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Item 1A. Risk Factors

2026-03-31 compared with 2025-03-26 · 1990 added, 1533 removed, 1858 unchanged (65% of the section changed)

of Risk Factors

is a summary of the principal factors that make an investment in the Shares speculative or risky.

This summary does not address all the

risks that we face.

Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found

below, and should be read in conjunction with the other information included in this Annual Report on Form 10-K, including the Trust’s

financial statements and related notes thereto, and our other filings with the SEC, before making an investment decision regarding the

See “Glossary of Defined Terms” for the definition of certain capitalized terms used in this Annual Report.

capitalized terms used, but not defined, herein have the meanings given to them in the Trust Agreement.

Associated with Ether and the Ethereum Network

assets such as ether were only introduced within the past decade, and the medium-to-long term value of the Shares is subject to a

number of factors relating to the capabilities and development of blockchain technologies and to the fundamental investment characteristics

of digital assets that are uncertain and difficult to evaluate.

value of the Shares relates directly to the value of ether, the value of which may be highly volatile and subject to fluctuations

due to a number of factors.

value of the Shares depends on the development and acceptance of the Ethereum network.

The slowing or stopping of the development

or acceptance of the Ethereum network may adversely affect an investment in the Trust.

to the nature of private keys, ether transactions are irrevocable, and stolen or incorrectly transferred ether may be irretrievable.

As a result, any incorrectly executed ether transactions could adversely affect an investment in the Trust.

threats to the Trust’s account with the Ether Custodians could result in the halting of Trust operations and a loss of Trust

assets or damage to the reputation of the Trust, each of which could result in a reduction in the price of the Shares.

amendments to the Ethereum network’s protocols and software could, if accepted and authorized by the Ethereum network community,

adversely affect an investment in the Trust.

For example, the Ethereum network recently implemented software upgrades and other changes

to its protocol, including the adoption of network upgrades collectively referred to as Serenity, or Ethereum 2.0.

Summary of Risk Factors

Below is a summary of the

principal factors that make an investment in the Shares speculative or risky.

This summary does not address all the risks that we face.

Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below, and should

be read in conjunction with the other information included in this Annual Report on Form 10-K, including the Trust’s financial statements

and related notes thereto, and our other filings with the SEC, before making an investment decision regarding the Shares.

All other capitalized

terms used, but not defined, herein have the meanings given to them in the Trust Agreement.

Risks Associated with Ether and the Ethereum Network

● Digital assets such as ether

were only introduced within the past decade, and the medium-to-long term value of the Shares is subject to a number of factors relating

to the capabilities and development of blockchain technologies and to the fundamental investment characteristics of digital assets that

are uncertain and difficult to evaluate.

● The value of the Shares relates

directly to the value of ether, the value of which may be highly volatile and subject to fluctuations due to a number of factors.

● The value of the Shares depends

on the development and acceptance of the Ethereum network.

The slowing or stopping of the development or acceptance of the Ethereum network

may adversely affect an investment in the Trust.

● Due to the nature of private

keys, ether transactions are irrevocable, and stolen or incorrectly transferred ether may be irretrievable.

As a result, any incorrectly

executed ether transactions could adversely affect an investment in the Trust.

Security threats to the Trust’s account with the Ether Custodians could result in the halting of Trust operations and a loss of Trust assets or damage to the reputation of the Trust, each of which could result in a reduction in the price of the Shares.

● Potential amendments to the

Ethereum network’s protocols and software could, if accepted and authorized by the Ethereum network community, adversely affect

an investment in the Trust.

For example, the Ethereum network recently implemented software upgrades and other changes to its protocol,

including the adoption of network upgrades collectively referred to as Serenity, or Ethereum 2.0.

Ethereum 2.0.

is a new iteration of Ethereum that amended its consensus mechanism to include ether staking and sharding.

A digital asset network’s

consensus mechanism is a material aspect of its source code, and any failure to properly implement such a change could have a material

adverse effect on the value of ether and the value of the Shares.

Ethereum network is still in the process of developing and making significant decisions that will affect policies that govern the

supply and issuance of ether as well as other Ethereum network protocols.

For example, the Ethereum network has on two separate occasions

reduced the quantity of ether rewarded per block and may make additional changes in the future.

Any material change to the supply

and issuance of ether may impact secondary market prices for ether.

digital asset networks, including Ethereum, face significant scaling challenges and are being upgraded with various features to increase

the speed and throughput of digital asset transactions.

is a new iteration of

Ethereum that amended its consensus mechanism to include ether staking and sharding.

A digital asset network’s consensus mechanism

is a material aspect of its source code, and any failure to properly implement such a change could have a material adverse effect on

the value of ether and the value of the Shares.

● The Ethereum network is still

in the process of developing and making significant decisions that will affect policies that govern the supply and issuance of ether

as well as other Ethereum network protocols.

For example, the Ethereum network has on two separate occasions reduced the quantity of

ether rewarded per block and may make additional changes in the future.

Any material change to the supply and issuance of ether may impact

secondary market prices for ether.

● Many digital asset networks,

including Ethereum, face significant scaling challenges and are being upgraded with various features to increase the speed and throughput

of digital asset transactions.

These attempts to increase the volume of transactions may not be effective.

temporary or permanent “fork” of the Ethereum blockchain could adversely affect an investment in the Trust.

technologies are based on the theoretical conjectures as to the impossibility of solving certain cryptographical puzzles quickly.

These premises may be incorrect or may become incorrect due to technological advances and could negatively impact the future usefulness

of ether and adversely affect an investment in the Trust.

price of ether on the ether market has exhibited periods of extreme volatility, which could have a negative impact on the performance

of the Trust.

For example, between November 2021 and June 2022, the price of ether fell from an all-time high of $4,721.07 to $879.80.

As of December 31, 2024, the price of ether has increased to $3,340.57.

exchanges on which ether trades are relatively new and, in some cases, may be subject to

but not comply with their relevant jurisdiction’s regulations, and, therefore, may

be more exposed to fraud and security breaches than established, regulated exchanges for

other financial assets or instruments, which could have a negative impact on the performance

of the Trust.

competing digital assets may pose a challenge to ether’s current market position, resulting

in a reduction in demand for ether, which could have a negative impact on the price of ether

and may have a negative impact on the performance of the Trust.

Associated with Investing in the Trust

value of the Shares may be influenced by a variety of factors unrelated to the value of ether.

NAV or Principal Market NAV may not always correspond to the market price of ether and, as a result, Creation Baskets may be created

or redeemed at a value that is different from the market price of the Shares.

inability of Authorized Participants and market makers to hedge their ether exposure may adversely affect the liquidity of Shares

and the value of an investment in the Shares.

Trust is subject to risks due to its concentration of investments in a single asset.

illiquid markets may exacerbate losses or increase the variability between the Trust’s NAV or the Principal Market NAV and its

market price.

amount of ether represented by the Shares will decline over tim e.

Administrator is solely responsible for determining the value of the ether holdings and ether holdings per Share, and any errors,

discontinuance or changes in such valuation calculations may have an adverse effect on the value of the Shares.

Associated with the Regulatory Environment of Ethereum

and current regulations by a United States or foreign government or quasi-governmental agency could have an adverse effect on an

investment in the Trust.

do not have the protections associated with ownership of Shares in an investment company registered under the 1940 Act or the protections

afforded by the CEA .

legal or regulatory developments may negatively affect the value of ether or require the Trust or the Sponsor to become registered

with the SEC or CFTC, which may cause the Trust to incur unforeseen expenses or liquidate.

regulatory changes or interpretations of an Authorized Participant’s, the Trust’s or the Sponsor’s activities require

the regulation of an Authorized Participant, the Trust or the Sponsor as a money service business under the regulations promulgated

by the Financial Crimes Enforcement Network (“FinCEN”), an Authorized Participant, the Trust or the Sponsor may be required

to register and comply with such regulations, which could result in extraordinary, recurring and/or nonrecurring expenses.

