ETF

Crypto ETFs Launch During Shutdown: HBAR, LTC, and SOL Break Through W/ Legal Provision

Historic crypto ETF launches proceed during government shutdown using automatic effectiveness provision. Canary's HBAR and Litecoin ETFs plus Bitwise and Grayscale Solana ETFs now trading. XRP approval odds remain high at 86-90% as altcoin ETF wave accelerates.

The Ripple Effect

28 Oct 2025 — 7 min read

In an unprecedented development, multiple cryptocurrency exchange-traded funds are launching while the U.S. government remains shut down, using an obscure legal provision that allows registration statements to become effective automatically—without SEC staff approval.

The Historic Launches

Canary Capital's spot Hedera (HBAR) and Litecoin (LTC) ETFs began trading on NASDAQ on Tuesday, October 28, marking the first U.S. ETFs for these digital assets. The Bitwise Solana Staking ETF (BSOL) also launched on the NYSE Arca the same day, while Grayscale's Solana Trust ETF (GSOL) is scheduled to convert on Wednesday, October 29.

"Litecoin and Hedera are the next two token ETFs to go effective after Ethereum," Canary CEO Steven McClurg stated. "We look forward to launching tomorrow." The Canary Litecoin ETF trades under ticker LTCC, while the Canary HBAR ETF uses ticker HBR, both with a management fee of 0.95%.

Bitwise's Solana offering features an industry-leading 0.20% management fee and includes staking capabilities powered by Helius. Grayscale's GSOL carries a 0.35% fee and also includes staking features for investors.

The Legal Mechanism: How It's Possible

The launches exploit a provision built into federal securities law that most issuers typically avoid. Under Section 8(a) of the Securities Act of 1933, registration statements automatically become effective 20 days after filing unless the SEC intervenes—which is impossible during the shutdown with no staff available.

The key steps that made these launches possible include:

Removal of Delaying Language: The issuers filed amended S-1 registration statements removing the standard "delaying amendment" that normally keeps registrations pending until SEC staff explicitly declares them effective.
Automatic Effectiveness: Without the delaying language and with no SEC staff able to object during the shutdown, the registration statements went effective by operation of law after the 20-day waiting period expired.
8-A Certifications: The NYSE and NASDAQ certified 8-A filings on October 27, which register the shares for exchange trading under the Securities Exchange Act of 1934—the final step before trading could commence.

As Morrison Foerster noted in their shutdown guidance, the SEC updated its framework on October 9, 2025, to provide flexibility for companies seeking to go public during the shutdown, effectively enabling this path to effectiveness.

"The operation of law does not always actually require an open government," Fox Business journalist Eleanor Terrett explained on X. The irony is stark: the government shutdown may have inadvertently accelerated some ETF launches rather than delaying them.

Market Implications

This development represents a watershed moment for cryptocurrency ETF adoption in the United States. Following the successful launches of spot Bitcoin and Ethereum ETFs in 2024, these altcoin products significantly expand institutional access to digital assets beyond the two largest cryptocurrencies.

Hedera (HBAR) and Litecoin rank among the top 30 cryptocurrencies by market capitalization. HBAR is the native token of Hedera, a decentralized public network utilizing the Hashgraph consensus algorithm for fast and secure transactions. Litecoin, created as a faster and more economical alternative to Bitcoin, maintains a similar architecture and serves primarily for peer-to-peer payments.

Solana's ETF approval is particularly significant given the blockchain's emphasis on speed and scalability. Bitwise CIO Matt Hougan has described Solana as "the only blockchain fast enough to support the tokenization of major assets at a global scale."

The competitive fee structures signal an aggressive battle for market share. Bitwise's 0.20% fee for BSOL substantially undercuts typical crypto ETF fees and includes a waiver for the first three months or until assets reach $1 billion. Bloomberg ETF analyst Eric Balchunas noted that while Canary's 0.95% fees are "pricey" compared to Bitcoin ETFs, they're standard for first-of-their-kind funds in emerging asset classes.

Regulatory Context

These launches come after the SEC approved generic listing standards for crypto ETFs in September 2025, streamlining the approval process. The standards require underlying assets to have futures trading on CFTC-regulated venues for at least six months, among other criteria.

The government shutdown, which began October 1, 2025, has left the SEC operating with extremely limited staff. While the EDGAR filing system remains operational, nearly all functions requiring staff review have been suspended indefinitely.

However, the automatic effectiveness provision created an unexpected workaround. As Dorsey & Whitney explained, companies can leverage Section 8(a) to proceed with offerings when timing is critical, though this approach carries additional risks since registration statements receive no staff review before going live.

