Institutional Support Grows for Liquid Staking in Solana ETFs

Interest from institutional players in liquid staking for Solana exchange-traded products (ETPs) is steadily increasing. A coalition of asset managers and infrastructure providers is urging the SEC to permit liquid staking in Solana ETFs, which could mark a pivotal moment for how staking is integrated into regulated investment products.

Liquid staking differs from the traditional model by offering a tradeable derivative token in return for staked assets. This lets investors keep their money available while still staking. The derivative tokens can be used in DeFi apps or as loan collateral. But this method adds extra steps and raises regulatory questions that have not been fully solved.

Institutional Appeal for Liquid Staking in Solana ETFs

Several notable organizations, including Solana infrastructure provider Jito Labs and asset managers such as VanEck and Bitwise, have submitted a joint request to the SEC seeking approval for liquid staking in Solana-based exchange-traded products (ETPs). The group, which also includes the Solana Policy Institute and Multicoin Capital Management, highlights the operational advantages that liquid staking could bring.

Usually, staking in ETFs requires issuers to keep a fixed proportion of assets staked. This often leads to frequent rebalancing when there are large inflows or outflows, which increases operational costs and raises the chance of tracking errors compared to the fund’s benchmark. Petitioners argue that using liquid staked tokens (LSTs) would provide more flexibility in managing asset allocations, reducing these risks and expenses.

The letter also points to additional benefits: stronger network security due to higher staking participation, more diverse investment options for market participants, and potential new revenue sources for ETF providers. Currently, at least nine Solana-linked ETPs are awaiting SEC approval, suggesting growing interest in this segment.

The Risks and Regulatory Landscape

While liquid staking brings advantages, it also comes with risks. Instead of locking tokens directly with a validator, it uses smart contracts to handle new tokens. This creates a higher risk of bugs or vulnerabilities, which could cause asset loss or reduced value.

There are additional concerns such as the potential for "depegging," which occurs when the derivative token no longer holds a one-to-one ratio with the original asset. There is also the risk of slashing if validators act improperly or fail to meet their responsibilities. These factors add complexity to the investment profile for both individuals and institutions.

Regulators are still hesitant to take a firm stance. The SEC has not issued clear rules on liquid staking. While it has indicated that some forms of traditional staking may not be classified as securities, liquid staking, with its derivative mechanisms, remains in a legal gray zone. This lack of clarity has made institutional adoption slower, despite growing interest.

Broader Context Around Staking in Crypto ETFs

Solana is not the only network moving toward staking integration in ETFs. Ethereum-focused funds are also aiming to include staking in their exchange-traded products. Nasdaq has taken a notable step by filing with the SEC to allow staking in BlackRock’s iShares Ether ETF. This reflects a growing trend across the digital asset industry.

Experts believe that enabling staking within ETFs could make these investment vehicles much more appealing to institutions. The ability to earn staking rewards without giving up liquidity helps address concerns around locked funds. This dynamic may drive more institutional investment into crypto, fueling stronger competition among fund providers.

According to Robbie Mitchnick, BlackRock’s head of digital assets, their Ether ETF has done well so far, but the lack of staking remains a key drawback. As ETFs evolve to include staking, traditional finance appears to be slowly embracing crypto yields within familiar regulatory frameworks.

What Does It Mean?

The growing institutional interest in enabling liquid staking within Solana ETFs signals a move toward bringing blockchain-native features into regulated investment frameworks. If the SEC approves such structures, it could improve efficiency, attract capital, and reshape how digital assets are packaged for traditional markets.

The implications would likely extend beyond Solana, setting precedents across the broader crypto ETF landscape. As regulators and industry players engage in this process, the outcomes could define the next phase of crypto’s integration into mainstream finance.