Associated with the Tax Treatment of the Trust and Ether

could incur a tax liability without an associated distribution of the Trust.

tax treatment of ether and transactions involving ether for state and local tax purposes is not settled.

hard “fork” of the Ether blockchain could result in Shareholders incurring a tax liability.

Exchange on which the Shares are listed may halt trading in the Trust’s Shares, which would adversely impact a Shareholder’s

ability to sell Shares.

market infrastructure of the ether spot market could result in the absence of active Authorized Participants able to support the

trading activity of the Trust, which would affect the liquidity of the Shares in the secondary market and make it difficult to dispose

that are not Authorized Participants may only purchase or sell their Shares in secondary trading markets, and the conditions associated

with trading in secondary markets may adversely affect Shareholders’ investment in the Shares.

Sponsor is leanly staffed and relies heavily on key personnel.

The departure of any such key personnel could negatively impact the

Trust’s operations and adversely impact an investment in the Trust.

do not have the rights enjoyed by investors in certain other vehicles and may be adversely affected by a lack of statutory rights

and by limited voting and distribution rights.

In certain circumstances, Shareholders may vote to appoint a successor Sponsor following

the Voluntary Withdrawal of the Sponsor, or to continue the Trust in certain instances of dissolution of the Trust.

shall otherwise have no voting rights with respect to the Trust.

liability of the Sponsor and the Trustee is limited, and the value of the Shares will be adversely affected if the Trust is required

to indemnify the Trustee or the Sponsor.

to the increased use of technologies, intentional and unintentional cyber-attacks pose operational and information security risks,

the occurrence of which can negatively impact an investment in the Trust.

following risks, some of which have occurred and any of which may occur in the future, can have a material adverse effect on our business

or financial performance, which in turn can affect the price of the Shares.

These are not the only risks we face.

There may be other

risks we are not currently aware of or that we currently deem not to be material but may become material in the future.

Associated with Ether and the Ethereum Network

is a relatively new technological innovation with a limited operating history.

has a relatively limited history of existence and operations compared to traditional commodities.

There is a limited established performance

record for the price of ether and, in turn, a limited basis for evaluating an investment in ether.

Although past performance is not necessarily

indicative of future result, if ether had a more established history, such history might (or might not) provide investors with more information

on which to evaluate an investment in the Trust.

and Ethereum generally.

is the native digital asset and unit of account on the Ethereum network.

The market value of ether is not related to any specific company,

government or asset.

The valuation of ether depends on a number of factors, including future expectations for the value of the Ethereum

network, the number of ether transactions, and the overall usage of ether as an asset.

This means that a significant amount of the value

of ether is speculative, which could lead to increased volatility.

Investors could experience significant gains, losses and/or volatility

in the Trust’s holdings, depending on the valuation of ether.

factors may affect the price of ether, including, but not limited to:

supply and demand, investors’ expectations with respect to

the rate of inflation, interest rates, currency exchange rates or future regulatory measures (if any) that restrict the trading of ether

or the use of ether as a form of payment.

The issuance of ether is determined by a computer code, not by a central bank, and prices can

be extremely volatile.

For instance, during the period from November 30, 2021 to June 17, 2022, ether experienced a decline of roughly

82%, from $4,784.50 to $879.80.

There is no assurance that ether will maintain its long-term value in terms of purchasing power in the

future, or that acceptance of ether payments by mainstream retail merchants and commercial businesses will continue to grow.

of the Trust’s investments in ether could decline rapidly, including to zero.

Ethereum network is an open-source decentralized project without a controlling issuer or administrator of software development.

result, core developers contribute their time and propose upgrades and improvements to the Ethereum network protocols and various software

implementations thereof, often on the Ethereum repository on the website Github.

Core developers’ roles evolve over time, largely

based on self-determined participation.

Although some market participants such as the Ethereum Foundation sponsor some developers, core

developers are not generally compensated for their work on the Ethereum network, and such developers may cease to provide services or

migrate to alternate digital asset networks.

In addition, a lack of resources may result in an inability of the Ethereum network community

to address novel technical issues or to achieve consensus around solutions therefor.

As with other digital asset networks, the Ethereum

network faces significant scaling challenges due to the fact that public blockchains generally face a tradeoff between security and scalability.

One means through which public blockchains achieve security is decentralization, meaning that no intermediary is responsible for securing

and maintaining these systems.

For example, a greater degree of decentralization generally means a given digital asset network is less

susceptible to manipulation or capture.

A digital asset network may be limited in the number of transactions it can process by the capabilities

of the participating nodes.

The Ethereum network’s Ethereum 2.0 upgrade addresses some of Ethereum’s speed, efficiency and

scalability issues through staking and sharding.

However, both hard forks and future software upgrades designed to further address scaling

may cause confusion or may not result in needed improvements, each of which could have a negative impact on the value of an investment

● A temporary or permanent “fork”

of the Ethereum blockchain could adversely affect an investment in the Trust.

● Blockchain technologies are

based on the theoretical conjectures as to the impossibility of solving certain cryptographical puzzles quickly.

These premises may be

incorrect or may become incorrect due to technological advances and could negatively impact the future usefulness of ether and adversely

affect an investment in the Trust.

● The price of ether on the ether

market has exhibited periods of extreme volatility, which could have a negative impact on the performance of the Trust.

between November 2021 and June 2022, the price of ether fell from an all-time high of $4,721.07 to $879.80.

As of December 31, 2025,

the price of ether has increased to $2,971.02.

● New competing digital assets

may pose a challenge to ether’s current market position, resulting in a reduction in demand for ether, which could have a negative

impact on the price of ether and may have a negative impact on the performance of the Trust.

Risks Associated with Investing in the Trust

● The value of the Shares may

be influenced by a variety of factors unrelated to the value of ether.

● The NAV or Principal Market

NAV may not always correspond to the market price of ether and, as a result, Creation Baskets may be created or redeemed at a value that

is different from the market price of the Shares.

● The inability of Authorized

Participants and market makers to hedge their ether exposure may adversely affect the liquidity of Shares and the value of an investment

in the Shares.

in the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality

for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets.

The cryptography underlying

Ethereum could prove to be flawed or ineffective, or developments in mathematics and/or technology, including advances in digital computing,

algebraic geometry and quantum computing, could result in such cryptography becoming ineffective.

In any of these circumstances, a malicious

actor may be able to take the Trust’s ether, which would adversely impact the value of the Shares.

Moreover, functionality of the

Ethereum network may be negatively affected such that it is no longer attractive to users, thereby dampening demand for ether and the

Ethereum network.

Even if another digital asset other than ether were affected by similar circumstances, any reduction in confidence

in the source code or cryptography underlying digital assets generally could negatively affect the demand for digital assets and therefore

adversely affect the value of the Shares.

as there is no centralized party controlling the development of the Ethereum network, there can be no assurance that the community as

a whole will not implement changes to the Ethereum network protocols that have an adverse impact on the Trust or an investment in the

from Proof-of-Work (PoW) to Proof-of-Stake (PoS) Consensus Mechanism.

