SECTION 4. BACKGROUND –

APPLICABLE REGULATORY RULES

.01 SEC Rules . The offer and sale of interests in a trust holding digital assets to investors in a public offering is subject to regulation by the U.S. Securities and Exchange Commission (SEC). The regulations and rules of the SEC address, among other matters, the public disclosure by the trust of its activities, including with respect to staking. Accordingly, the SEC reviews and must approve such disclosure before the trust is permitted to make a public offering of trust interests. SEC rules also may require an issuer to provide additional disclosure to investors when material facts relating to its offering change, which disclosure the SEC also reviews and approves.

.02 SEC Statement and Orders Relat- ing to Staking . On May 29, 2025, the SEC Division of Corporation Finance issued a Statement on Certain Protocol Staking Activities. ³ The Statement addresses certain activities known as “staking” on digital asset networks that use proofof-stake as a consensus mechanism. On July 29, 2025, the SEC approved In-Kind Creations and Redemptions for Crypto ETPs. ⁴ On September 17, 2025, the SEC approved rule changes proposed by three national securities exchanges to adopt generic listing standards for exchangetraded products that hold commodities, which as defined in the SEC order include certain digital assets. ⁵

.03 Exchange Rules . Interests in trusts holding digital assets may be listed and traded on a national securities exchange that is a self-regulatory organization. The rules of the national securities exchange,

3 SEC, Statement on Certain Protocol Staking Activities (May 29, 2025), https://www.sec.gov/newsroom/speeches-statements/statement-certain-protocol-staking-activities-052925.

4 SEC Release No. 34-103571, 90 FR 36248 (Aug. 1, 2025); SEC, SEC Permits In-Kind Creations and Redemptions for Crypto ETPs (July 29, 2025), https://www.sec.gov/newsroom/pressreleases/2025-101-sec-permits-kind-creations-redemptions-crypto-etps. An ETP is an exchange-traded product.

5 SEC Release No. 34-103995, 90 FR 45414 (Sept. 22, 2025).

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for which are carried out on a permissionless network that uses a proof-of-stake consensus mechanism to validate those transactions.

(3) The trust’s digital assets are held by a custodian, acting on behalf of the trust, at digital asset addresses controlled by the custodian. Only the custodian has access to the private keys associated with those digital asset addresses; accordingly, only the custodian can effect a sale, transfer, or exercise the rights of ownership over the trust’s digital assets, including while those assets are staked. For Federal income tax purposes, the trust retains ownership of the digital assets at all times, including while they are staked.

(4) The trust’s staking of its digital assets protects and conserves trust property by mitigating the risk that another party or group could control a majority of the total staked digital assets of that type and engage in transactions that could reduce the value of the trust’s digital assets.

(5) The trust’s activities relating to digital assets are limited to: (i) accepting deposits of the digital asset or cash in exchange for newly issued interests in the trust; (ii) holding the digital assets and cash; (iii) paying trust expenses and selling digital assets for cash to pay trust expenses or to make cash redemptions of trust interests; (iv) purchasing additional digital assets with cash contributed to the trust; (v) distributing digital assets or cash to trust interest holders in redemption of their interests in the trust; (vi) selling digital assets for cash in connection with the trust’s liquidation; and (vii) directing the staking of its digital assets in a manner consistent with the applicable requirements of the national securities exchange on which the trust interests are traded and this safe harbor, including providing for a liquidity reserve to the extent provided in section 6.02(9) of this revenue procedure and entering into a contingent liquidity arrangement to the extent provided in section 6.02(12) of this revenue procedure. Pursuant to the trust agreement, the trust is prohibited from seeking to take advantage of variations in the market to improve the investments of trust interest holders,

approved by the SEC, prescribe conditions that must be satisfied in order for shares (including trust interests) to be listed. Under those rules, certain trust interest holders are issued interests in the trust in a specified aggregate minimum number in return for a deposit of a quantity of the underlying digital asset and/or cash; and when aggregated in the same specified minimum number, the trust interests may be redeemed at such holder’s request by the trust, which will deliver to the redeeming holder the quantity of the underlying digital asset and/or cash.

.04 Liquidity Policies and Proce- dures . The generic listing standards of the national securities exchange where a trust’s interests are listed and traded that have been approved by the SEC require that the trust have in place liquidity risk policies and procedures to ensure that the trust can redeem trust interests at a trust interest holder’s request. ⁶ Pursuant to these generic listing standards, if a trust has on a daily basis less than 85 percent of its assets readily available to meet redemption requests, the trust must have and disclose written liquidity risk policies and procedures reasonably designed to address the risk that it could not meet requests to redeem interests issued by the trust without significant dilution of the remaining holders’ interests in the trust. For this purpose, an asset is deemed not readily available to meet redemption requests if it is segregated, pledged, hypothecated, encumbered, or otherwise restricted or prevented from being liquidated, sold, transferred, or assigned within one business day. These policies and procedures must be periodically reviewed, no less frequently than annually. The exchange’s disclosure requirements regarding liquidity risk are intended to cover situations such as staking by the trust of its digital assets, particularly if the staked amount exceeds 15 percent of the trust’s assets on any given day and such staked assets are not readily available for redemption requests within one business day. The generic listing standards require that the trust’s liquidity risk policies and procedures be prominently displayed on the trust’s website.