ETHW 10-K & 10-Q changes, risk factors and insider trading

Decentralized governance of the Ethereum network and potential amendments to the Ethereum network’s protocols and software could, if accepted and authorized by the Ethereum network community, could have a negative impact on the performance of the Trust.

The Trust’s operations rely heavily on the Sponsor, whose limited staffing, potential discontinuance, and conflicts of interestsinterest could adversely impact the Trust’s management and stability and the value of the Shares.

The trading prices of many digital assets, including ether, have experienced extreme volatility in recent periods and may continue to do so. For instance, there were steep increases in the value of certain digital assets, including ether, over the course of 2017, followed by steep drawdowns throughout 2018 in digital asset trading prices, including for ether. These drawdowns notwithstanding, digital asset prices, including ether, increased significantly again during 2019, decreased significantly again in the first quarter of 2020 amidst broader market declines as a result of the novel coronavirus outbreak, and increased significantly again over the remainder of 2020 and the first quarter of 2021. Digital asset prices, including ether, continued to experience significant and sudden changes throughout 2021 followed by steep drawdowns in the fourth quarter of 2021, as well as throughout 2022,2022. andSince then, digital asset prices have continued to fluctuate through 20232024, 2025, and toearly date in 2024.2026.

Blockchain participants, including miners and validators, maintain the record of ownership of digital assets. These participants validate transactions, secure the network, and ensure the integrity of the blockchain. If these entities suffer from cyberattacks or other security incidents (whether from hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or the loss or corruption of data, software, hardware or other computer equipment, or from the inadvertent transmission of computer viruses or other malware, other forms of malicious attacks, malfeasance or negligent acts of their personnel, or via other means, including phishing attacks and other forms of social engineering), or if for financial or other reasons they cease to perform these functions, the functioning of the blockchains on which the ownership of digital assets is recorded and and the basis of their valuation based may be jeopardized. For instance, if a successful cyberattack were to disable miners or validators, the validation of transactions could be delayed or fail, potentially leading to unauthorized transactions or the loss of digital assets.

The trading prices of ether have experienced extreme volatility in recent periods and may continue to do so. In 2021, ether experienced significant highs before experiencing substantial declines throughout 2022. This pattern of rapid appreciation followed by steep drawdowns has recurred multiple times, including in 2013-2014, 2017-2018, and 2021-2022. In 2023, ether’sEther's price has continued to fluctuate, with a notable low of $1,535.49 on October 12, 2023,2023 and a high of $4,031.50 on March 11, 2024. As of December 31, 2024,2025, ether’sether's price stands at $3,340.40,$2,971.94, reflecting ongoing volatility. Over the past 12 months (using data ending January 5, 20252026), ether has exhibited a historical annualized volatility of approximately 62.68%76.67% and a maximum annual price decrease of 44.95%.60.25%.

Extreme volatility may persist, and the value of the Shares may significantly decline in the future without recovery. The digital asset markets have previously experienced a bubble and may do so again in the future. The bankruptcy of major digital asset companies like Celsius Network, Voyager Digital Ltd., and Three Arrows Capital, along with the collapse of TerraUSD and FTX Trading Ltd. (“FTX”) in late 2022 severely impacted confidence in the digital asset market. These events have led to widespread negative publicity, further bankruptcies, and legal actions, highlighting the volatility and risks inherent in Ether and other digital assets.

In response to these events (collectively, the "2022 Events"),events, the digital asset markets experienced extreme price volatility and other entities in the digital asset industry were, and may continue to be, negatively affected, further undermining confidence in the digital asset markets. These events also negatively impacted the liquidity of the digital asset markets as certain entities affiliated with FTX engaged in significant trading activity. If the liquidity of the digital asset markets is negatively impacted by these events, digital asset prices, including ether, may continue to experience significant volatility or price declines and confidence in the digital asset markets may be further undermined.

In addition, regulatory and enforcement scrutiny of digital assets has increased, including from, among others, the Department of Justice,DOJ, the SEC, the CFTC, the White House and Congress, as well as state regulators and authorities. The regulatory landscape for digital assets remains uncertain and continues to evolve. For example, in January 2024, the SEC approved the listing and trading of several bitcoin spot ETFs. This decision came after the U.S. Court of Appeals for the District of Columbia found that the SEC’s previous denial of the Grayscale Bitcoin Trust’s ETF listing was “arbitrary and capricious” due to insufficient explanation, especially given the approval of similar bitcoin futures-based ETFs. For more information regarding regulatory and enforcement scrutiny of digital assets, see the risk factor entitled "Regulatory changes or actions by federal or state executives or legislators may affect the value of the Shares or restrict the use of ether, its validating activity or the operation of its networks or the digital asset markets in a manner that adversely affects the value of the Shares."

While the Merge significantly reduced Ethereum’s energy consumption by approximately 99.95%, it did not immediately address all scalability challenges. Subsequent upgrades, such as the “Dencun” update in March 2024, have been implemented to further enhance scalability and efficiency. This planned fork introduced several Ethereum Improvement Proposals ("EIPs"),EIPs, including EIP 4844, aimed at reducing transaction fees for Layer 2 solutions by providing temporary storage spaces called Binary Large Objects (“blobs”) on the Layer 1 Ethereum network. This change is expected to lower costs for Layer 2 solutions by storing batched transactions more efficiently, though it initially resulted in decreased demand for ether, potentially impacting its market price. Additionally, some Layer 2 networks, like Blast, experienced temporary outages following the upgrade. As with any major software change, the Dencun update carries risks of bugs, security vulnerabilities, and other unanticipated issues that could affect the Ethereum network’s adoption and the value of ether.

The rate at which new ether is issued and put into circulation is variable and influenced by several mechanisms within the Ethereum network. Unlike the Bitcoin network, the Ethereum network has no formal cap on its total supply. However, it employs various mechanisms that collectively limit the ether supply. These mechanisms, known as the “Ethereum Triple Halving,” have been instrumental in reducing the issuance of new ether.

The Ethereum network, like many other digital asset networks, faces significant scaling challenges due to due to inherent trade-offs between security and scalability in public blockchains. One means through which public blockchains achieve security is decentralization, meaning that no intermediary is responsible for securing and maintaining these systems. A higher degree of decentralization generally means a given digital asset network is less susceptible to manipulation or capture. In practice, this typically means that every single validator on a given digital asset network is responsible for securing the system by processing every transaction and every single full node is responsible for maintaining a copy of the entire ledger of the network. As a result, a digital asset network may be limited in the number of transactions it can process because all validators participate in validating each block and each fully participating node must store and validate all transactions.

Following the Merge, core development of the Ethereum source code has increasingly focused on modifications of the Ethereum protocol to increase speed, throughput and scalability and also improve existing or next-generation uses. To address scaling issues such as network congestion, slow throughput and periods of high transaction fees owing to spikes in network demand, the Ethereum community has shifted its strategy from traditional sharding to a rollup-centric roadmap. Initially, sharding was proposed to increase Ethereum’s of the Ethereum blockchain by splitting the blockchain into subsections, called shards, and dividing validation responsibility so that a defined subset of validators would be responsible for each shard, rather than all validators being responsible for the entire blockchain, allowing for parallel processing and validation of transactions. This approach aimed to enable parallel processing and validation of transactions. However, with the rapid advancement of Layer 2 scalability solutions, which process transactions off-chain and submit bundled data to the main Ethereum network, the focus has transitioned to enhancing these rollups. The launch of proto-danksharding (known as "EIP-4844") in the “Dencun” upgrade in March 2024 introduces “blob-carrying transactions,” allowing rollups to add data blobs to blocks at a lower cost. These blobs are not accessible to the Ethereum Virtual Machine ("EVM") and are automatically deleted after a set period, reducing long-term storage requirements.