September 2022, the Ethereum network moved from a proof-of-work to a proof-of-stake mechanism called Serenity, or Ethereum 2.0.

proof-of-work, in which miners expend computational resources to compete to validate transactions and are rewarded coins in proportion

to the amount of computational resources expended, in proof-of-stake, validators risk or “stake” coins to compete to be randomly

selected to validate transactions and are rewarded coins in proportion to the total amount of coins staked.

Any malicious activity, such

as disagreeing with the eventual consensus or otherwise violating protocol rules, results in the forfeiture or “slashing”

of a portion of the staked coins.

● The Trust is subject to risks

due to its concentration of investments in a single asset.

● Possible illiquid markets may

exacerbate losses or increase the variability between the Trust’s NAV or the Principal Market NAV and its market price.

● The amount of ether represented

by the Shares will decline over time.

● Ether staking may result in

adverse tax consequences for Shareholders.

Risks Associated with the Regulatory Environment

Future and current regulations by a United States or foreign government or quasi-governmental agency could have an adverse effect on an investment in the Trust.

Shareholders do not have the protections associated with ownership of Shares in an investment company registered under the 1940 Act or the protections afforded by the CEA.

Future legal or regulatory developments may negatively affect the value of ether or require the Trust or the Sponsor to become registered with the SEC or CFTC, which may cause the Trust to incur unforeseen expenses or liquidate.

Risks Associated with the Tax Treatment of

the Trust and Ether

The treatment of staking in a grantor trust for U.S.

federal income tax

purposes is still developing.

The tax treatment of ether and transactions involving ether for state and local tax purposes is not settled.

A hard “fork” of the Ether blockchain could result in Shareholders incurring a tax liability.

The Exchange on which the Shares are listed may halt trading in the Trust’s Shares, which would adversely impact a Shareholder’s ability to sell Shares.

The market infrastructure of the ether spot market could result in the absence of active Authorized Participants able to support the trading activity of the Trust, which would affect the liquidity of the Shares in the secondary market and make it difficult to dispose of Shares.

Shareholders that are not Authorized Participants may only purchase or sell their Shares in secondary trading markets, and the conditions associated with trading in secondary markets may adversely affect Shareholders’ investment in the Shares.

The following risks, some

of which have occurred and any of which may occur in the future, can have a material adverse effect on our business or financial performance,

which in turn can affect the price of the Shares.

These are not the only risks we face.

There may be other risks we are not currently

aware of or that we currently deem not to be material but may become material in the future.

Risks Associated with

Ether and the Ethereum Network

Ether is a relatively

new technological innovation with a limited operating history.

Ether has a relatively limited

history of existence and operations compared to traditional commodities.

There is a limited established performance record for the price

of ether and, in turn, a limited basis for evaluating an investment in ether.

Although past performance is not necessarily indicative

of future result, if ether had a more established history, such history might (or might not) provide investors with more information on

which to evaluate an investment in the Trust.

Ether and Ethereum generally.

Ether is the native digital

asset and unit of account on the Ethereum network.

The market value of ether is not related to any specific company, government or asset.

The valuation of ether depends on a number of factors, including future expectations for the value of the Ethereum network, the number

of ether transactions, and the overall usage of ether as an asset.

This means that a significant amount of the value of ether is speculative,

which could lead to increased volatility.

Investors could experience significant gains, losses and/or volatility in the Trust’s

holdings, depending on the valuation of ether.

Several factors may affect

the price of ether, including, but not limited to:

supply and demand, investors’ expectations with respect to the rate of inflation,

interest rates, currency exchange rates or future regulatory measures (if any) that restrict the trading of ether or the use of ether

as a form of payment.

The issuance of ether is determined by a computer code, not by a central bank, and prices can be extremely volatile.

For instance, during the period from November 30, 2021 to June 17, 2022, ether experienced a decline of roughly 82%, from $4,784.50 to

There is no assurance that ether will maintain its long-term value in terms of purchasing power in the future, or that acceptance

of ether payments by mainstream retail merchants and commercial businesses will continue to grow.

The value of the Trust’s investments

in ether could decline rapidly, including to zero.

The Ethereum network is an

open-source decentralized project without a controlling issuer or administrator of software development.

As a result, core developers

contribute their time and propose upgrades and improvements to the Ethereum network protocols and various software implementations thereof,

often on the Ethereum repository on the website Github.

Core developers’ roles evolve over time, largely based on self-determined

participation.

Although some market participants such as the Ethereum Foundation sponsor some developers, core developers are not generally

compensated for their work on the Ethereum network, and such developers may cease to provide services or migrate to alternate digital

asset networks.

In addition, a lack of resources may result in an inability of the Ethereum network community to address novel technical

issues or to achieve consensus around solutions therefor.

As with other digital asset networks, the Ethereum network faces significant

scaling challenges due to the fact that public blockchains generally face a tradeoff between security and scalability.

One means through

which public blockchains achieve security is decentralization, meaning that no intermediary is responsible for securing and maintaining

these systems.

For example, a greater degree of decentralization generally means a given digital asset network is less susceptible to

manipulation or capture.

A digital asset network may be limited in the number of transactions it can process by the capabilities of the

participating nodes.

The Ethereum network’s Ethereum 2.0 upgrade addresses some of Ethereum’s speed, efficiency and scalability

issues through staking and sharding.

However, both hard forks and future software upgrades designed to further address scaling may cause

confusion or may not result in needed improvements, each of which could have a negative impact on the value of an investment in the Shares.

Moreover, in the past, flaws

in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed

users’ personal information and/or resulted in the theft of users’ digital assets.

The cryptography underlying Ethereum could

prove to be flawed or ineffective, or developments in mathematics and/or technology, including advances in digital computing, algebraic

geometry and quantum computing, could result in such cryptography becoming ineffective.

In any of these circumstances, a malicious actor

may be able to take the Trust’s ether, which would adversely impact the value of the Shares.

Moreover, functionality of the Ethereum

network may be negatively affected such that it is no longer attractive to users, thereby dampening demand for ether and the Ethereum

Even if another digital asset other than ether were affected by similar circumstances, any reduction in confidence in the source

code or cryptography underlying digital assets generally could negatively affect the demand for digital assets and therefore adversely

affect the value of the Shares.

Finally, as there is no centralized

party controlling the development of the Ethereum network, there can be no assurance that the community as a whole will not implement

changes to the Ethereum network protocols that have an adverse impact on the Trust or an investment in the Shares.

Moving from Proof-of-Work

(PoW) to Proof-of-Stake (PoS) Consensus Mechanism.

In September 2022, the Ethereum

network moved from a proof-of-work to a proof-of-stake mechanism called Serenity, or Ethereum 2.0.

Unlike proof-of-work, in which miners

expend computational resources to compete to validate transactions and are rewarded coins in proportion to the amount of computational

resources expended, in proof-of-stake, validators risk or “stake” coins to compete to be randomly selected to validate transactions

and are rewarded coins in proportion to the total amount of coins staked.

Any malicious activity, such as disagreeing with the eventual

consensus or otherwise violating protocol rules, results in the forfeiture or “slashing” of a portion of the staked coins.

Should any of the Trust’s Staking Services Providers engage in malicious activity or perform poorly, then such Staking Services

Providers may be blacklisted which could negatively impact the Trust’s abilities to engage in Staking Activities and/or otherwise

result in the Trust earning reduced staking rewards.

Proof-of-stake is viewed as more energy efficient and scalable than proof-of-work.

