NYSE Advances Crypto ETFs Under Existing SEC Rules Amid Government Shutdown: Solana, Litecoin, and Hedera ETFs Launch Through Automatic Regulatory Process
A Quiet Revolution: How Crypto ETFs Defied Washington Gridlock
In a landmark development for digital asset markets, the New York Stock Exchange has launched four new spot cryptocurrency ETFs tied to Solana (SOL), Litecoin (LTC), and Hedera (HBAR) despite an ongoing U.S. government shutdown that has left the Securities and Exchange Commission operating with minimal staff. The October 27 listings mark the first expansion of U.S. spot crypto ETFs beyond Bitcoin and Ethereum, representing a significant milestone in the institutionalization of digital assets.
The launches proceeded through a combination of automatic regulatory mechanisms and pre-approved listing standards that enabled progress without direct SEC intervention. Bloomberg ETF analyst Eric Balchunas confirmed the developments via social media, noting: "The Exchange has just posted listing notices for Bitwise Solana, Canary Litecoin and Canary HBAR to launch TOMORROW and grayscale Solana to convert the day after. Assuming there's not some last min SEC intervention, looks like this is happening."
This regulatory end-run demonstrates how cryptocurrency markets are increasingly operating within established securities frameworks, even as traditional government functions face disruption. The successful launches highlight both the maturation of crypto regulatory processes and the resilience of automated approval mechanisms built into U.S. securities law.
The Regulatory Framework That Made It Possible
The pathway for these ETF approvals was established in mid-September 2025 when the SEC introduced procedural reforms called "generic listing standards" for commodity-based exchange-traded products, a category that now includes cryptocurrencies. Published in the Federal Register on September 17 and taking effect immediately after approval, this policy eliminated the need for individual applications under Section 19(b) of the Securities Exchange Act—a process that previously required up to eight months of review for each new ETF.
This regulatory evolution builds directly on years of legal precedent. Spot Bitcoin ETFs were approved in January 2024 after court rulings found the SEC's earlier denials inconsistent with its approval of Bitcoin futures ETFs. Ethereum spot ETFs followed in May 2024. The new generic listing standards extended this same logic to other cryptocurrencies demonstrating sufficient market maturity and trading oversight.
Under this framework, exchanges including NYSE, Nasdaq, and Cboe can now list crypto-backed ETFs directly if the underlying asset meets specific conditions such as having a regulated futures market or surveillance-sharing agreements with other exchanges. This shift from case-by-case review to standardized criteria created the regulatory foundation that allowed these latest ETFs to advance despite the government shutdown.
How Automatic Effectiveness Overcame Government Shutdown
The timing seemed particularly inauspicious for new financial product launches. On October 1, the U.S. federal government entered a shutdown after Congress failed to pass funding legislation, forcing key regulatory agencies including the SEC to begin widespread staff furloughs. The commission announced it would retain only a limited number of employees for emergency enforcement and market-surveillance duties, with over 90% of its workforce placed on furlough under its contingency plan.
Yet the ETF launches proceeded through what FOX Business journalist Eleanor Terrett and Bloomberg's Eric Balchunas described as a carefully orchestrated filing process. Each ETF issuer submitted two key documents: the S-1 registration under the Securities Act of 1933 and the 8-A registration under the Securities Exchange Act of 1934.
The critical mechanism was the automatic effectiveness provision embedded in securities law. By statute, S-1 filings automatically become effective twenty days after submission unless the issuer requests a delay or the SEC intervenes—a rule designed specifically to prevent bureaucratic delays. Issuers included language in their amended S-1s confirming they would become automatically effective after the statutory period, allowing them to move forward without direct SEC approval.
With all 8-A filings certified by the exchange and the S-1s reaching automatic effectiveness, every legal requirement was satisfied despite the SEC's limited operations. The entire process had been designed to function lawfully without real-time regulatory involvement.
Spotlight on Solana: Staking Innovation Drives Institutional Appeal
Among the newly launched products, Solana appears positioned for strongest early adoption, with two separate ETF vehicles launching within days of each other. Bitwise's Solana Staking ETF debuted on October 27, while Grayscale's Solana ETF converted from its existing closed-end Solana Trust on October 29.
The Bitwise product represents a significant innovation in crypto ETF structure. Rather than simply holding SOL tokens, the fund stakes them directly on the Solana network and distributes rewards to shareholders—creating the first U.S. crypto ETF to combine spot exposure with on-chain yield. As Bitwise announced via social media: "Introducing $BSOL — the Bitwise Solana Staking ETF. Starts trading tomorrow. First U.S. ETP to have 100% direct exposure to spot SOL. Maximizing Solana's 7%+ average staking reward rate*. Targeting 100% of assets staked."
This staking feature provides a tangible source of return absent in most traditional ETFs, creating parallels to income-generation models used in fixed-income and dividend strategies that are familiar to institutional investors. The yield component could prove particularly attractive in environments where total return strategies dominate investment decision-making.