Layer 2 solutions aim to increase throughput and reduce transaction fees by handling or validating transactions off the main Ethereum network (known as “Layer 1”) and then attempting to take advantage of the perceived security and integrity advantages of the Layer 1 Ethereum network by uploading the transactions validated on the Layer 2 protocol back to the Layer 1 Ethereum network. The details of how this is done vary significantly between different Layer 2 technologies and implementations. Key Layer 2 implementations include “rollups,” which execute transactions outside the Layer 1 blockchain and then post the data, typically in batches, back to the Layer 1 Ethereum blockchain where consensus is reached. “Zero knowledge rollups” are generally designed to run the computation needed to validate the transactions off-chain, on the Layer 2 protocol, and submit a proof of validity of a batch of transactions (not the entire transactions themselves). By contrast, “optimistic rollups” assume transactions are valid by default and only run computation, via a fraud proof, in the event of a challenge. Other proposed Layer 2 scaling solutions include, among others, “state channels,” which are designed to allow participants to run a large number of transactions on the Layer 2 side channel protocol and only submit two transactions to the main Layer 1 Ethereum blockchain (the transaction opening the state channel, and the transaction closing the channel); and “side chains,” in which an entire Layer 2 blockchain network with similar capabilities similar to those of the existing Layer 1 Ethereum blockchain runs in parallel with the existing Layer 1 Ethereum blockchain and allows smart contracts and DApps to run on the Layer 2 side chain without burdening the main Layer 1 network, and others. To date, the Ethereum network community has not coalesced overwhelmingly around any particular Layer 2 solution, though this could change.

These MEV practices can undermine transaction predictability and fairness, potentially deterring users from engaging with DeFi protocols or the Ethereum network. Regulatory bodies have begun to scrutinize MEV activities. In May 2024, the European Union, under the Markets in Crypto-Assets ("MiCA") regulation, designated MEV as a form of illegal market abuse, aiming to curb sophisticated market manipulation and promote fair participation. Additionally, in May 2024, U.S. prosecutors charged two individuals with exploiting the Ethereum blockchain to steal $25 million through MEV manipulation, marking the first criminal case involving this type of exploitation. Such regulatory actions could lead to stricter oversight and potential restrictions on MEV-related practices, affecting the attractiveness of the Ethereum network for users and validators, which may adversely impact the value of ether and, by extension, the value of the Shares.

Federal and state regulators including FinCEN and OFAC have been examining the operations of digital asset networks, digital asset users and the digital asset markets, with particular focus on the extent to which digital assets can be used to launder the proceeds of illegal activities, evade sanctions, or fund criminal or terrorist enterprises. For example, certain privacy-enhancing features have been, or are expected to be, introduced to a number of digital asset networks, and these features may provide law enforcement agencies with less visibility into transaction-level data. Europol, the European Union’s law enforcement agency, released a report in October 2017 noting the increased use of privacy-enhancing digital assets like Zcash and Monero in criminal activity on the internet. In August 2022, OFAC banned all transactions by U.S. persons or in the United States involving Tornado Cash, a digital asset protocol designed to obfuscate blockchain transactions, by adding Tornado Cash and certain Ethereum wallet addresses associated with the protocol to its Specially Designated Nationals and Blocked Persons ListList. A large portion of validators globally, as well as notable industry participants such as Centre, the issuer of the USDC stablecoin, have reportedly complied with the sanctions and blacklisted the sanctioned addresses from interacting with their networks. In October 2023, FinCEN issued a notice of proposed rulemaking that identified convertible virtual currency ("CVC") mixing as a class of transactions of primary money laundering concern and proposed requiring covered financial institutions to implement certain recordkeeping and reporting requirements on transactions that covered financial institutions know, suspect, or have reason to suspect involve CVC mixing within or involving jurisdictions outside the United States. The DOJ has also arrested and charged the developers of certain digital asset networks and digital assets for crimes related to money laundering and other offenses.

Furthermore, Authorized Participants, as broker-dealers, and the Prime Execution Agent and Ether Custodian, as entities licensed to conduct virtual currency business activity by the New York Department of Financial Services and as limited-purpose trust companies subject to New York Banking Law, respectively, are “financial institutions” subject to the U.S. Bank Secrecy Act, as amended (“BSA”),amended, and U.S. economic sanctions laws. The Trust will only accept creation and redemption requests from Authorized Participants who have represented to the Trust that they have implemented compliance programs that are designed to ensure compliance with applicable sanctions and anti-money laundering laws. The Trust will not hold any ether except that which has been delivered by approved Ether Trading Counterparties or by execution through the Prime Execution Agent, in connection with Authorized Participant creation requests. Moreover, the Prime Execution Agent has represented to the Trust that it has implemented and will maintain and follow compliance programs that are designed to comply with applicable sanctions and anti-money laundering laws and that it performs both initial and ongoing due diligence on each of its customers as well as ongoing transaction monitoring that is designed to identify and report suspicious activity conducted through customer accounts, including those opened by the Authorized Participants or their agents/partners for purposes of facilitating ether deposits to, and withdrawals from, the Trust’s Trading Balance, as required by law.

The Ethereum network relies on open-source protocols, which means that any user can become a node by downloading the Ethereum Client, a software application that implements the Ethereum network specification, modifying it, and proposing that other nodes, validators, and users adopt those changes. While anyone can propose modifications, the Ethereum Foundation and core developers are influential in initiating updates to the Ethereum network’s source code. However, the adoption of proposed updates is not automatic and depends on decentralized consensus. For any modification to be effective, Ethereum nodes must choose to download and implement the updated source code in their individual Ethereum Clients. The adoption process ultimately relies on a critical mass of validators, DApps developers, smart contract developers, and other users who transact on the Ethereum network to support the proposed changes. However, this process is not guaranteed to succeed. If a significant majority of validators and users do not support a proposed modification, or if the modification is not backward-compatible, it may result in a split of the Ethereum network, known as a “hard fork.” In the event of a hard fork, one group of nodes may continue running the pre-modified software while another group adopts the new version, resulting in two distinct versions of the Ethereum network operating on separate blockchains with no interchangeability between them. Hard forks can be disruptive, leading to fragmentation of the network’s user base, developers, and validators. This division may weaken the security of each network if the number of validators becomes too small, increasing vulnerability to attacks or reduced functionality. Additionally, competing parallel blockchains may confuse users and reduce overall adoption of updates and modifications to the Ethereum network’s source code, potentially impacting the value and utility of ether-based assets, including the Shares. Contentious debates among network participants regarding proposed updates can further complicate this process, sometimes leading to ill will among developers, validators, and other stakeholders.

Ether’s protocols may also be cloned. Unlike a hard fork, which modifies an existing blockchain and results in two networks with the same genesis block, a clone is a copy of a protocol’s codebase that results in an entirely new blockchain with a new genesis block. Tokens are created solely from the new “clone” network, and, unlike with hard forks, holders of tokens from the original network do not automatically receive tokens from the cloned network. A clone creates a competing network with characteristics substantially similar to the original network but with modifications introduced by the developers of the clone. This competition may affect the market dynamics of the original network. For example, in September 2020, Binance launched Binance Smart Chain ("BSC"), a separate blockchain network from the Ethereum network, by cloning the open-source code of Ethereum network. BSC utilizes the Proof-of-Staked Authority ("PoSA") consensus mechanism, differing from Ethereum’s Proof-of-Stake model, which enables BSC to offer faster transactions and lower fees, making it particularly attractive for DApps. Moreover, BSC maintains compatibility with EVM, allowing developers to seamlessly migrate Ethereum-based DApps to BSC. The emergence of BSC introduced a competitive alternative to Ethereum network, potentially influencing ether’s market dynamics. BSC’s lower transaction fees and faster processing times attracted users and developers, leading to a diversification of activity across multiple platforms, which may have impacted the demand for ether, as some DeFi projects and users opted for BSC’s more cost-effective solutions, which could potentially affect the value of the Shares.