There is no guarantee

that the Ethereum community will embrace Ethereum 2.0, and the new protocol may never fully scale.

possibility exists that Ethereum 2.0 may never achieve the goals of the Ethereum community, which may have a negative impact on the market

value of ether, and consequently the NAV of the Trust.

inability to recognize the economic benefit of Staking Activities could adversely impact an investment in the Trust.

neither the Trust, nor the Sponsor, nor the Ether Custodians, nor any other person associated with the Trust will, directly or indirectly,

employ any portion of the Trust’s assets in actions where any portion of the Trust’s ether becomes subject to the Ethereum

proof-of-stake validation or is used to earn additional ether or generate income or other earnings (“Staking Activities”).

Accordingly, the Trust currently does not derive any income from, or receive any form of staking rewards of any kind in connection with,

or otherwise recognize any economic benefit from, any Staking Activity.

Upon receiving regulatory approval to do so, the Sponsor may,

from time to time, stake a portion of the Trust’s ether on behalf of the Trust through one or more trusted staking providers.

should be aware that investing in Shares of the Trust differs significantly from investing ether directly or in an investment strategy

that involves the staking of ether.

An investor in Shares of the Trust currently will not receive any additional income or ether rewards

that they otherwise may receive from Staking Activities.

Foregoing potential returns from Staking Activities could cause an investment

in the Shares to deviate from that which would have been obtained by purchasing and holding ether directly by virtue of giving up staking

as a source of return when an investor holds the Shares.

This may adversely impact the value of an investment in Shares of the Trust.

introduces a risk of loss of Ether, which could adversely affect the value of the Shares.

neither the Trust, nor the Sponsor, nor the Ether Custodians, nor any other person associated with the Trust will, directly or indirectly,

employ any Staking Activities.

Upon receiving regulatory approval to do so, the Sponsor may, from time to time, stake a portion of the

Trust’s ether on behalf of the Trust through one or more trusted staking providers.

introduces a risk of loss of Ether.

None of the Trust’s assets, including potentially staked assets, are subject to the protections

enjoyed by depositors or customers of institutions with FDIC or Securities Investor Protection Corporation membership.

The Ethereum network

imposes three types of sanctions for validator misbehavior or inactivity, which would result in a portion of staked ether being destroyed

There is no guarantee that the Ethereum community will embrace Ethereum 2.0, and the new protocol may never fully scale.

The possibility exists that

Ethereum 2.0 may never achieve the goals of the Ethereum community, which may have a negative impact on the market value of ether, and

consequently the NAV of the Trust.

Staking introduces

a risk of loss of ether, which could adversely affect the value of the Shares.

Staking introduces a risk

of loss of ether.

None of the Trust’s assets, including potentially staked assets, are subject to the protections enjoyed by depositors

or customers of institutions with FDIC or Securities Investor Protection Corporation membership.

The Ethereum network imposes three types

of sanctions for validator misbehavior or inactivity, which would result in a portion of staked ether being destroyed or “burned”:

penalties, slashing and inactivity leaks.

validator may face penalties if it fails to take certain actions, such as providing a timely attestation to a block proposed by another

Under this scenario, a validator’s staked ether could be burned in an amount equal to the reward to which it would have

been entitled for performing the actions.

more severe sanction (i.e., “slashing”) is imposed if a validator commits malicious acts related to the proposal or attestation

of blocks with invalid transactions.

A validator may face penalties

if it fails to take certain actions, such as providing a timely attestation to a block proposed by another validator.

Under this scenario,

a validator’s staked ether could be burned in an amount equal to the reward to which it would have been entitled for performing

A more severe sanction (i.e.,

“slashing”) is imposed if a validator commits malicious acts related to the proposal or attestation of blocks with invalid

transactions.

Slashing can result in the validator having a portion of its staked ether immediately burned.

this initial slashing, the validator is queued for forceful removal from the Ethereum network’s validator “pool,” and

more of the validator’s stake is burned over a period regardless of whether the validator makes any further slashable errors, at

which point the validator is automatically removed from the validator pool.

ether may also be burned through a process known as an “inactivity leak,” which is triggered if the Ethereum protocol has

gone too long without finalizing a new block.

For a new block to be successfully added to the blockchain, validators that account for

at least two-thirds of all staked ether must agree on the validity of a proposed block.

This means that if validators representing

more than one-third of the total staked ether are offline, no new blocks can be finalized.

To prevent this, an inactivity leak

causes the ether staked by the inactive validators to gradually “bleed away” until these inactive validators represent less

than one-third of the total stake, thereby allowing the remaining active validators to finalize proposed blocks.

This provides

a further incentive for validators to remain online and continue performing validation activities.

can be no guarantee that penalties, slashing or inactivity leaks and resulting losses will not occur as a result of the Staking Activities,

if they are undertaken.

Furthermore, a staking provider’s liability to the Trust is expected to be limited, and a staking provider

may lack the assets or insurance in order to support the recovery of any losses incurred.

There can be no guarantee that the Trust would

recover any of its staked assets, or the value thereof, if it is subject to sanctions imposed by the Ethereum network.

ether tokens will be inaccessible for a variable period of time, determined by a range of factors, which could result in certain liquidity

risk to the Trust.

receiving regulatory approval to do so, the Sponsor may, from time to time, stake a portion of the Trust’s ether on behalf of the

Trust through one or more trusted staking providers.

Under current Ethereum network protocols, staked ether tokens are permitted

to be un-staked by the holder of such ether tokens.

However, as part of the “activating” and “exiting”

processes of staking, staked ether tokens will be inaccessible for a variable period of time determined by a range of factors, including

network congestion, resulting in certain liquidity risks that the Sponsor plans to manage.

is the funding of a validator to be included in the active set, thereby allowing the validator to participate in the Ethereum network’s proof-of-stake consensus

After this initial slashing,

the validator is queued for forceful removal from the Ethereum network’s validator “pool,” and more of the validator’s

stake is burned over a period regardless of whether the validator makes any further slashable errors, at which point the validator is

automatically removed from the validator pool.

Staked ether may also be burned

through a process known as an “inactivity leak,” which is triggered if the Ethereum protocol has gone too long without finalizing

For a new block to be successfully added to the blockchain, validators that account for at least two-thirds of

all staked ether must agree on the validity of a proposed block.

This means that if validators representing more than one-third of

the total staked ether are offline, no new blocks can be finalized.

To prevent this, an inactivity leak causes the ether staked by the

inactive validators to gradually “bleed away” until these inactive validators represent less than one-third of the

total stake, thereby allowing the remaining active validators to finalize proposed blocks.

This provides a further incentive for validators

to remain online and continue performing validation activities.

There can be no guarantee

that penalties, slashing or inactivity leaks and resulting losses will not occur as a result of the Staking Activities, if they are undertaken.

Furthermore, a staking provider’s liability to the Trust is expected to be limited, and a staking provider may lack the assets or

insurance in order to support the recovery of any losses incurred.

There can be no guarantee that the Trust would recover any of its staked

assets, or the value thereof, if it is subject to sanctions imposed by the Ethereum network.

Staked ether tokens

will be inaccessible for a variable period of time, determined by a range of factors, which could result in certain liquidity risk to

The Sponsor may, from time

to time, stake a portion of the Trust’s ether on behalf of the Trust through one or more Staking Services Providers.

current Ethereum network protocols, staked ether tokens are permitted to be un-staked by the holder of such ether tokens.

as part of the “activating” and “exiting” processes of staking, staked ether tokens will be inaccessible for a

variable period of time determined by a range of factors, including network congestion, resulting in certain liquidity risks that the

Sponsor plans to manage.

“Activation” is

the funding of a validator to be included in the active set, thereby allowing the validator to participate in the Ethereum network’s proof-of-stake consensus

“Exit” is the request to exit from the active set and no longer participate in the Ethereum Network’s proof-of-stake consensus

1 unchanged sentence

ether will be inaccessible for a period of time.

