Why the SEC Delayed SUI ETF by Canary Capital and What’s Next?

SEC Delays Decision on Canary Capital’s Spot SUI ETF Amid Ongoing Regulatory Scrutiny

Washington, D.C. — June 5, 2025 — The U.S. Securities and Exchange Commission (SEC) has officially postponed its decision on the highly anticipated spot SUI Exchange-Traded Fund (ETF) proposed by Canary Capital, citing continued regulatory concerns and the need for further evaluation. The delay adds to a growing list of deferred cryptocurrency-related financial products, signaling that federal regulators remain cautious, even as investor appetite for digital assets continues to grow.

The latest decision underscores an ongoing trend within the SEC under new leadership, reflecting both a heightened interest in crypto and a deliberate, methodical review process that appears designed to preserve market stability and ensure investor protection.

Understanding the SUI ETF: Why It Matters

The proposed SUI ETF by Canary Capital is designed to offer investors direct exposure to the SUI token—an emerging digital asset that powers the Sui blockchain, known for its high throughput and low latency. SUI has gained significant traction within the decentralized finance (DeFi) community due to its scalability and innovative Move programming language, which offers greater security for smart contract deployment.

Source: CoinMarketCap

If approved, this ETF would allow institutional and retail investors to gain access to SUI through traditional stock exchanges, bypassing the need to directly purchase and store the cryptocurrency. Such products have become increasingly popular among asset managers looking to bridge the gap between traditional finance and the burgeoning world of Web3.

Analysts believe that a spot ETF could serve as a major step toward mainstream acceptance of SUI and boost its liquidity, offering more reliable pricing and improved transparency for participants in both traditional and digital markets.

Market Response: Price Dip and Trading Volume Decline

Following the SEC’s announcement, SUI’s price slipped by 1.88% over the past 24 hours, while trading volume dropped by 3.48%, according to data from CoinMarketCap. The token is now trading at approximately $3.20. While the SEC's delay certainly weighed on market sentiment, other contributing factors—such as the recent security breach involving the Cetus Protocol, a DeFi platform built on the Sui network—have also added downward pressure on the token.

Security incidents like the Cetus hack highlight one of the major concerns the SEC often points to: systemic risks associated with DeFi ecosystems and the broader crypto market. These vulnerabilities serve as cautionary reminders of the challenges regulators face in balancing innovation with investor safety.

New SEC Leadership Maintains Cautious Approach

The latest ETF delay comes under the oversight of newly appointed SEC Chairman Paul Atkins, a figure well-known for his pro-market views during prior tenures in public office. Many within the crypto industry had hoped that his leadership would herald a more open stance toward digital asset innovation.

However, the current posture from the Commission suggests a continuity of cautious review, rather than a dramatic policy shift. The SEC stated it required additional time to evaluate the SUI ETF application, citing concerns related to market manipulation, liquidity risks, and the adequacy of consumer protections.

Under existing regulations, the SEC has up to 250 days to deliver a final decision on ETF applications. Although the initial decision window is set at 45 days, it can be extended multiple times. In the case of the SUI ETF, the SEC is making full use of its discretionary review period, declining to issue a decision in the first window—a move consistent with recent precedent involving other crypto-related filings.

Canary Capital’s Broader Crypto ETF Strategy

Canary Capital has emerged as a prolific player in the race to bring regulated crypto products to mainstream investors. Over the past several months, the firm has submitted multiple ETF proposals for various digital assets, including Litecoin, Hedera, Solana, SEI, Tron, and even the whimsical Pudgy Penguins NFT ecosystem.

The proposed SUI ETF represents a landmark step for Canary, being the first attempt to secure an ETF tied to this particular token. The firm has emphasized the product’s potential to provide safer and more efficient access to digital assets for institutional clients.

In parallel, other major players are also entering the fray. Financial services giant 21Shares, in collaboration with Nasdaq, recently filed Form 19b-4 to propose their own SUI ETF. This followed an earlier filing of Form S-1 by 21Shares, signaling its intention to rapidly expand its footprint in the regulated crypto investment market. The competition between firms signals strong confidence in SUI’s long-term viability, despite the current regulatory overhang.

A Broader Pattern of Delays for Crypto ETFs

Canary’s SUI ETF is far from the only proposal to face regulatory hurdles. In May alone, the SEC postponed decisions on at least ten other cryptocurrency ETFs, involving tokens such as Cardano (ADA), Solana (SOL), Dogecoin (DOGE), XRP, Avalanche (AVAX), and Litecoin (LTC). These proposals were submitted by some of the most established firms in the industry, including Grayscale Investments, 21Shares, CoinShares, and Bitwise Asset Management.

Each deferral was accompanied by SEC statements emphasizing the need for enhanced technical reviews, stronger legal frameworks, and deeper evaluations of market integrity. Grayscale, for instance, had hoped to convert several of its single-asset trusts into spot ETFs—an effort that was delayed due to pending clarifications around market surveillance and custody solutions.

This wave of postponements illustrates the deep-seated regulatory hesitancy that continues to define the SEC’s stance on digital assets, even amid increasing institutional participation and growing consumer interest.

Why the SEC Remains Hesitant

Despite a surge of optimism across the financial sector—especially after JPMorgan’s recent initiative to offer loans backed by BlackRock’s spot Bitcoin ETF—regulatory agencies remain deeply cautious. The SEC has repeatedly cited three primary concerns: potential for market manipulation, insufficient investor protection mechanisms, and a lack of legal clarity in key areas such as asset custody, liquidity, and trading infrastructure.

Furthermore, the rapid pace of innovation in the crypto space often outstrips the ability of existing frameworks to adapt. This lag has created a regulatory gray area where innovative products struggle to find approval, even as they gain popularity among financial institutions and retail investors alike.

What’s Next for SUI and Crypto ETFs?

While the delay in approving the SUI ETF is undoubtedly a setback for Canary Capital and SUI token advocates, it may also represent a pivotal moment in the broader journey toward regulatory acceptance. With multiple firms now vying for similar products, and with increased public scrutiny of SEC processes, the pressure is mounting for clearer, more responsive regulatory frameworks.

Industry insiders remain hopeful that continued dialogue between regulators and market participants will pave the way for eventual approval of spot crypto ETFs. For now, however, the road remains long and uncertain.

As for investors, the delay serves as a reminder to stay informed, exercise caution, and prepare for continued volatility. While the eventual approval of a SUI ETF could open up significant new investment channels, the timing of such developments will ultimately depend on regulators’ confidence in the maturity and safety of the underlying infrastructure.

Writer @Erlin

Erlin is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.

 

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