XRP and Ripple: Implications for the Next Wave

The successful launch of these altcoin ETFs has significant implications for pending XRP ETF applications. With at least 13 active XRP ETF filings with the SEC—including proposals from Bitwise, Franklin Templeton, Grayscale, 21Shares, WisdomTree, and Canary Capital—market participants are closely watching for similar breakthroughs.

XRP ETF Approval Landscape

Prediction markets on Polymarket currently show 86% odds of XRP ETF approval by December 31, 2025, reflecting strong market confidence despite recent delays. Bloomberg Intelligence analysts James Seyffart and Eric Balchunas place their estimates at 90% or higher for most crypto ETF filings, with only specialized products facing lower approval odds.

The regulatory environment for XRP has dramatically improved following the SEC's decision to drop its lawsuit against Ripple Labs in March 2025. This marked a significant reversal in the agency's enforcement approach under the Trump administration, which has seen the SEC withdraw lawsuits against major exchanges including Coinbase and Kraken.

Market Infrastructure Building

Several developments have strengthened the case for XRP ETF approval:

Futures Market Maturity: The REX-Osprey XRPR ETF launched in September 2025, attracting $37.7 million in first-day volume—the highest for any ETF launch in 2025 and five times the debut volume of earlier XRP futures-based products.
Institutional Custody: Multiple qualified custodians, including Coinbase Custody and BitGo, have established infrastructure for securely holding XRP, addressing a key regulatory concern.
Legal Clarity: Judge Torres's 2023 ruling established that programmatic XRP distributions on exchanges are not securities transactions, providing crucial legal precedent.

Impact on XRP Price and Adoption

Analysts project that XRP ETF approval could drive substantial institutional inflows similar to those seen with Bitcoin ETFs. Some market observers speculate price targets between $4 and $8 in the near term following approval, with more optimistic projections reaching $20 to $27 based on historical Q4 performance patterns.

However, analysts caution that an "approve and crash" scenario remains possible, similar to the "buy the rumor, sell the news" pattern observed after spot Bitcoin ETF approvals. XRP's strong retail holder base and known volatility could amplify such price swings.

Ripple's Strategic Positioning

Ripple has formally applied for a U.S. national trust bank charter with the Office of the Comptroller of the Currency (OCC). The proposed Ripple National Trust Bank would focus on custodial services, stablecoin reserve management, and institutional custody—positioning Ripple to benefit from both its native token's ETF success and the broader digital asset infrastructure buildout.

The company recently received approval for its RLUSD stablecoin in Dubai, demonstrating progress in expanding its regulated product offerings. These regulatory wins, combined with potential ETF approvals, position Ripple at the intersection of traditional finance and digital assets.

Timeline Considerations

Several XRP ETF filings face review deadlines between October 18 and October 25, though the government shutdown has created uncertainty around these timelines. The recent Solana, HBAR, and Litecoin launches demonstrate that issuers may pursue the automatic effectiveness route if the shutdown continues, potentially accelerating XRP ETF availability despite regulatory paralysis.

Polymarket's betting markets, which have historically shown over 90% accuracy within a month of resolution, suggest strong conviction among market participants that at least one XRP ETF will receive approval before year-end.

The Road Ahead

The successful launch of HBAR, LTC, and SOL ETFs during the shutdown demonstrates the crypto industry's adaptability and determination to expand institutional access channels. With dozens of additional crypto ETF applications pending—including products for XRP, Dogecoin, Polkadot, and others—the floodgates may have opened for a wave of altcoin ETF launches.

However, challenges remain. The SEC retains the authority to review these ETFs post-launch and could potentially request amendments or, in extreme cases, issue stop orders. Additionally, once the government reopens, the agency may scrutinize the automatic effectiveness pathway more closely, potentially requiring issuers to reinsert delaying amendments for future filings.

For now, institutional and retail investors have gained access to regulated investment vehicles for leading blockchain networks beyond Bitcoin and Ethereum. The competitive fee structures, inclusion of staking capabilities, and diverse asset selection mark a new chapter in cryptocurrency's integration with traditional financial markets.

As Bitwise's launch announcement noted, these products represent the "first US ETP to have 100% direct exposure" to their respective cryptocurrencies with staking capabilities—a technical achievement that could set the standard for future crypto ETF offerings.

Key Takeaways

Canary Capital's HBAR and LTC ETFs, plus Bitwise and Grayscale Solana ETFs, launched using an automatic effectiveness provision during the government shutdown
The legal mechanism bypassed the need for SEC staff approval by leveraging Section 8(a) of the Securities Act after removing delaying amendments
Competitive fee structures range from Bitwise's industry-leading 0.20% to Canary's 0.95%, with several funds including staking capabilities
XRP ETF approval odds remain high at 86-90% according to prediction markets and Bloomberg analysts, with multiple applications pending
The launches expand institutional crypto access beyond Bitcoin and Ethereum, potentially opening the door for additional altcoin ETF approvals

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