The duration of activating and exiting periods are dependent on a range of factors,

including network conditions.

The duration of activating and exiting periods are dependent on a range of factors, including

network conditions.

However, depending on demand, un-staking can take between hours, days or weeks to complete.

can result in certain liquidity risk to the Trust, which the Sponsor will seek to manage through a range of risk management methods.

in the event the Trust is then permitted to operate an ongoing redemption program due to the time involved in “exiting” the

staking process there is a risk that the Trust could become unable to timely meet excessive redemption requests in amounts that are greater

than the portion of the Trust’s ether that remains un-staked, leading to temporary delays in settlement and, in extreme

scenarios, the temporary unavailability of the Trust’s redemption program.

Moreover, any staked ether which must be un-staked in

order to fulfill a redemption (to the extent such redemption cannot be fulfilled utilizing the portion of the Trust’s ether that

has not been staked) will be un-staked only after the redemption request is approved by the Trust, the Sponsor executes an un-stake or

This can result

in certain liquidity risk to the Trust, which the Sponsor will seek to manage through a range of risk management methods.

Even in the event the Trust

is then permitted to operate an ongoing redemption program due to the time involved in “exiting” the staking process there

is a risk that the Trust could become unable to timely meet excessive redemption requests in amounts that are greater than the portion

of the Trust’s ether that remains un-staked, leading to temporary delays in settlement and, in extreme scenarios, the

temporary unavailability of the Trust’s redemption program.

Moreover, any staked ether which must be un-staked in order

to fulfill a redemption (to the extent such redemption cannot be fulfilled utilizing the portion of the Trust’s ether that has not

been staked) will be un-staked only after the redemption request is approved by the Trust, the Sponsor executes an un-stake or

withdrawal transaction, and such transaction is processed by the Ethereum Network.

The staking provider will not be able to change the

addresses on the Ethereum network to which staked ether is to be withdrawn or to which ether rewards shall be sent.

Trust will be dependent on third parties to effectively execute the Trust’s Staking Activities.

the Sponsor currently anticipates that Staking may be carried out by the Custodian, its affiliates, or third-party staking providers,

the amount of staking rewards that the Trust’s staking activity will generate will be dependent on the performance of the staking

provider, including the adequacy and reliability of the hardware and software utilized by the staking provider.

If the staking providers

experience service outages or otherwise are unable to optimally execute the staking of the Trust’s Ether, the Trust’s staking

rewards may be adversely affected.

scheduled creation of newly minted ether and their subsequent sale may cause the price of ether to decline, which could negatively affect

an investment in the Trust.

accordance with the Ethereum 2.0 upgrades, newly created or minted ether are generated through a process referred to as “staking”

which involves the collection of a staking reward of new ether.

To operate a node, a validator must acquire and lock 32 ether by sending

a special transaction to the staking contract, which transaction associates the staked ether with a withdrawal address (to unlock the

ether and receive any staking rewards) and a validator address (to designate the validator node performing transaction verification).

When the recipient makes newly minted ether available for sale, there can be downward pressure on the price of ether as the new supply

is introduced into the ether market.

on ether supply.

is the second largest cryptocurrency by market capitalization behind bitcoin.

As of December 31, 2024, ether had a total market capitalization

of approximately $401 billion and represented approximately 12.0% of the entire digital asset market.

rate at which new ether are issued and put into circulation is expected to vary.

The Ethereum network has no formal cap on the total

supply of ether.

As of December 31, 2024, the Ethereum network has a total outstanding supply of approximately 120.5M ether.

network does, however, feature several mechanisms that, individually and in aggregate, have the effect of limiting the total supply of

ether outstanding.

These mechanisms are sometimes referred to collectively as the “Ethereum Triple Halving.”

a result of the Merge, where the Ethereum network moved from a proof-of-work to a proof-of-stake mechanism under Ethereum 2.0, the rate

of issuance is greatly reduced.

Under proof-of-work, miners expend computational resources to compete to validate transactions and are

rewarded coins in proportion to the amount of computational resources expended, which resulted in comparably more new tokens rewarded.

By contrast, under proof-of-stake, validators risk or “stake” coins to compete to be randomly selected to validate transactions

and are rewarded coins in proportion to the amount of coins staked, which results in comparably fewer new tokens rewarded.

the Merge, approximately 1,700 ether are issued per day, though the issuance rate varies based on the number of validators on the network.

As of December 31, 2024, approximately 2,197 ether were issued in the previous day.

The issuance rate varies based on the number of validators

on the network and other factors.

The Staking Services Provider will not be able to change

the addresses on the Ethereum network to which staked ether is to be withdrawn or to which ether rewards shall be sent.

The Trust is dependent on third parties to effectively execute the Trust’s

Staking Activities.

The amount of staking rewards that the Trust’s staking activity will

generate is dependent on the performance of the Staking Services Providers, including the adequacy and reliability of the hardware and

software utilized by the Staking Services Providers.

If the Staking Services Providers experience service outages or otherwise are unable

to optimally execute the staking of the Trust’s ether, the Trust’s staking rewards may be adversely affected.

The Trust will stake its ether only if it may do so without undue legal

or regulatory risk, such as, without limitation, the risk of jeopardizing the Trust’s ability to qualify as a grantor trust for

tax purposes, which could harm the value of the Shares.

The Trust’s investment objective is to seek to track the performance

of ether, as measured by the performance of the Index adjusted for the Trust’s expenses and other liabilities, and to reflect rewards

from staking a portion of the Trust’s ether, to the extent the Sponsor in its sole discretion determines that the Trust may do so

without undue legal or regulatory risk, such as, without limitation, the risk of jeopardizing the Trust’s ability to qualify as

a grantor trust for tax purposes.

If the Sponsor determines the Trust is not able to so carry out staking activities, the Trust may cease

some or all of its staking activities.

Staking on the Ethereum network involves delegating ether to validators and carries risks discussed

further below.

Staked ether may be subject to community-determined penalties for validator misbehavior, or slashing.

If the Staking Services

Providers cause the Trust’s staked ether to be subject to such slashing losses, the Trust could suffer losses of the staked ether.

Additionally, the staking process includes protocol-defined warm-up, activation and withdrawal periods, during which staked ether is temporarily

locked and inaccessible.

These phases affect when ether begins earning rewards, participates in consensus and becomes available for transfer

or redelegation.

The Staking Services Providers stake the Trust’s ether as the node

operator and operate a validator node to stake the Trust’s ether.

The Staking Services Providers perform their staking services

in collaboration with the Ether Custodians, as the ether is staked directly from the Trust’s ether accounts with the Ether Custodians.

The Trust maintains control of the ether while it is staked because it remains in the Trust’s account with the Ether Custodians

(i.e., it is kept in a separate account for which the Trust is the beneficial and record owner and is not commingled with other parties’

accounts with the Ether Custodians).

Staking is a passive activity for the Trust, as it does not operate its own staking program.

Trust’s role is limited to evaluating and contracting with one or more Staking Services Providers and instructing such Staking Services

Provider on when to stake and/or unstake the Trust’s ether.

The rewards owed or paid to the Staking Services Providers reduce the

amount of ether rewards that are generated from the Trust’s Staking Program that are available as the assets of the Trust.

Staking Services Provider that generates staking rewards is entitled to Staking Provider Consideration.

The portion of the consideration

paid to the Sponsor for arranging for the staking of the Trust’s ether (the “Sponsor’s Staking Portion”) is comprised

of an aggregate of 25% of the gross proceeds generated from staking (“Staking Consideration”).