Pursuant to the Trust Agreement, to the extent that the Trust involuntarily receives such assets in a Trust wallet, it will, as soon as practicable, and, if possible, immediately, distribute such assets to the Sponsor. Once such assets have been acquired, the Sponsor may take any lawful action necessary or desirable in connection with its acquisition thereof. In the event that the Sponsor decides to sell the Incidental Right(s) and/or IR Asset(s), it will seek to do so for cash. This may be a sale of the Incidental Right(s) and/or IR Asset(s) directly in exchange for cash, or in exchange for another digital asset that may subsequently be exchanged for cash. The Sponsor would then contribute that cash back to the Trust, which in turn would distribute the cash to the Depository Trust Company (“DTC”) to be distributed to Shareholders in proportion to the number of Shares owned.

In particular, in the two weeks that followed the February 7, 2014, halt of bitcoin withdrawals from Mt. Gox, the price of bitcoin fell on other exchanges dropped from around $795 on February 6, 2014, to $578 on February 20, 2014. Additionally, in December 2020, the Russian cryptocurrency exchange Livecoin experienced a major security breach, during which hackers gained control of its servers and manipulated the exchange rates, inflating the prices of bitcoin and ether from their actual values to over $450,000 and $15,000, respectively. Exploiting these artificially inflated prices, the hackers cashed out substantial profits. Without control over its systems, Livecoin was unable to prevent or mitigate the damage, leading to significant financial losses. More recently, in July 2024, the popular Indian cryptocurrency exchange WazirX suffered a significant security breach resulting in the loss of approximately $235 million, which accounted for nearly half of its total reserves. According to its latest Proof of Reserve report, the exchange held assets valued at just over $502 million. The compromised assets included roughly $52 million in Ether, along with various other digital assets.

The ShareholderShareholders isare solely responsible for providing the Trust or its agent with accurate information with respect to its ether wallet and sending ensuring that their contributions are sent to the correct ether wallet address of the Trust. If a Shareholder’s contributions are sent to the wrong wallet address or are not delivered to the Trust, the Trust will have no liability to the Shareholder. If information provided by a Shareholder proves incorrect, and as a result, ether is not delivered to the Trust, the Trust will have no liability to the Shareholder for the Trust’s good faith reliance on such misinformation.

Transfers of ether among users are accomplished via ether transactions (i.e., sending ether from one user to another). The creation of an ether transaction requires the use of a unique numerical code known as a “private key.” In the absence of the correct private key corresponding to a holder’s particular ether, the ether is inaccessible. The custody of the Trust’s ether is handled by the Ether Custodian, and the transfer of ether to and from Authorized Participants is directed by the Sponsor. The Sponsor has reviewed and evaluated the procedures and internal controls of the Trust’s Ether Custodian to safeguard the Trust’s ether holdings. If the Ether Custodian’s internal procedures and controls are inadequate to safeguard the Trust’s ether holdings, and the Trust’s private keys are lost, destroyed or otherwise compromised and no accessible backup,backup exists, the Trust will be unable to access its ether, which could result in a partial or total loss of the Trust’s ether holdings, leading to adverse impact on the value of an investment in the Shares.

The Ethereum network relies on the internet. A significant disruption of internet connectivity, whether regional or global, could halt or delay transaction processing and consensus operations on the Ethereum network until such disruptions are resolved. In the past, variants of digital assets have experienced denial-of-service (“DoS”) attacks, leading to temporary delays in block creation and asset transfers. While the Ethereum network has implemented protections against such attacks, the risk of temporary service disruptions remains.

Digital assets are also susceptible to border gateway protocol hijacking (“BGP hijacking”). Such an attack can be a very effective way for an attacker to intercept traffic en route to a legitimate destination. BGP hijacking impacts the way different nodes and validators are connected to one another by isolating portions of them from the remainder of the network, which could lead to a risk of the network allowing double-spending and other security issues. If BGP hijacking occurs on the Ethereum network, participants may lose faith in the security of Ether, which could affect bictoin’sbitcoin’s value and consequently the value of the Shares.

Decentralized governance of the Ethereum network and potential amendments to the Ethereum network’s protocols and software could, if accepted and authorized by the Ethereum network community, could have a negative impact on the performance of the Trust.

Membership in the community of core developers evolves over time, largely based on self-determined participation in the resource section dedicated to Ether on GitHub.com. These developers gain influence through their ongoing contributions but are constrained by the decentralized nature of the network. In other words, the Ethereum network has no central decision-making body or clear manner in which participants can come to an agreement other than through overwhelming consensus. The lack of clarity on governance may adversely affect ether’s utility and ability to grow and face challenges, both of which may require solutions and directed effort to overcome problems, especially long-term problems. For example, in 2024, a vulnerability in one of the programming languages used to write certain Ethereum smart contracts was discovered on the Ethereum blockchain, exposing certain smart contracts to potential exploitation, resulting in substantial financial losses for affected parties. Although patches were quickly released, concerns about the effectiveness of these solutions remain, underscoring the governance challenges in resolving security risks. To the extent lack of clarity in corporate governance of the Ethereum network leads to ineffective decision-making that slows development and growth, the value of the Shares may be adversely affected.

While the Trust does not invest in stablecoins, it may nonetheless be exposed to risks that stablecoins pose for the ether market and other digital asset markets. Stablecoins are digital assets designed to have a stable value over time compared to typically volatile digital assets, and are typically marketed as being pegged to a fiat currency, such as the U.S. dollar, at a certain value. Although the prices of stablecoins are intended to be stable, their market value may fluctuate. This volatility has in the past apparently impacted the price of ether. Stablecoins are a relatively new phenomenon, and it is impossible to know all of the risks that they could pose to participants in the ether market. In addition, stablecoins are subject to evolving regulatory requirements in the United States. For example, on July 18, 2025, President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (the “GENIUS Act”) into law, establishing a federal framework for certain “payment stablecoins,” and U.S. regulators have begun related implementation efforts (including requests for comment and other actions). The GENIUS Act includes provisions addressing the regulatory treatment of certain “payment stablecoins,” including provisions that may affect whether certain payment stablecoins are treated as “securities” under the federal securities laws. However, the scope and interpretation of these provisions and their application to particular stablecoin structures may evolve and may not cover all stablecoin products, programs, or arrangements. In addition, some regulators have argued that certain stablecoins, particularly Tether, are improperly issued without sufficient backing which, when the stablecoin is used to pay for ether, could cause artificial rather than genuine demand for ether, artificially inflating the price of ether. There are also allegations that those associated with certain stablecoins may be involved in laundering money.money or evading sanctions. On February 17,23, 2021, the New York Attorney General enteredannounced intoa an agreementsettlement with Tether’s operators, requiring them to cease any further trading activity with New York persons and pay $18.5 million in penalties for false and misleading statements made regarding the assets backing Tether. On October 15, 2021, the CFTC announced a settlement with Tether’s operators in which they agreed to pay $42.5 million in fines to settle charges that, among others, Tether’s claims of maintaining sufficient U.S. dollar reserves to back every Tether stablecoin in circulation with the “equivalent amount of corresponding fiat currency” held by Tether were untrue. In addition, ain largeJune amount of Tether is issued as ERC-20 tokens on2025 the EthereumDOJ network.announced Ifan Tether wereaction to norecover longerapproximately be$225.3 issuedmillion orin USDT linked to ceasealleged operatingcryptocurrency oninvestment scams, and in January 2026 the EthereumDOJ network,announced demandcharges foralleging etherthat USDT and other crypto assets were used to paylaunder proceeds of corruption. These and similar regulatory, supervisory, and law-enforcement actions may result in the gasfreezing, feesseizure, fordelisting, ERC-20or Tetherreduced transactionsutility of particular stablecoins, which could reduce liquidity in bitcoin markets and aadversely substantial source of demand for ether could decline, which may causeaffect the price of etherbitcoin to decrease. Any material decreaseand, in the value of ether could negatively affectturn, the value of the Shares.