Solana's underlying fundamentals support its institutional appeal. The network processes over 65,000 transactions per second—far higher than most competing blockchains—while maintaining average transaction costs below $0.01. Its ecosystem ranks among the most active in crypto, with substantial volumes across DeFi platforms, memecoins, and blockchain gaming applications.
Litecoin and Hedera: Testing Appetite for Smaller Networks
While Solana captured early attention, the simultaneous launches of Canary Capital's Litecoin ETF and Hedera ETF test investor appetite for digital assets outside the established top tier by market capitalization. Both products follow classic spot ETF structures, holding actual LTC and HBAR tokens in custody through regulated partners including BitGo and Coinbase Custody.
Litecoin brings historical significance as one of the earliest Bitcoin forks, maintaining consistent network activity and name recognition despite increasing competition. Its simpler technological profile compared to smart contract platforms may appeal to investors seeking crypto exposure without complex ecosystem dynamics.
Hedera represents a different approach to distributed ledger technology, utilizing a hashgraph consensus mechanism rather than traditional blockchain architecture. Its enterprise-focused development trajectory and governing council structure have attracted corporate participants, potentially creating appeal for investors seeking blockchain exposure with established business partnerships.
Both assets face challenges in achieving liquidity comparable to larger cryptocurrencies. Their positions outside the top 20 global crypto assets by market capitalization mean they may experience higher slippage or illiquidity during large trades—factors that could influence institutional allocation decisions despite ETF availability.
Pipeline Perspective: Nearly 100 Crypto ETFs Await Approval
The successful launch of these four ETFs represents just the beginning of a much broader expansion in regulated digital asset products. Industry trackers indicate nearly 100 additional crypto ETF proposals currently sit in the U.S. regulatory pipeline, covering more than 20 different tokens.
The most closely watched proposals include spot ETFs tied to Ripple (XRP), Cardano (ADA), and Avalanche (AVAX), along with multi-asset "basket" products that would hold mixes of leading cryptocurrencies. Several issuers are experimenting with hybrid models incorporating staking rewards or on-chain lending income, taking direct cues from Bitwise's Solana Staking ETF innovation.
Analysts anticipate the next approval wave could arrive between late 2025 and early 2026, depending on how the SEC prioritizes its backlog once normal government operations resume. The generic listing standards created in September provide a streamlined pathway for these applications, potentially accelerating future approvals significantly compared to previous cycles.
Historical precedent suggests substantial potential inflows await these products. Bitcoin spot ETFs brought over $10 billion in inflows within their first month after launch in January 2024, while Ethereum ETFs crossed $1 billion within weeks of approval in May 2024. Even fractions of these amounts rotating toward newer products could dramatically deepen liquidity and compress volatility for underlying assets.
Broader Market Implications: From Speculative Tokens to Institutional Assets
The expansion of crypto ETFs beyond Bitcoin and Ethereum represents a fundamental shift in how digital assets are perceived within traditional finance. Rather than being treated primarily as speculative tokens, cryptocurrencies meeting specific criteria are increasingly viewed as investable assets that can meet institutional compliance, custody, and transparency standards.
This transition carries profound implications for market structure. ETFs make crypto exposure accessible to large financial advisors, retirement funds, and brokerage platforms that cannot hold tokens directly due to regulatory restrictions or operational limitations. This structural access opens entirely new capital channels toward assets that previously saw demand concentrated among retail investors and specialized crypto funds.
The automatic effectiveness mechanism that enabled these launches during government shutdown also demonstrates how regulatory processes can function independently of political circumstances. This resilience could prove crucial during future periods of governmental instability, providing market participants with greater predictability regarding product timelines.
As Balchunas observed following the launches: "Within hours of the announcement, Solana's (SOL) price rose about 4%, while Litecoin (LTC) and Hedera (HBAR) also recorded modest gains." While trading volumes for these new products are expected to remain small compared with Bitcoin's debut, they establish critical precedents for future expansion.
Strategic Conclusion: Watching Regulatory Evolution and Market Adoption
The successful launch of Solana, Litecoin, and Hedera ETFs during government shutdown represents both a tactical achievement for issuers and a strategic milestone for cryptocurrency markets broadly. The process demonstrates that established regulatory frameworks can accommodate digital asset innovation even amid significant operational disruptions.
Market participants should monitor several developments in coming months: how quickly trading volumes and assets under management accumulate for these new products; whether staking-based models gain traction compared to standard spot structures; and how efficiently the SEC processes its substantial pipeline of pending applications once normal operations resume.
The integration of cryptocurrency exposure into conventional investment vehicles continues advancing regardless of political or bureaucratic obstacles. As regulatory pathways become more standardized and automated mechanisms prove reliable during disruptions, cryptocurrency markets move steadily closer to full institutionalization—transforming how capital allocators access digital assets regardless of governmental circumstances.
The events of late October 2025 demonstrate that cryptocurrency's journey toward mainstream financial integration has developed sufficient momentum to overcome even significant operational challenges—suggesting that further expansion likely awaits once standard governmental functions resume and regulatory backlogs begin clearing through established automated processes.