Of the Sponsor’s Staking

Portion, the Sponsor pays the Staking Services Providers for their services in connection with staking activities.

The Trust receives

and retains the remainder of the gross Staking Consideration.

The staking rewards earned by the Trust accrue to the Trust’s account

with the Ether Custodians and are generally staked in the same way as the Trust’s already staked ether.

Block rewards and transaction

fees are not considered staking rewards and do not accrete to the Trust.

The Trust may be negatively

impacted by Staking Activities.

The Ethereum network uses

a proof-of-stake consensus mechanism to secure and operate the network, meaning that the voting power of a validator in the network is

determined by the amount of stake delegated to them by ether token holders.

In proof-of-stake, validators risk or “stake”

coins to compete to be randomly selected to validate transactions and are rewarded coins in proportion to the total amount of coins staked.

The more stake delegated to a validator, the more voting power they have, the higher the likelihood is that the validator will be selected

to propose and validate blocks and the higher the associated reward will be.

This, in turn, leads to higher ether earnings for the ether

tokenholders who chose to stake with the validator in question.

If an ether tokenholder chooses

to engage in staking, they must either choose a specific validator to stake with or have sufficient ether to be selected as a validator

by the Ethereum network themselves.

The choice of validator can potentially impact the amount of staking rewards the tokenholder receives.

The factors determining this amount include, but are not limited to:

● Validator commission rate:

validator can choose to set a non-zero commission rate specifying the percentage of staking rewards they are taking from the stakers.

For example, if a validator has a commission rate of 10%, then 10% of such staker’s staking rewards are given to the validator.

● Validator performance:

with bad performance will receive reduced staking rewards for the applicable period, and ether tokenholders who have delegated their

stake to such validator will also receive reduced rewards for such period when they withdraw their stake from such validator.

If any Staking Services Provider

experiences operational or other difficulties, terminates their services, fails to comply with regulations, raises their prices or disputes

key intellectual property rights sold or licensed to, the Trust, the Trust could suffer losses.

The Trust may also suffer the consequences

of such Staking Services Provider’s mistakes.

For example, if the Trust’s Ether Custodians or Staking Services Provider selected

to act as validators fail to behave as expected, default, fail to perform, suffer cybersecurity attacks, experience security issues or

encounter other problems, the assets of the Trust may be irretrievably lost.

The failure or capacity restraints of vendors and services,

a cybersecurity breach involving any service providers or the termination or change in terms or price or commission rate of a vendor,

third-party software license or service agreement on which the Trust relies, could disrupt the Trust’s Staking Activities or cause

Replacing any Staking Services Provider or addressing other issues with vendors and service providers could entail significant

delay, expense and disruption for the Trust.

As a result, if these vendors and service providers experience difficulties, are subject

to cybersecurity breaches, terminate their services, dispute the terms of intellectual property agreements or raise their prices, and

the Sponsor is unable to replace them with other vendors and service providers, particularly on a timely basis, the Trust’s Staking

Activities could be interrupted or disrupted, and the Trust could suffer a loss.

The Ethereum network dictates

requirements for participation in the network’s protocols and may reduce rewards if the relevant activities are not performed correctly.

Malicious or poorly performing validators may also be “blacklisted”, meaning that ether tokenholders may decide to no longer

delegate stake to such actors thereby resulting in such actors not being selected to validate and they would therefore be unable to receive

staking rewards therefrom.

Should any of the Trust’s Staking Services Providers engage in malicious activity or perform poorly,

then such Staking Services Providers may be blacklisted which could negatively impact the Trust’s abilities to engage in Staking

Activities and/or otherwise result in the Trust earning reduced staking rewards.

Staking requires that the

Trust lock up the staked ether and become subject to an unbonding period to unstake the staked ether, meaning that the Trust cannot transfer

the staked ether during the time that the ether is staked and during which it is being unbonded.

The unbonding period may be longer than

anticipated based on network activity.

Note that the duration of the bonding period may depend on a range of factors including network

Due to the time involved in “exiting” the staking process, there

is a risk that the Trust could become unable to timely meet excessive redemption requests in amounts that are greater than the portion

of the Trust’s ether that remains un-staked, leading to temporary delays in settlement and, in extreme scenarios, the temporary

unavailability of the Trust’s redemption program.

Moreover, any staked ether which must be un-staked in order to fulfill a redemption

(to the extent such redemption cannot be fulfilled utilizing the portion of the Trust’s ether that has not been staked, or through

another mechanism to manage liquidity in connection with Redemption Orders) will be un-staked only after the redemption request is approved

by the Trust, the Sponsor executes an un-stake or withdrawal transaction through the Ether Custodians, and such transaction is processed

by the Ethereum network.

The Staking Services Providers will not be able to transfer unstaked ether or Staking Provider Consideration

to another address on the Ethereum network.

In addition, depending on

the anticipated length of the unbonding period, the staked ether may be classified as illiquid under the Trust’s liquidity risk

management program.

In addition, if ether is determined to be a security under the 1933 Act, it could be subject to significant constraints

in terms of any transfer or disposal of such ether.

In such event, the Trust may consider ether to be an “illiquid security”,

which it defines as a security that the Trust reasonably expects cannot be sold or disposed of in current market conditions in seven calendar

days or less without the sale or disposition significantly changing the market value of the security.

Rewards for staked ether

may be accrued even before the staked ether is unbonded.

Once accrued, such ether rewards are considered part of the Trust’s assets,

even if unbonding has not occurred.

The Sponsor and the Trust will manage liquidity in accordance with the Trust’s liquidity risk

policies and procedures and will monitor staking and bonding/unbonding activity closely on a daily basis.

There is no guarantee that the

Trust will receive any rewards with respect to staked ether.

Past rewards are not indicative of future returns.

The staking rewards that

the Trust may receive from staking ether, if any, may be affected by, among other factors:

● the total amount of ether staked by users of the Ethereum

● the total amount of ether staked by the Trust;

● changes to the Ethereum network as a result of protocol governance

● changes to validator fees or commission rates set by the validators,

including the commission charged by the Staking Services Provider (if any);

● halts, outages or other anticipated or unanticipated interruptions

affecting the Ethereum network or third-party service providers involved in the staking of the Trust’s ether;

● anticipated or unanticipated downtime by the Staking Services

● loss or deprivation of ether as a result of a violation of

the Ethereum network’s rules by the Staking Services Provider;

● validators ceasing to be eligible to participate in the Ethereum

network’s proof-of-stake protocol and earn rewards;

● “bonding”, “unbonding” or other ether

lock-up periods specified by the Ethereum network;

● delays or other operational factors related to or otherwise

impacting the Trust’s Staking Activities.

The Staking Provider may not optimally execute

the staking activities.

The Trust relies on the resources of the Staking Services Providers to facilitate

the Sponsor’s staking activities.

The Staking Services Providers provide the hardware, software and services necessary to stake

the ether from a validator node.

The hardware and software utilized by the Staking Services Providers may prove to be inadequate to maximize

the Trust’s staking revenue.

The Trust is dependent on the hardware, software and services of the Staking Services Providers to

effectively execute the staking activities.

The Sponsor has no ability to supervise or direct the conduct of the Staking Services Providers.

In addition, the Staking Provider Consideration is paid from the proceeds

of the staking program received by the Trust.

The payment of the Staking Provider Consideration reduces the portion of the staking rewards

generated by the staking activities that are actually retained by the Trust.

Accordingly, the staking rewards actually retained by the

Trust are less than what the Trust would retain if the Sponsor were to administer its own staking activities without the assistance of

third-party service providers.