USDC is a reserve-backed stablecoin issued by Circle Internet Financial that is commonly used as a method of payment in digital asset markets, including the ether market. An affiliate of the Sponsor acts as investment manager to a money market fund, the Circle Reserve Fund, which the issuer of USDC uses to hold cash, U.S. Treasury bills, notes and other obligations issued or guaranteed as to principal and interest by the U.S. Treasury, and repurchase agreements secured by such obligations or cash, which serve as reserves backing USDC stablecoins. While USDC is designed to maintain a stable value at $1.00, on March 10, 2023, the value of USDC fell below $1.00 for multiple days after Circle Internet Financial disclosed that $3.3 billion of the USDC reserves were held at Silicon Valley Bank, which had entered FDIC receivership earlier that day. Since then, USDC has managedgenerally totraded restorenear its peg tointended $1.00 andvalue, but it has not experienced a depegging event of similar magnitude.fluctuations. Stablecoins are reliant on the U.S. banking system and U.S. treasuries, and the failure of either to function normally could affect stablecoin operations, and adversely affecting the value of the Shares. In addition, implementation of the GENIUS Act and evolving U.S. stablecoin regulation could require stablecoin issuers and market participants to obtain licenses or approvals, satisfy reserve and disclosure requirements, or restrict certain activities, any of which could affect stablecoin availability and liquidity. An affiliate of the Sponsor also has a minority equity interest in the issuer of USDC. Similar to Tether, a large amount of USDC is issued as ERC-20 tokens on the Ethereum network. If USDC were to no longer be issued or to cease operating on the Ethereum network, demand for ether used to pay the gas fees for ERC-20 USDC transactions could decline, and a substantial source of demand for ether could be eliminated, which could cause the price of ether to decrease, and negatively affect the value of the Shares.

Some stablecoins have been alleged to be securities under the federal securities laws.laws and the regulatory status of stablecoins remains in flux. For example, on June 5, 2023, the SEC alleged in a complaint that the stablecoin BUSD, a U.S. dollar stablecoin issuedassociated bywith Binance,the Binance ecosystem, was a “crypto asset security” and that Binance “offered and sold to U.S. investors as part of a profit-earning scheme within the Binance ecosystem.” However, on June 28, 2024, a federal judge dismissed the SEC's claim that BUSD was a security, stating that the SEC failed to credibly establish that BUSD was offered or sold as such. On May 29, 2025, the SEC filed a joint stipulation to dismiss, with prejudice, the civil enforcement action against Binance entities and founder Changpeng Zhao, and stated that the dismissal decision did not necessarily reflect the Commission’s position on other litigation or proceedings. In another example, the District Court for the Southern District of New York denied defendants’ motion to dismiss an SEC complaint asserting that the stablecoin TerraUSD (UST), a U.S. dollar stablecoin issued by Terra Labs, is a security. Further public concern about the possible security status of stablecoins manifested in November 2023, when the financial technology company PayPal disclosed in a filing that it had received a subpoena from the SEC relating to the PayPal USD stablecoin that requested the production of documents. IfPayPal alater widelydisclosed usedthat, stablecoinin wereFebruary legally2025, determinedthe toSEC becommunicated ait security,was closing this couldinquiry triggerwithout massenforcement redemptions and broader instability in the digital asset market, negatively impacting the value of the Shares.action.

Given the foundational role that stablecoins play in global digital asset markets, their fundamental liquidity and actual stability can have a significant impact on the broader digital asset market, including the market for ether. Because a large portion of the digital asset market still depends on stablecoins such as Tether and USDC, there is a risk that a disorderly de-pegging or a run on Tether or USDC could lead to significant market volatility in digital assets more broadly. Volatility in stablecoins, operational issues with stablecoins (for example, technical issues that prevent settlement), concerns about the sufficiency of any reserves that support stablecoins or potential manipulative activity when unbacked stablecoins are used to pay for other digital assets (including ether), or regulatory concernschanges aboutaffecting stablecoin issuers or intermediaries, such as exchanges, that support stablecoins, and enforcement actions or sanctions targeting stablecoin-related activity could impact individuals’ willingness to trade on venues that rely on stablecoins, reduce liquidity in the ether market, and affect the value of ether, and in turn impact an investment in the Shares.

The Constituent Platforms have changed over time. For example, on January 25, 2019, ItBititBit was suspended from the Pricing Index due to data quality issues, which suspension was lifted on February 1, 2019 after the Benchmark Provider confirmed that data quality assurance measures were in place to identify the errors that the ItBititBit data contained through a full match of parameters. On August 30, 2019, Gemini was added to the Pricing Index. On October 28, 2019, Coinbase was added to the Pricing Index. On May 3, 2022, LMAX Digital was added to the Pricing Index. The Benchmark Provider, under the oversight of the CME CF Cryptocurrency Pricing Products Oversight Committee, may remove or add Constituent Platforms in the future at its discretion. For more information on the inclusion criteria for Constituent Platforms in the Pricing Index, see the section entitled “The CME CF Ether – Dollar Reference Rate – New York Variant (Pricing Index)” under Item 1 – Business of this Annual Report.

The Trust utilizes the Pricing Index to establish its NAV and NAV per Share. Any errors or delays in the Pricing Index could lead to inaccuracies in the NAV and NAV per Share, resulting in a different investment outcome for the Trust and its Shareholders than if these events had not occurred. Losses or costs associated with such errors or other risks would generally be borne by the Trust and its Shareholders. Neither the Sponsor nor its affiliates or agents provide any guarantees regarding the accuracy or timeliness of the Pricing Index.

In cases where Ethereum network encounters outages or other issuers,issues, the liquidity of the Shares may decline and the price of the Shares may fluctuate independently of the price of ether. This could result in the Shares trading at a premium or discount to their NAV. Furthermore, in the event that the market for ether becomes relatively illiquid and thereby materially limiting opportunities for arbitraging by delivering ether in return for Baskets, the price of Shares may diverge from the value of underlying ether, potentially leading to adverse effects on an investment in the Shares.

The Trust’s operations rely heavily on the Sponsor, whose limited staffing, potential discontinuance, and conflicts of interestsinterest could adversely impact the Trust’s management and stability and the value of the Shares.

In addition, the hedging mechanisms employed by Authorized Participants and market makers, such as futures contracts, to hedge their exposure to ether may not always function as intended during periods of market stress. For example, the ether futures market, although growing, has a limited history and may be less liquid, more volatile, and more susceptible to rapid market fluctuations compared to more established futures markets. Inability to hedge through futures due to liquidity constraints or regulatory changes may further impede the ability of Authorized Participants to manage their exposure, potentially reducing liquidity in the Shares and increasing price volatility.

Each outstanding Share represents a unit of undivided beneficial ownership of the Trust, which does not generate any income. Since the Trust regularly transfers ether to pay the Sponsor Fee and extraordinary, non-recurring expenses not assumed by the Sponsor, the amount of ether represented by each Share will gradually decline over time. This decrease happens even with Shares issued in exchange for additional deposits of ether or cash used to acquire ether over time, as the amount of ether required to create a Share will be adjusted to match the current proportion of ether per Share outstanding.

Therefore, holding Shares in the Trust may not perfectly track the performance of ether itself, and over time, the diminishing ether per Share is likely to erode the value of the Shares relative to direct ether holdings, which would adversely affect the overall return on an investment in the Trust.

On March 22, 2023, the Prime Execution Agent and Coinbase Global (collectively, the “Relevant Coinbase Entities”), received a “Wells Notice” from the SEC, indicating a preliminary determination to pursue enforcement action for alleged violations of federal securities laws. On June 6, 2023, the SEC filed a complaint in federal court against the Relevant Coinbase Entities, alleging violations under the Exchange1934 Act and the 1933 Act. Since then, the legal battle has intensified, with both parties making arguments in the U.S. Court of Appeals for the Third Circuit. As of February 2025, the SEC has formally dismissed its lawsuit against the Relevant Coinbase Entities following its establishment of a Crypto Task Force in January 2025 aimed at developing a comprehensive regulatory framework for digital assets. The dismissal marks a shift in the SEC’s enforcement approach, moving toward a more structured and transparent regulatory policy. While the litigation previously created uncertainty regarding the regulatory treatment of digital asset platforms, its resolution reduces immediate legal risks for the Relevant Coinbase Entities and the broader industry. While the Ether Custodian has not been directly named in the litigation, the resolution of this litigation mitigates potential uncertainties regarding the Trust’s operational stability and its ability to maintain its assets. However, the evolving regulatory landscape for digital assets remains subject to change, and any future enforcement actions or regulatory developments could impact the Trust’s ability to operate effectively and maintain its assets, which would adversely affect the value of an investment in the Shares.

