Bloomberg ETF analysts James Seyffart and Eric Balchunas are predicting that the U.S. Securities and Exchange Commission (SEC) will approve spot Litecoin exchange-traded funds (ETFs) before the end of 2025. The SEC has indicated that Litecoin has a higher chance of approval compared to XRP, Solana, and Dogecoin, with probabilities of 65%, 70%, and 75% respectively.
Litecoin, which was developed in 2011 as a faster alternative to Bitcoin, operates through a proof-of-work mechanism similar to Bitcoin’s authentication system. The regulatory pathway for Litecoin looks more favorable as the SEC considers it to be in the commodity category. Seyffart and Balchunas highlight that regulatory documents S-1 and 19b-4 have been submitted to support the SEC’s evaluation of Litecoin.
In terms of market demand, consultants predict that Litecoin ETFs would attract less interest compared to Bitcoin or Ether ETFs. Seyffart states that any fund issuer would still consider a Litecoin ETF valuable even if its initial capital remains below $50 million. Bitcoin and Ether ETFs collected over $43.88 billion in net inflows during their initial release period from January to July 2024.
The SEC is expected to make its decision on the applications for Litecoin, Solana, XRP, and Dogecoin crypto ETFs between October 2 and October 18. Seyffart believes that the regulatory climate is supportive of approving a Litecoin ETF before the mandatory timeline ends.
XRP and Solana face ongoing regulatory questions regarding their proposed ETFs. The classification of XRP as a security is still unresolved, as the SEC has appealed a court ruling that stated XRP sold on secondary markets cannot be classified as a security. The SEC, under acting Chair Mark Uyeda, is now overseeing the case initiated by former Chair Gary Gensler, which brings hope for a possible dismissal of the enforcement action.
The classification of Solana also needs clarification, which hinders the SEC from evaluating it using possible commodities ETF assessment methods. The approval process for XRP and Solana ETFs remains uncertain due to outstanding classification matters.
Market analysts expect U.S.-based ETF issuers to file various cryptocurrency-focused ETFs in the coming months. Seyffart explains that the strategy is to submit multiple ETF proposals to determine which ones will succeed. Balchunas predicts that the chances of approval for crypto ETFs other than Litecoin are unlikely to exceed 5% before the 2024 political changes.
Canary Capital and 21Shares, financial firms, have submitted ETF proposals for Hedera and Polkadot assets. The approval odds for these filings are not available. Market analysts anticipate progress in the crypto ETF sector as regulatory guidelines continue to evolve.