The Trust may vary the

amount of ether to be staked and the rewards received may accordingly change from time to time.

While the Trust may stake

a maximum of 100% of its ether holdings, the amount of ether that remains unstaked is determined based on the Trust’s Utilization

Rate analysis, and accordingly may vary from time to time.

Based on Utilization Rate analysis applied to historical data, the Trust generally

intends to stake between 40% and 70% of the ether it holds, although the amount of ether that is staked may be lesser or greater from

time to time.

The precise percentage to be staked will be based on the estimated liquidity needs of the Trust, as determined by the Sponsor.

Accordingly, changes in the percentage of ether holdings that are staked could impact the value of Shares held by investors.

The scheduled creation

of newly minted ether and their subsequent sale may cause the price of ether to decline, which could negatively affect an investment in

In accordance with the Ethereum

2.0 upgrades, newly created or minted ether are generated through a process referred to as “staking” which involves the collection

of a staking reward of new ether.

To operate a node, a validator must acquire and lock 32 ether by sending a special transaction to the

staking contract, which transaction associates the staked ether with a withdrawal address (to unlock the ether and receive any staking

rewards) and a validator address (to designate the validator node performing transaction verification).

When the recipient makes newly

minted ether available for sale, there can be downward pressure on the price of ether as the new supply is introduced into the ether market.

Limits on ether supply.

Ether is the second largest

cryptocurrency by market capitalization behind bitcoin.

As of December 31, 2025, ether had a total market capitalization of approximately

$358 billion and represented approximately 11.42% of the entire digital asset market.

The rate at which new ether

are issued and put into circulation is expected to vary.

The Ethereum network has no formal cap on the total supply of ether.

As of December

31, 2025, the Ethereum network has a total outstanding supply of approximately 117.8M ether.

The Ethereum network does, however, feature

several mechanisms that, individually and in aggregate, have the effect of limiting the total supply of ether outstanding.

These mechanisms

are sometimes referred to collectively as the “Ethereum Triple Halving.”

As a result of the Merge,

where the Ethereum network moved from a proof-of-work to a proof-of-stake mechanism under Ethereum 2.0, the rate of issuance is greatly

Under proof-of-work, miners expend computational resources to compete to validate transactions and are rewarded coins in proportion

to the amount of computational resources expended, which resulted in comparably more new tokens rewarded.

By contrast, under proof-of-stake,

validators risk or “stake” coins to compete to be randomly selected to validate transactions and are rewarded coins in proportion

to the amount of coins staked, which results in comparably fewer new tokens rewarded.

Following the Merge, approximately 1,700 ether are

issued per day, though the issuance rate varies based on the number of validators on the network.

As of December 31, 2025, approximately

1406 ether were issued in the previous day.

The issuance rate varies based on the number of validators on the network and other factors.

As of December 31, 2025, approximately 13.67 ether were burned in the previous day.

change from proof-of-work to proof-of-stake also limits the total supply of ether in circulation by effectively locking staked, certain

period of time, making it temporarily unavailable for trading or selling.

Additionally,

the supply of ether is limited as a result of the deflationary gas fee burning mechanism introduced by EIP 1559 in August 2021 to reform

the Ethereum gas fee market.

The change from proof-of-work

to proof-of-stake also limits the total supply of ether in circulation by effectively locking staked, certain period of time, making it

temporarily unavailable for trading or selling.

Additionally, the supply of

ether is limited as a result of the deflationary gas fee burning mechanism introduced by EIP 1559 in August 2021 to reform the Ethereum

gas fee market.

EIP 1559 split of fees into two components:

the base fee (calculated depending on the network activity involved)

the base fee (calculated depending on the network activity involved) and the

When ether is used to pay the base fee, it is removed from circulation, or “burnt,” and the tip is paid to validators.

As a result of this fee burning mechanism, the overall supply of ether decreases as more ether are destroyed through the fee burn.

the fee burning depends on the network activity, the more the transactions on the Ethereum network, the more ether is burned and the

lower the issuance.

This also has the effect of reducing the incentives for validators to validate transactions with higher gas fees,

since those validators would only receive the tip and not base fees.

On occasion, the ether supply has been deflationary over a 24-hour

period as a result of the burn mechanism.

prevailing level of transaction fees may adversely affect the usage of the Ethereum network.

ether is created when ether validators use their stake on the Ethereum network to participate in the consensus mechanism, which records

and verifies every ether transaction on the Ethereum blockchain.

In return for their services, validators are rewarded through receipt

of a set amount of ether.

If transaction fees voluntarily paid by users are not sufficiently high or if transaction fees increase to

the point of being prohibitively expensive for users, validators may not have an adequate incentive to continue validating.

if the price of ether or the reward for validating new blocks is not sufficiently high to incentivize validators, validators may cease

participating in the consensus mechanism.

Validators ceasing operations or participation in the consensus mechanism would reduce the

collective processing power on the Ethereum network, which would adversely affect the confirmation process for transactions (i.e., temporarily

decreasing the speed at which blocks are added to the blockchain) and make the Ethereum network more vulnerable to malicious actors obtaining

sufficient control to alter the blockchain and hinder transactions.

Any reduction in confidence in the confirmation process or processing

power of the Ethereum network may adversely affect a Trust’s investments in Ether.

amount of new ether earned by staking may be adjusted.

Historically, the validating reward associated with solving an Ethereum block

has been reduced, although the supply of new ether is uncapped.

If the transaction fees are too low, miners may not be incentivized to

expend processing power to validate transactions and confirmations of transactions on the blockchain could be temporarily slowed.

in the processing power expended by validators on the Ethereum network could reduce infrastructure security, reduce confidence in the

Ethereum network, or expose the Ethereum network to a malicious actor or botnet obtaining a majority of processing power on the Ethereum

Decreased demand for ether or reduced security on the Ethereum network may adversely impact an investment in the Shares.

trading prices of many digital assets, including ether, have experienced extreme volatility in recent periods and may continue to do

Extreme volatility in the future, including further declines in the trading prices of ether, could have a material adverse effect

on the value of the Shares and the Shares could lose all or substantially all of their value.

trading prices of many digital assets, including ether, have experienced extreme volatility in recent periods and may continue to do

For instance, there were steep increases in the value of certain digital assets, including ether, over the course of 2021, and multiple

market observers asserted that digital assets were experiencing a “bubble.” These increases were followed by steep drawdowns

throughout 2022 in digital asset trading prices, including for ether.

These episodes of rapid price appreciation followed by steep drawdowns

have occurred multiple times throughout ether’s history, including in 2021, before repeating again in 2022.

Over the course of

2024, ether prices continued to exhibit extreme volatility.

volatility may persist, and the value of the Shares may significantly decline in the future without recovery.

The digital asset markets

may still be experiencing a bubble or may experience a bubble again in the future.

For example, in the first half of 2022, each of Celsius

Network, Voyager Digital Ltd., and Three Arrows Capital declared bankruptcy, resulting in a loss of confidence in participants of the

digital asset ecosystem and negative publicity surrounding digital assets more broadly.

the fee burning depends on the network activity, the more the transactions on the Ethereum network, the more ether is burned and the lower

the issuance.

This also has the effect of reducing the incentives for validators to validate transactions with higher gas fees, since

those validators would only receive the tip and not base fees.

On occasion, the ether supply has been deflationary over a 24-hour period

as a result of the burn mechanism.

The prevailing level

of transaction fees may adversely affect the usage of the Ethereum network.

New ether is created when

ether validators use their stake on the Ethereum network to participate in the consensus mechanism, which records and verifies every ether

transaction on the Ethereum blockchain.