Moreover, the complex nature of transferring the Trust’s assets to a new custodian or prime broker in the event of insolvency, business failure, or interruption, default, failure to perform, security breach or other problems of the Ether Custodian or Cash Custodian would present significant challenges. The Sponsor could decide to replace Coinbase Custody pursuant to the Ether Custody Agreement. Similarly, Coinbase Custody or CoinbaseCoinbase, Inc. could terminate services under the Ether Custody Agreement or the Prime Execution Agreement respectively upon providing the applicable notice to the Trust for any reason, or immediately for Cause.Cause, as defined in the applicable agreement. During any such transfer, the Trust’s ether and cash could be at risk of loss or mismanagement, negatively affecting the Trust’s performance and potentially resulting in the loss of a substantial portion of the Trust’s assets. In addition, CoinbaseCoinbase, Inc. does not guarantee uninterrupted access to the Tradingtrading Platformplatform or the services it provides to the Trust as Prime Execution Agent. Under certain circumstances, CoinbaseCoinbase, Inc. is permitted to halt or suspend trading on its trading platform, or impose limits on the amount or size of, or reject, the Trust’s orders, including in the event of, among others, (i) delays, suspension of operations, failure in performance, or interruption of service that are directly due to a cause or condition beyond the reasonable control of CoinbaseCoinbase, Inc, (ii) the Trust has engaged in unlawful or abusive activities or fraud, (iii) the acceptance of the Trust’s order would cause the amount of Trade Credits extended to exceed the maximum amount of Trade Credit that the Trust’s agreement with the Trade Credit Lender permits to be outstanding at any one time, or (iv) a security or technology issue occurred and is continuing that results in CoinbaseCoinbase, Inc. being unable to provide trading services or accept the Trust’s order, in each case, subject to certain protections for the Trust. Additionally, any delays in locating a suitable replacement for the Ether Custodian or Cash Custodian, as applicable, could force the Sponsor to terminate the Trust and liquidate its ether holdings, which would disrupt operations and harm Shareholders. Even if a new custodian is found, the need to negotiate a new ether custody agreement or cash custody agreement could result in higher operational costs, which would reduce the net asset value of the Trust and adversely affect the value of the Shares.

The Trust is not a registered investment company subject to the Investment Company Act of 1940 (the “Investment Company Act”). Consequently, Shareholders of the Trust do not have the regulatory protections provided to Shareholders in registered and regulated investment companies, which, for example, require investment companies to have a certain percentage of disinterested directors and regulate the relationship between the investment company and certain of its affiliates. Further, the Trust will not hold or trade in commodity futures contracts regulated by the Commodity Exchange Act, as administered by the CFTC. The Trust will not engage in “retail commodity transactions” — any ether transaction entered into on a leveraged, margined or financed basis. Such transactions are deemed to be commodity futures under the Commodity Exchange Act and subject to CFTC jurisdiction. Furthermore, the Sponsor believes that the Trust is not a commodity pool for purposes of the Commodity Exchange Act. Consequently, Shareholders will not have the regulatory protections provided to Shareholders in Commodity Exchange Act-regulated instruments or commodity pools. In December 2025, the CFTC withdrew certain interpretive guidance relating to “retail commodity transactions” in digital assets. However, the scope of the CFTC’s jurisdiction and the application of the Commodity Exchange Act to digital asset products and transactions (including transactions involving ether) remain subject to change through legislation, regulation, agency interpretation, and judicial decisions.

The regulatory landscape for digital assets in the United States is complex and evolving, with multiple federal and state agencies actively overseeing various aspects of their use, trading, and compliance obligations. These agencies include, but are not limited to, the SEC, the U.S.CFTC, CommodityFinCEN, Futures Trading Commission (“CFTC”), the Financial Crimes Enforcement Network (“FinCEN”), the Office of Foreign Assets Control (“OFAC”),OFAC, the Office of the Comptroller of the Currency, the Federal Reserve Board, the U.S. Department of the Treasury, the Consumer Financial Protection Bureau, the Federal Trade Commission, the Internal Revenue Service, the U.S. Department of Justice (“DOJ”) and various state financial regulators and state Attorneys General.

In recent years, the SEC has increased enforcement actions and investigations in the crypto sector, targeting entities it deems in violation of securities laws. This includes actions against platforms such as Kraken for offering unregistered securities and staking services, as well as investigations into Coinbase,certain Ripple,digital Binanceasset platforms and ConsenSysservice forproviders. activitiesIn 2025, the SEC dismissed a number of pending civil enforcement actions involving variousmajor digitalcrypto assetsmarket andparticipants, services.including Coinbase. The SEC also proposedproposed, adopted, or adoptedwithdrew several rules lastand yearissued multiple staff statements and other staff guidance in 2025 that could significantly impact the digital asset industry. These included amendments to the Exchange Act’s definition of “dealer,” which could negatively affect numerous digital asset trading platforms, and certain DeFi platforms in particular, and proposed amendments to the SEC Custody Rule under the Advisers Act, which would make it more difficult for asset managers to custody digital assets. The SEC also raised concerns about compliance and market oversight of digital assets, and emphasized retail investor protection and market integrity as key priorities, with its Division of Examinations identifying digital assets as a focus for 2025.priorities. These regulatory actions and heightened scrutiny extend to emerging areas such as DeFi protocols and NFTsprotocols, creating additional legal challenges and market uncertainty.

However, recent SEC developments indicate possible shifts in its regulatory approach, although the SEC’s long-term direction remains uncertain. The SEC approved multiple spot Bitcoin ETFs for the first time in January 2024 followed by the approval of multiple spot Ethereum ETFs in July 2024, including the Bitwise trusts holding bitcoin and ether. These approvals suggestdo thatnot bothconstitute a binding determination of the legal classification of bitcoin andor ether mayunder bethe commodities.federal securities laws or the Commodity Exchange Act for all purposes. More recently, the SECSEC, among other things: 1(i) withdrewissued Staff Accounting Bulletin 121,No. eliminating122 on January 23, 2025, which rescinded Staff Accounting Bulletin No. 121; (ii) announced the requirementformation for companies to recognizeof a liability and corresponding asset for safeguarding digital assets; and 2) formed a new Crypto Task Force ledon byJanuary Commissioner21, Hester2025; Peirce(iii) aimedissued atmultiple providingstaff greaterstatements regulatoryin clarity2025 toaddressing, theamong digitalother things, certain protocol staking activities and disclosure practices for crypto asset industry.ETPs; and (iv) approved orders and exchange rule changes in 2025 affecting crypto asset ETP operations (including permitting in-kind creations and redemptions for certain bitcoin- and ether-based crypto asset ETPs and adopting generic listing standards for commodity-based trust shares). That said, any permanent regulatory shift remains uncertain at this time, and there is no assurance a more favorable U.S. regulatory environment will emerge at the federal or state levels. Any adverse regulatory developments or enforcement actions could negatively impact the value of these assets and related products, including the Trust.

The SEC has also regularly stated that certain digital assets may be considered “securities” under federal securities laws, and this classification can have significant implications for digital assets, including ether. The legal test for determining whether any given crypto asset, product, or service is an investment contract security was set forth in the 1946 Supreme Court case SEC v. W.J. Howey Co. and whether any given crypto asset, product, or service is a note in the 1990 Supreme Court case Reves v. Ernst & Young. The legal tests for determining whether any given crypto asset, product, or service is a security requires a highly complex, fact-driven analysis. Accordingly, whether any given crypto asset, product or service would be ultimately deemed by a federal court to be a security is uncertain and difficult to predict notwithstanding the conclusions of the SEC or any conclusions the Trust may draw regarding the likelihood that a particular crypto asset, product or service could be deemed a “security” or “securities offering” under applicable laws. Former SEC Director William Hinman stated in 2018 that ether, in its decentralized form at the time, did not meet these criteria; but former SEC Chairman Gary Gensler suggested that ether might be a security asin recentlycertain aspublic lastremarks year.during his tenure. In addition, in May 2025 the staff of the SEC’s Division of Corporation Finance issued a statement regarding the acceptability of certain protocol staking activities; however, staff statements reflect staff views, are not binding on the Commission, and may be withdrawn or modified. None of these statements are comprehensive or binding, and the SEC continues to scrutinize aspects of the digital asset space, including ether.

