Sonic Labs, the development team behind the Sonic blockchain (ticker: S, formerly FTM), has officially paused its plan to allocate up to $50 million worth of S tokens to seed a potential U.S.-listed spot ETF. The decision, announced by CEO Mitchell Demeter on December 27, 2025, reverses a governance-approved proposal from earlier in the year.
The original plan, approved by Sonic governance when the S token was trading at higher prices, authorized the minting of tokens to support regulated institutional access. However, as market conditions weakened and the price of S declined, the team decided to hold off on execution. "As the market cooled, we held off on minting those tokens, and no ETF tokens have been issued," Demeter stated. Upon becoming CEO in late September, he chose to maintain the pause.
The core issue is token dilution. The company revealed that executing the original $50M allocation at current price levels would require minting over 600 million new S tokens, a volume that conflicts with the governance proposal's intent and could negatively impact the token's supply structure.
In response, Sonic Labs has established a new, stricter framework for any future ETF allocation. The revised terms mandate that token minting can only occur when the S price is above $0.50, with a hard cap of 100 million tokens issued. The total allocation value remains capped at $50 million, favoring the issuance of fewer tokens at higher price points to protect the ecosystem. The company emphasized that allocated tokens would be locked within the regulated ETF product and would not enter the secondary market, thus avoiding additional selling pressure.
Sonic Labs reiterated that providing compliant access for institutional investors via a U.S. ETF remains a long-term strategic priority, but future steps will be guided by updated market conditions and transparent governance processes.
