The Securities and Exchange Commission delayed its decision Monday on whether to approve Canary Funds' proposed spot Litecoin exchange-traded fund, extending its review period and requesting public feedback on the application. The Nashville-based asset manager's product would provide direct exposure to Litecoin, a cryptocurrency with approximately $6.6 billion market capitalization that operates on an open-source blockchain developed from Bitcoin's original codebase.
What to Know:
- The SEC is seeking public comments specifically focused on whether the ETF proposal adequately addresses concerns about market manipulation
- Canary Funds was founded in 2023 by Steven McClurg, a former Valkyrie Funds co-founder who filed the Litecoin ETF application in October 2024
- Industry analysts consider Litecoin among the most likely candidates for early approval under the SEC's new leadership following recent Bitcoin and Ethereum ETF approvals
The regulatory agency announced the delay on its deadline day, opting to solicit public input rather than issue an immediate decision on the proposed investment vehicle. This postponement follows a pattern of delays for several altcoin ETF applications, including those tied to XRP, Hedera, and Dogecoin, though the Canary Litecoin ETF had remained untouched until now.
In its announcement, the SEC emphasized its focus on investor protection concerns. "In particular, the Commission seeks comment on whether the proposal to list and trade Shares of the Trust, which would hold LTC, is designed to prevent fraudulent and manipulative acts and practices or raises any new or novel concerns not previously contemplated by the Commission," the agency stated.
The delay comes amid growing institutional interest in cryptocurrency investment products beyond the recently approved Bitcoin and Ethereum ETFs.
Data from The Block indicates multiple issuers are competing to launch Litecoin ETFs, with Grayscale and CoinShares among those pursuing similar products. This competitive landscape reflects heightened institutional demand for regulated crypto investment vehicles that provide exposure to digital assets beyond the two largest cryptocurrencies.
Shifting Regulatory Environment Under New Leadership
The cryptocurrency regulatory landscape has undergone significant changes following Donald Trump's election victory and his subsequent appointments to key financial regulatory positions. New SEC Chairman Paul Atkins, who assumed the role in April 2025, has expressed more favorable views toward digital asset innovation than his predecessor.
Atkins recently stated his belief in the "huge benefits" of cryptocurrencies, signaling a potential policy shift at the Commission. Under his leadership, the SEC has already dropped several enforcement actions against crypto firms and initiated public roundtables focused on developing more coherent oversight frameworks for digital asset markets.
The Canary Litecoin application represents an early test case for how the Atkins-led SEC will approach cryptocurrency investment products beyond Bitcoin and Ethereum.
Bloomberg Intelligence ETF analyst James Seyffart noted on social platform X that while the delay was anticipated, Litecoin's positioning could potentially give it an advantage in securing future approval.
"Litecoin shares many technical similarities with Bitcoin, which may simplify the regulatory evaluation process compared to other alternative cryptocurrencies," Seyffart explained. The cryptocurrency's longevity in the market and its derivative relationship to Bitcoin's codebase could provide regulators with more established data points for evaluation.
Market participants have noted the SEC's methodical approach despite the leadership change. The Commission continues to emphasize concerns about market manipulation, custody solutions, and investor protection frameworks in its evaluation of cryptocurrency investment products. These considerations remain central to the regulatory process regardless of the administration's broader policy direction.
The public comment period provides an opportunity for market participants, academics, and consumer advocates to weigh in on the proposal's merits.
Comments submitted during this period will become part of the official record the Commission considers in its final determination. The SEC did not specify an end date for the comment period in its announcement, but similar reviews have typically extended for several months.
Canary Funds, which launched its first investment products last year, has positioned itself as a boutique asset manager focused on digital asset investment vehicles. McClurg, who previously helped launch some of the first Bitcoin futures ETFs while at Valkyrie, brings significant industry experience to the application process.
Closing Thoughts
The SEC's decision to delay ruling on Canary's Litecoin ETF application reflects its continuing cautious approach to cryptocurrency investment products despite new leadership. While the regulatory environment appears more accommodating under Chairman Atkins, the Commission maintains its focus on market integrity and investor protection concerns. The outcome of this application may establish important precedents for the next wave of cryptocurrency ETF approvals beyond Bitcoin and Ethereum.