In addition, the CFTC has regulatory jurisdiction over ether futures markets, having classified ether as a “commodity” under the Commodity Exchange Act ("CEA"). This classification grants the CFTC authority to pursue cases of fraud and manipulation in the ether spot market; however, its jurisdiction in spot markets is generally limited to transactions involving leverage, collateral, or financing. The National Futures Association ("NFA") serves as the self-regulatory organization for U.S. futures markets, including ether futures, but does not oversee Ether’s spot market. Recent CFTC enforcement actions illustrate its heightened scrutiny of digital asset markets. In 2023 and 2024, the CFTC launched actions against firms such as FTX, Binance, and Coinbase for violations including illegal off-exchange commodity trading and inadequate AML controls. Notably,In September 2025, SEC and CFTC staff issued a joint statement regarding the trading of certain spot crypto asset products on CFTC-registered designated contract markets, and in AprilDecember 2024,2025 the CFTC finedannounced Coinbasethe $6.5first-ever millionlisted forspot compliancecrypto failurescontract and tradingwithdrew inaccuracies,certain reinforcinginterpretive itsguidance focusrelating onto ensuringretail integritycommodity intransactions Ether-relatedinvolving digital assets. These developments illustrate that the scope of CFTC oversight relating to digital assets and otherspot digital asset transactions.markets remains subject to change.

One of the most prominent use-cases of digital asset networks is the operation of DeFi protocols. Ether is one of the digital assets that are native to the native Ethereum networksnetwork on which DeFi protocols are deployed and therefore the value of ether relies in part on the functionality and use of such DeFi protocols. The U.S. financial system is extensively regulated at both the federal and state level with a particular focus on intermediaries such as banks, broker-dealers, futures commission merchants, investment funds, investment advisers, financial asset exchanges, trading platforms, clearinghouses and custodians. U.S. laws and regulations impose specific obligations on financial services intermediaries both for the protection of their customers and for the protection of the U.S. financial system as a whole. These include, among others, capital requirements, activities restrictions, reporting and disclosure requirements and obligations to monitor the activities of their customers and to ensure that the intermediaries’ activities and the activities of their customers are conducted in accordance with applicable laws and regulations. Non-U.S. laws and regulatory requirements may impose similar obligations. By seeking to eliminate or substantially limit the role of traditional financial services intermediaries in lending, brokering, advisory, trading, clearing, custodying and other financial services activities, DeFi protocols pose numerous challenges to the longstanding oversight framework developed under U.S. law and used by U.S. and other regulators. For example, one former commissioner of the CFTC has publicly stated that he believes certain DeFi protocols and activities operating without regulatory licensing likely violate the Commodity Exchange Act. Further, most DeFi activities rely on users maintaining “self-hosted” wallets, and DeFi protocols generally do not engage in anti-money laundering and know-your-customer or other customer identification and due diligence processes, each of which have raised concerns for regulators, including the U.S. Department of the Treasury, and international standard-setting bodies such as the Financial Action Task Force. In March 2025, OFAC removed Tornado Cash from the Specially Designated Nationals and Blocked Persons List. However, U.S. sanctions policy and enforcement priorities relating to mixers, sanctions evasion, and other illicit finance risks involving digital assets may change, and DeFi protocols, service providers, and users may continue to face sanctions-related risks.

Ether and other digital assets currently face an uncertain regulatory landscape in many foreign jurisdictions such as the European Union, China, the United Kingdom, Australia, Russia, Israel, Poland, India and Canada. Cybersecurity attacks by state actors, particularly for the purpose of evading international economic sanctions, are likely to attract additional regulatory scrutiny to the acquisition, ownership, sale and use of digital assets, including ether. Various foreign jurisdictions have adopted, and may continue to adopt in the near future, laws, regulations or directives that affect digital assets, particularly with respect to digital asset exchanges, trading venues and service providers that fall within such jurisdictions’ regulatory scope. Some countries have classified digital assets broadly as “securities,” while others, like Switzerland, Malta, and Singapore, have adopted a more nuanced approach. As a result, digital assets may be considered securities in one country but not in another. The European Union’s Markets in Crypto-Assets ("MiCA") regulation recently took effect and seeks to establish a comprehensive framework for digital assets, including stablecoins and crypto-asset service providers. Beyond the EU, the United Kingdom’s Financial Services and Markets Act expands the Financial Conduct Authority’s ("FCA")FCA's oversight of crypto activities, enabling further regulation of stablecoins and other digital assets. The Monetary Authority of Singapore ("MAS") has also introduced stablecoin regulations under its Payment Services Act, and China has maintained strict scrutiny of digital assets following its 2021 prohibition of mining.

On January 23, 2025, President Trump issued Executive Order 14178, titled “Strengthening American Leadership in Digital Financial Technology,” which revoked President Biden’s March 2022 Executive Order 14067, “Ensuring Responsible Development of Digital Assets.” Among other things, President Trump’s order establishes the President’s Working Group on Digital Asset Markets, tasked with proposing a federal regulatory framework for digital assets within 180 days. This working group is directed to focus on fosteringdeveloping innovation,policy reducingrecommendations, including potential legislative and regulatory burdens,proposals relating to digital asset market structure and ensuringstablecoins. In July 2025, the White House released a report described as fulfilling the executive order’s 180-day report requirement. In addition, on March 6, 2025, President Trump issued an executive order establishing a “Strategic Bitcoin Reserve” and a “U.S. competitivenessDigital inAsset globalStockpile,” which could affect digital financialasset markets.markets and increase regulatory and public policy attention to digital assets.

President Trump’s executive order follows ongoing legislative efforts to establish a comprehensive regulatory framework for digital assets. On May 22, 2024, the U.S. House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (“Fit21”),Fit21, advancing efforts to establish a federal framework for digital assets. Fit21 seeks to clarify the SEC’s and CFTC’s jurisdiction, granting the CFTC primary oversight of digital commodities while preserving the SEC’s authority over securities. Alongside Fit21, other proposals aim to refine digital asset classifications, disclosure requirements, and tax treatment. However, the future of these regulatory efforts, and how regulatory authority may be divided among regulators, remains uncertain. For example, on July 17, 2025, the U.S. House of Representatives passed the Digital Asset Market Clarity Act of 2025, and on July 18, 2025, the President signed the GENIUS Act into law establishing a federal framework for certain payment stablecoins. In addition, on April 10, 2025, the President signed legislation disapproving an IRS rule that would have expanded certain digital asset tax reporting requirements to certain DeFi participants. There can be no assurance whether, when, or in what form additional federal digital asset legislation will be enacted or how any such legislation will affect ether, the Trust, or the Shares.

These recent developments illustrate that the regulatory landscape remains volatile. If further restrictions or outright bans were introduced in major economies such as these, the ability to acquire, hold, or trade ether could be severely compromised. Such restrictions may not only impact ether transactions but could also extend to the ownership, holding or trading in the Shares. Any such restriction could result in the termination and liquidation of the Trust’s ether holdings, which could occur at a time that is disadvantageous to Shareholders, leading to potential financial losses and adverse impact on the value of the Shares.

