOE) under the symbol [OSOL] on an ongoing basis, expecting arbitrage opportunities to keep Share value closely linked to the Index Price. The Sponsor anticipates a net creation of Shares if they trade at a premium to NAV per Share and a net redemption if they trade at a discount, indicating an effective arbitrage mechanism. The Solana Network is expected to introduce automatic slashing functionality in the future. The SEC's Crypto Task Force aims to develop a comprehensive regulatory framework for digital assets, and proposed digital assets market infrastructure legislation (CLARITY Act) is progressing. Certain IRS regulations on digital asset information reporting are delayed until January 1, 2027.

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 the arbitrage opportunities may provide a mechanism to mitigate the effect of such premium or discount.
• The Sponsor believes that the SEC is unlikely to approve a request to list the shares of a spot ETP that holds a digital asset that the SEC believes is an unregistered security.
• The Sponsor has discussed the security status of SOL with external counsel and continues to believe that SOL is not a security.

Industry Context

The digital asset industry is characterized by rapid evolution, extreme volatility, and significant regulatory uncertainty. The filing highlights the emergence of central bank digital currencies (CBDCs) and increased competition from other digital assets and smart contract platforms (e.g., Ethereum, Polkadot, Avalanche, Cardano). The SEC's recent approval of generic listing standards for spot commodity ETPs, including digital assets, signals a shifting regulatory landscape that could intensify competition for the Trust. The 2022 FTX collapse and subsequent regulatory scrutiny underscore the inherent risks and the need for clearer regulatory frameworks within the digital asset ecosystem.

Comparison to Industry Standards

• The Index (CME CF Solana-Dollar Reference Rate New York Variant) utilizes the same methodology as the CME CF Solana Reference Rate (SRR), with the only material difference being the calculation time (4:00 p.m. ET vs. 4:00 p.m. London time).
• The Index is designed based on the IOSCO Principles for Financial Benchmarks and is subject to U.K. BMR regulations, with compliance attested by a Limited Assurance Audit under the ISAE 3000 standard.
• Constituent Platforms for the Index (Coinbase, Gemini, Kraken, LMAX Digital, Bitstamp, Crypto.com) are selected based on criteria including oversight, market conditions, regulatory compliance, and data reliability.
• The Solana Network's Proof of History (PoH) and Proof of Stake (PoS) consensus mechanism is presented as aiming for higher transaction speed and capacity compared to traditional Proof of Work (PoW) blockchains like Bitcoin and Ethereum.
• The Trust faces competition from other spot SOL ETPs, including those with pending SEC applications or recent approvals, and non-U.S. ETPs that hold and stake SOL.

Management Changes

Corporate Governance

Legal Proceedings

• The SEC, under former Chair Gensler's leadership, took the position that SOL is a security and brought enforcement actions against digital asset trading platforms (Binance, Coinbase, Kraken) alleging certain digital assets, including SOL, are securities.
• Between February 2025 and May 2025, the SEC entered into court-approved joint stipulations to dismiss lawsuits against Binance, Coinbase, and Kraken.
• In September 2024, the SEC filed a settled enforcement action against Mango Labs, LLC, Mango DAO, and Blockworks Foundation (the Mango Enforcement Action), describing SOL as an example of a crypto asset offered and sold as a security.
• In October 2024, the SEC filed an enforcement action against Cumberland DRW, LLC (the Cumberland Enforcement Action), also describing SOL as a security.
• In March 2025, the SEC and Cumberland DRW, LLC filed a joint request to dismiss the Cumberland Enforcement Action, which was approved and dismissed.
• The Sponsor has been contacted by staff from the SEC's Division of Enforcement with respect to securities law compliance matters involving SOL and subsequently received a termination notice for this inquiry.

Related Party Transactions

• The Sponsor receives a management fee (annualized []% of NAV, paid in U.S. dollars; historically 2.5% paid in SOL).
• All Staking Rewards earned by the Trust are paid solely to the Sponsor.
• The Trust paid $179,037, $270,617, and $74,717 in Staking Rewards to the Sponsor for the fiscal periods ended June 30, 2025, December 31, 2024, and December 31, 2023, respectively.
• REX Shares, LLC, an affiliate of the Sponsor, has invested approximately $600,000 in GlobalStake, the Trust's current Staking Provider.
• Certain shareholders are related parties of the Trust, owning 1,005 Shares valued at $4,903 as of June 30, 2025, and $6,098 as of December 31, 2024.
• The Prime Execution Agent (Coinbase Inc.) and SOL Custodian (Coinbase Custody Trust Company, LLC) are affiliates of Coinbase Global.

Stakeholder Impact

• Shareholders: Face risks from SOL price volatility, potential trading at a premium/discount to NAV, limited voting rights, restricted derivative actions, and no benefit from forks or airdrops. They may also incur tax liability without associated distributions.
• Sponsor: Benefits from management fees and all staking rewards. Bears routine operational expenses. Faces potential conflicts of interest due to its multiple roles and affiliations.
• Authorized Participants: Facilitate the creation and redemption of Baskets. May face challenges in hedging their SOL exposure and could potentially favor competing products, impacting the Trust's liquidity.
• Solana Network: Its stability and functionality are critical to the Trust's operations. The network is impacted by validator participation, potential attacks (e.g., 33%, 50%, >66% attacks), and network congestion.
• Service Providers (e.g., Custodians, Prime Execution Agent): Their operational stability and security are crucial for the Trust's assets. Disruptions or insolvency could lead to loss of Trust assets or operational delays.

Next Steps

• Listing Shares on Cboe BZX Exchange, Inc. (CBOE) under the symbol [OSOL] after the registration statement becomes effective.
• Continuous issuance of Shares on an ongoing basis.
• The Sponsor will notify investors of any changes in transaction fees.
• The Sponsor will notify investors of the engagement of additional Liquidity Providers.
• Automatic slashing functionality is expected to be introduced in the Solana Network in the future.
• The SEC's Crypto Task Force is intended to develop a comprehensive and clear regulatory framework for digital assets.
• Proposed digital assets market infrastructure legislation, the CLARITY Act, continues to progress.
• Certain aspects of the IRS Regulations addressing information reporting of digital assets have been delayed to January 1, 2027.

Key Dates

Recommendation

The Trust offers direct exposure to Solana, which has shown significant historical growth, and is pursuing a CBOE listing that could enhance liquidity. However, recent financial performance shows a decline in net assets and SOL price. Significant regulatory uncertainty surrounds SOL's classification as a security, which could have a material adverse impact. The structure where staking rewards are paid solely to the Sponsor, coupled with limited shareholder rights and potential conflicts of interest, raises governance concerns. Given the high volatility of SOL and the inherent risks of digital asset investments, a 'hold' recommendation is appropriate for investors already exposed, awaiting clearer regulatory guidance and consistent positive performance, while new investors should exercise extreme caution.

Keywords

Solana, SOL, Cryptocurrency, Digital Asset, Trust, ETF, ETP, Osprey Funds, SEC, S-1, Blockchain, Staking, Coinbase, Investment, Crypto, Asset Management, Financial Services, Regulation, Arbitrage, CBOE