The Sponsor and the Trust believe that the Trust is not a money transmitter or money services business. To the extent that the activities of the Trust cause it to be deemed a “money services business,” particularly a “money transmitter,” under the regulations promulgated by FinCEN under the authority of the U.S. Bank Secrecy Act, the Trust may be required to comply with FinCEN regulations, including those that would mandate the Trust register as a money services business, implement an anti-money laundering program, make certain reports to FinCEN, and maintain certain records. Additionally, certain states require a virtual currency business (or its equivalent) to register at the state level as a money transmitter (or its equivalent), and/or as a virtual currency business (or its equivalent). Similarly, the activities of the Trust or the Sponsor may require it to be licensed at the state level as a money transmitter (or its equivalent) and/or as a virtual currency business (or its equivalent), such as under New York’s Department of Financial Services’ BitLicense regulatory regime. Other states with pending or existing special licensing requirements for cryptocurrency companies include, but are not limited to, California, which is implementing its Digital Financial Assets LawLaw, ("DFAL").including certain provisions effective January 1, 2025 and a licensing regime currently scheduled to take effect on July 1, 2026.

Such additional regulatory obligations may cause the Trust or the Sponsor to incur extraordinary expenses. If the Trust or the Sponsor decides to seek the required registration or licenses, there is no guarantee that they will timely receive them. The Sponsor may decide to terminate the Trust in response to the changed regulatory circumstances, and possibly at a time that is disadvantageous to the Shareholders. Additionally, to the extent the Trust or the Sponsor is found to have operated without appropriate state licenses or federal registration, it may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and penalties, all of which would harm the reputation of the Trust or the Sponsor, decrease the liquidity, and have a material adverse effect on the price of,of the Shares.

Along with the Trust’s and Sponsor’s confidential data and information collected in the normal course of the Trust’s activities, the Sponsor, on behalf of the Trust, collects and retains certain types of data, including personally identifiable information, which is subject to certain laws and regulations relating to privacy, data protection, and cybersecurity. The Trust and Sponsor must comply with applicable federal and state laws and regulations governing the collection, retention, processing, storage, disclosure, access, use, security, and privacy of such information in addition to the Trust’s information security and privacy policies and other actual and asserted obligations, including contractual obligations and applicable industry standards. The legal, regulatory, and contractual environment surrounding the foregoing continues to evolve and may be challenging to comply with, and there has been an increasing amount of focus on privacy, data protection, and cybersecurity issues with the potential to affect the Trust’s activities. In 2024, the regulatory landscape became more complex. For example, nineteena growing number of states have enacted privacy laws, with more set to take effect between now and 2026. This patchwork of state laws increases compliance costs and complexity. Additionally, the American Privacy Rights Act ("APRA") was proposed in April 2024, aiming to establish federal data privacy standards. IfAPRA has not yet been enacted, but if it were enacted, APRA would supersede state laws, further altering compliance requirements.

State privacy laws are also increasingly being used to regulate artificial intelligence ("AI"), particularly in areas involving automated decision-making. The California Privacy Rights Act ("CPRA") and Colorado Privacy Act impose requirements on businesses using AI-driven profiling, including restrictions on data sharing when AI influences legal or significant consumer decisions. These and other emerging state laws reflect a broader trend of integrating AI governance within privacy frameworks.

The Trust and Sponsor have incurred, and may continue to incur, significant expenses in an effort to comply with privacy, data protection, and cybersecurity standards and protocols imposed by law, regulation, industry standards, or contractual obligations. The various privacy, data protection, and cybersecurity legal obligations that apply to the Trust and Sponsor may evolve in a manner that impacts their policies or practices, and the Trust and Sponsor and the Trust and Sponsor may be required to take additional measures to comply with new and evolving obligations. Such efforts may not be successful or may have other negative consequences. For example, failure to comply with state or federal privacy laws may result in regulatory fines, class action lawsuits, and limitations on the Trust’s ability to process Shareholder data. Further, changes in cybersecurity standards may require the Trust and Sponsor to implement costly upgrades to their data infrastructure. In particular, with laws and regulations imposing new and increasingly burdensome obligations and with substantial uncertainty over the interpretation and application of these and other laws and regulations, the Trust and Sponsor may face challenges in maintaining their compliance and making necessary changes to applicable policies and practices and may incur significant costs and expenses in an effort to do so. Despite the efforts of the Trust and Sponsor to comply with applicable laws, regulations, and other actual or asserted obligations relating to privacy, data protection and cybersecurity, it is possible that their interpretations of the law, practices, policies, or platform or other services or offerings could be inconsistent with, or fail or be alleged to fail to meet all requirements of, such laws, regulations, or obligations.

Prior to the commencement of operations on July 22, 2024, on May 28, 2024, BAM purchased 8 Shares at a per-Share price of $25.00 for $200.00 in a transaction exempt from registration under Section 4(a)(2) of the 1933 Act (the “Seed Shares”).Shares. Delivery of the Seed Shares was made on May 28, 2024. Prior to the commencement of operations on July 22, 2024, BAM redeemed the entirety of its 8 Seed Shares for $200.00. Additionally, on July 22, 2024, Bitwise Investment Manager, LLC (“BIM”),BIM, an affiliate of the Sponsor, purchased the initial 100,000 Shares of the Trust (the “Seed Baskets”) for $2,500,000, at a per-share price of $25.00. BIM acted as a statutory underwriter in connection with the initial purchase of the Seed Baskets. On July 23, 2024, BIM sold all of its 100,000 Shares of the Trust for cash.

As of December 31, 2024*,2025, the Trust held a net closing balance of 121,101.8582115,663.9141 ether with a total market value of $405,188,652$342,919 based on the PricingCME IndexCF Ether – Dollar Reference Rate – New York Variant (“ETHUSD_NY”) price per ether of $3,345.85,$2,964.79 used to determine the Trust’sTrust's NAV. The total market value of the Trust’sTrust's ether held was $404,528,647$343,746 based on the price of an ether (Lukka Prime Rate) in the principal market (Crypto.com) of $3,340.40,$2,971.94, used to determine the Trust’sTrust's Principal Market NAV.

The Trust agreed to paypays the unitary Sponsor Fee of 0.20% per annum of the Trust’s ether holdings. The Sponsor contractually waived the Sponsor Fee on the first $500 million of Trust assets through January 22, 2025, and has been accruing at an annual rate of 0.20% of the Trust’s netEther assetsholdings since then. As a result, the only ordinary expense of the Trust is expected to be the Sponsor Fee. In exchange for the Sponsor Fee, the Sponsor has agreed to assume and pay the normal operating expenses of the Trust, which include the Trustee’s monthly fee and out-of-pocket expenses, the fees of the Trust’s regular service providers (Cash Custodian, Ether Custodian, Prime Execution Agent, Marketing Agent, Transfer Agent and Administrator), exchange listing fees, tax reporting fees, SEC registration fees, printing and mailing costs, audit fees and up to $500,000 per annum in ordinary legal fees and expenses. The Sponsor may determine in its sole discretion to assume legal fees and expenses of the Trust in excess of $500,000 per annum. The Sponsor also agreed to pay the costs of the Trust’s organization.

The Trust does not hold a cash balance except in connection with the creation and redemption of Baskets (blocks of 10,000 Shares) or to pay expenses not assumed by the Sponsor. To pay for expenses not assumed by the Sponsor that are denominated in U.S. dollars, the Sponsor, on behalf of the Trust, may sell the Trust’s ether as necessary to pay such expenses. The cash proceeds of the sale are sent to the Sponsor to pay the expenses. Any remaining cash areis distributed back to the Cash Custodian. The Sponsor expects that the Trust will have an immaterial amount of cash flow from its operations and that its cash balance will be insignificant at the end of each reporting period. The Trust’s only sources of cash are proceeds from the sale of Baskets and ether. The Trust will not borrow to meet liquidity needs. See Part I, Item I under the heading “Business - Fees and Expenses” for an additional discussion of the Trust’s fees and expenses.

The Trust is not aware of any trends, demands, conditions or events that are reasonably likely to result in material changes to its liquidity needs. While broader economic and market conditions, including evolving trade policies and tariffs, could impact the price of ether and contribute to increased market volatility, the Trust does not currently anticipate these factors will materially affect its liquidity needs.

As of December 31, 2024,2025, the Trust has not used, nor does it expect to use in the future, special purpose entities to facilitate off-balance sheet financing arrangements and have no loan guarantee arrangements or off-balance sheet arrangements of any kind other than agreements entered into in the normal course of business, which may include indemnification provisions related to certain risks service providers undertake in performing services which are in the best interests of the Trust. While the Trust’s exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on athe Trust’s financial position.

No material changes have occurred during the periodyear from July 22, 2024 (commencement of operations) toended December 31, 2024.2025.

The Trust’s periodic financial statements are prepared in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 820, “Fair Value Measurements and Disclosures” (“ASC Topic 820”) and utilize an exchange-traded price from the Trust’s principal market for ether on the Trust’s financial statement measurement date. The Sponsor determines in its sole discretion the valuation sources and policies used to prepare the Trust’s financial statements in accordance with U.S. GAAP. The Trust has engaged a third-party vendor to obtain a price from a principal market for ether, which will be either the market the Trust normally transacts in for ether or, if the Trust does not normally transact in any market or such market suffers an operational interruption and is unavailable, determined and designated by such third-party vendor daily based on its consideration of several exchange characteristics, including oversight, and the volume and frequency of trades. Under U.S. GAAP, such a price is expected to be deemed a Level 1 input in accordance with the ASC Topic 820 because it is expected to be a quoted price in active markets for identical assets or liabilities.

For the three and six months ended MarchJune 31,30, 2026 Comparedcompared to the three and six months ended MarchJune 31,30, 2025^

During the three months ended MarchJune 31,30, 2026, the Trust's net assets decreased from $343,685 on December 31, 2025 to $219,228 on March 31, 2026 to $168,466 on June 30, 2026. The decrease in the Trust's net assets resulted primarily from dispositions of approximately (6355) ether to pay the Sponsor Fee, and approximately (47,8216,296) ether for the redemption of Shares, with a value of $(116,53613,477) from the Trust. Dispositions were partially offset by additions to the Trust of approximately 36,8718,443 ether with a value of $102,476$17,404 in connection with Share creations during the period.

Net realized and change in unrealized loss on investment in ether for the three months ended MarchJune 31,30, 2026 was $(110,42054,697), which included a realized gain of $54$24 on the transfer of ether to pay the Sponsor Fee, a realized loss of $(38,4986,838) on the sale of ether to meet redemptions, a realized gain of $868 from the transfer of ether to meet In-Kind Redemptions, and a change in unrealized depreciation on investment in ether of $(72,84447,883). Net realized and change in unrealized loss on investment in ether for the period resulted primarily from ether price depreciation from $2,964.79 on December 31, 2025 to $2,097.12 on March 31, 2026 to $1,576.51 on June 30, 2026. Net decrease in net assets resulting from operations for the three months ended MarchJune 31,30, 2026 was $(110,55954,805), which consisted of the net realized and unrealized loss on investment in ether, less the Sponsor Fee of $(139108).

By comparison, during the three months ended MarchJune 31,30, 2025, the Trust's net assets decreasedincreased from $404,529 on December 31, 2024 to $173,762 on March 31, 2025 to $268,915 on June 30, 2025. The decreaseincrease in the Trust's net assets resulted primarily from dispositionsadditions of approximately (24) ether to pay the Sponsor Fee, and approximately (33,143) ether for the redemption of Shares, with a value of $(101,753) from the Trust. Dispositions were partially offset by additions to the Trust of approximately 7,17421,293 ether with a value of $20,853$49,482 in connection with Share creations during the period. Additions were partially offset by dispositions from the Trust of approximately (9,465) ether with a value of $(16,204) in connection with Share redemptions and (47) ether with a value of $(96) to pay the Sponsor Fee during the period.

During the three months ended MarchJune 31,30, 2025, net realized and change in unrealized lossgain on investment in ether was $(149,835),$61,981, which included a realized gain of $2$9 on the transfer of ether to pay the Sponsor Fee, a realized loss of $(13,64116,707) on the sale of ether to meet redemptions, and a change in unrealized depreciationappreciation on investment in ether of $(136,196).$78,679. Net realized and change in unrealized lossgain on investment in ether for the period resulted primarily from ether price depreciationappreciation from $3,345.85 on December 31, 2024 to $1,836.58 on March 31, 2025 to $2,505.17 on June 30, 2025. Net decreaseincrease in net assets resulting from operations for the three months ended MarchJune 31,30, 2025 was $(149,928),$61,876, which consisted of the net realized and unrealized lossgain on investment in ether, less the Sponsor Fee of $(136105) and waiver and reimbursement of $43..

As of MarchJune 31,30, 2025,2026, the Trust held a net closing balance of 95,108.4265106,742.1564 ether with a total market value of $174,674,234$168,280,077 based on the ETHUSD_NY price of $1,836.58,$1,576.51, used to determine the Trust's NAV. The total market value of the Trust's ether held was $173,794,481$168,495,696 based on the price of ether (Lukka Prime Rate) in the principal market (Crypto.com) of $1,827.33,$1,578.53, used to determine the Trust's Principal Market NAV.

The Trust agreed to pay the unitary Sponsor Fee of 0.20% per annum of the Trust’s ether holdings. The Sponsor contractually waived the Sponsor Fee on the first $500 million of Trust assets through January 22, 2025, and the Sponsor Fee has been accruing at an annual rate of 0.20% of the Trust’s net assets since then. As a result, the only ordinary expense of the Trust is expected to be the Sponsor Fee. In exchange for the Sponsor Fee, the Sponsor has agreed to assume and pay the normal operating expenses of the Trust, which include the Trustee’s monthly fee and out-of-pocket expenses, the fees of the Trust’s regular service providers (Cash Custodian, Ether Custodian, Prime Execution Agent, Marketing Agent, Transfer Agent and Administrator), exchange listing fees, tax reporting fees, SEC registration fees, printing and mailing costs, audit fees and up to $500,000 per annum in ordinary legal fees and expenses. The Sponsor may determine in its sole discretion to assume legal fees and expenses of the Trust in excess of $500,000 per annum. The Sponsor also agreed to pay the costs of the Trust’s organization.

As of MarchJune 31,30, 2026, the Trust has not used, nor does it expect to use in the future, special purpose entities to facilitate off-balance sheet financing arrangements and has no loan guarantee arrangements or off-balance sheet arrangements of any kind other than agreements entered into in the normal course of business, which may include indemnification provisions related to certain risks service providers undertake in performing services which are in the best interests of the Trust. While the Trust’s exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on the Trust’s financial position.

Sponsor Fee payments made to the Sponsor are calculated asat aan fixedannual percentagerate of 0.20% of the Trust’s NAV.ether holdings. As such, the Sponsor cannot anticipate the payment amounts that will be required under these arrangements for future periods assince NAVsthe areTrust’s notholdings knownof untilether awill futurevary date.in the normal course of business operations.

No material changes have occurred during the threesix months ended MarchJune 31,30, 2026.

First, the Trust reviews a list of Digital Asset Markets that are U.S. accessible, have historically provided publicly available data, and are exchanges that Bitwise normally transacts on. Specifically, the Trust utilizes a third-party valuation vendor, Lukka, Inc., to identify publicly available, well established and reputable crypto asset exchanges selected in theirits sole discretion.

Second, Lukka, Inc. sorts these Digital Asset Markets from high to low by market-based volume and level of activity of ether traded on each Digital Asset Market. For the threesix months ended MarchJune 31,30, 2026, this sort was performed for Digital Asset Markets for the period mid-Februarymid-May through mid-Marchmid-June 2026.

As of MarchJune 31,30, 2026, Lukka, Inc. included Binance, Bitfinex, Bitflyer, Bitstamp, Bullish, Bybit, Coinbase, Crypto.com, Gate.io, Gemini, HitBTC, Huobi, itBit, Kraken, KuCoin, LMAX, MEXC Global, OKX and Poloniex as its primary Exchange Markets in consideration.

At MarchJune 31,30, 20262026, the principal market for ether, which comprised the majority of the Trust’s assets for the period ended MarchJune 31,30, 2026, was Crypto.com with a price of $2,095.22.$1,578.53.