In return for their services, validators are rewarded through receipt of a set amount of ether.

If transaction fees voluntarily paid by users are not sufficiently high or if transaction fees increase to the point of being prohibitively

expensive for users, validators may not have an adequate incentive to continue validating.

Further, if the price of ether or the reward

for validating new blocks is not sufficiently high to incentivize validators, validators may cease participating in the consensus mechanism.

Validators ceasing operations or participation in the consensus mechanism would reduce the collective processing power on the Ethereum

network, which would adversely affect the confirmation process for transactions (i.e., temporarily decreasing the speed at which blocks

are added to the blockchain) and make the Ethereum network more vulnerable to malicious actors obtaining sufficient control to alter the

blockchain and hinder transactions.

Any reduction in confidence in the confirmation process or processing power of the Ethereum network

may adversely affect a Trust’s investments in Ether.

The amount of new ether earned

by staking may be adjusted.

Historically, the validating reward associated with solving an Ethereum block has been reduced, although the

supply of new ether is uncapped.

If the transaction fees are too low, miners may not be incentivized to expend processing power to validate

transactions and confirmations of transactions on the blockchain could be temporarily slowed.

A reduction in the processing power expended

by validators on the Ethereum network could reduce infrastructure security, reduce confidence in the Ethereum network, or expose the Ethereum

network to a malicious actor or botnet obtaining a majority of processing power on the Ethereum network.

Decreased demand for ether or

reduced security on the Ethereum network may adversely impact an investment in the Shares.

The trading prices of

many digital assets, including ether, have experienced extreme volatility in recent periods and may continue to do so.

Extreme volatility

in the future, including further declines in the trading prices of ether, could have a material adverse effect on the value of the Shares

and the Shares could lose all or substantially all of their value.

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 2021, and multiple market observers asserted

that digital assets were experiencing a “bubble.” These increases were followed by steep drawdowns throughout 2022 in digital

asset trading prices, including for ether.

These episodes of rapid price appreciation followed by steep drawdowns have occurred multiple

times throughout ether’s history, including in 2021, before repeating again in 2022.

Over the course of 2025, ether prices continued

to exhibit extreme volatility.

Extreme volatility may persist,

and the value of the Shares may significantly decline in the future without recovery.

The digital asset markets may still be experiencing

a bubble or may experience a bubble again in the future.

For example, in the first half of 2022, each of Celsius Network, Voyager Digital

Ltd., and Three Arrows Capital declared bankruptcy, resulting in a loss of confidence in participants of the digital asset ecosystem and

negative publicity surrounding digital assets more broadly.

In November 2022, FTX Trading Ltd.

one of the largest digital asset exchanges by volume at the time, halted customer withdrawals amid rumors of the company’s liquidity

issues and likely insolvency, which were subsequently corroborated by its CEO.

Shortly thereafter, FTX’s CEO resigned, and FTX

and many of its affiliates filed for bankruptcy in the United States, while other affiliates have entered insolvency, liquidation, or

similar proceedings around the globe, following which the U.S.

Department of Justice brought criminal fraud and other charges, and the

SEC and CFTC brought civil securities and commodities fraud charges, against certain of FTX’s and its affiliates’ senior

executives, including its former CEO, who was found guilty of these criminal charges in November 2023.

In addition, several other entities

in the digital asset industry filed for bankruptcy following FTX’s bankruptcy filing, such as BlockFi Inc.

and Genesis Global Capital,

LLC (“Genesis”).

In response to these events (collectively, the “2022 Events”), the digital asset markets have

experienced extreme price volatility and other entities in the digital asset industry have been, and may continue to be, negatively affected,

further undermining confidence in the digital asset markets.

These events have 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 continues to be 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 may increase, including from, among others, the U.S.

Department of Justice, the SEC, the CFTC, the White House and Congress,

as well as state regulators and authorities.

These events are continuing to develop, and the full facts are continuing to emerge.

is not possible to predict at this time all of the risks that they may pose to the Trust, its service providers or to the digital asset

industry as a whole.

volatility in the future, including further declines in the trading prices of ether, could have a material adverse effect on the value

of the Shares, and the Shares could lose all or substantially all of their value.

The Trust is not actively managed and will not take

any actions to take advantage, or mitigate the impacts, of volatility in the price of ether.

markets on which ether trades are relatively new and largely unregulated.

asset markets, including spot markets for ether, are growing rapidly.

The spot markets through which ether and other digital assets trade

are new and largely unregulated.

These markets are local, national and international and include a broadening range of digital assets

and participants.

Significant trading may occur on systems and platforms with minimum predictability.

Spot markets may impose daily,

weekly, monthly or customer-specific transaction or withdrawal limits or suspend withdrawals entirely, rendering the exchange of ether

for fiat currency difficult or impossible.

Participation in spot markets requires users to take on credit risk by transferring ether

from a personal account to a third party’s account.

asset exchanges do not appear to be subject to, or may not comply with, regulation in a similar manner as other regulated trading platforms,

such as national securities exchanges or designated contract markets.

Many digital asset exchanges are unlicensed, unregulated, operate

without extensive supervision by governmental authorities, and do not provide the public with significant information regarding their

ownership structure, management team, corporate practices, cybersecurity, and regulatory compliance.

In particular, those located outside

the United States may be subject to significantly less stringent regulatory and compliance requirements in their local jurisdictions.

a result, trading activity on or reported by these digital asset exchanges is generally significantly less regulated than trading in

regulated U.S.

securities and commodities markets, and may reflect behavior that would be prohibited in regulated U.S.

(“FTX”) one of the largest

digital asset exchanges by volume at the time, halted customer withdrawals amid rumors of the company’s liquidity issues and likely

insolvency, which were subsequently corroborated by its CEO.

Shortly thereafter, FTX’s CEO resigned, and FTX and many of its affiliates

filed for bankruptcy in the United States, while other affiliates have entered insolvency, liquidation, or similar proceedings around

the globe, following which the U.S.

Department of Justice brought criminal fraud and other charges, and the SEC and CFTC brought civil

securities and commodities fraud charges, against certain of FTX’s and its affiliates’ senior executives, including its former

CEO, who was found guilty of these criminal charges in November 2023.

In addition, several other entities in the digital asset industry

filed for bankruptcy following FTX’s bankruptcy filing, such as BlockFi Inc.

and Genesis Global Capital, LLC (“Genesis”).

In response to these events, the digital asset markets have experienced extreme price volatility and other entities in the digital asset

industry have been, and may continue to be, negatively affected, further undermining confidence in the digital asset markets.

have 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 continues to be 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 may increase, including from, among others, the U.S.

of Justice, the SEC, the CFTC, the White House and Congress, as well as state regulators and authorities.

These events are continuing

to develop, and the full facts are continuing to emerge.

It is not possible to predict at this time all of the risks that they may pose

to the Trust, its service providers or to the digital asset industry as a whole.

Extreme volatility in the

future, including further declines in the trading prices of ether, could have a material adverse effect on the value of the Shares, and

the Shares could lose all or substantially all of their value.

The Trust is not actively managed and will not take any actions to take

advantage, or mitigate the impacts, of volatility in the price of ether.

Spot markets on which

ether trades are relatively new and largely unregulated.

Digital asset markets, including

spot markets for ether, are growing rapidly.

The spot markets through which ether and other digital assets trade are new and largely unregulated.

These markets are local, national and international and include a broadening range of digital assets and participants.

Significant trading

may occur on systems and platforms with minimum predictability.

Spot markets may impose daily, weekly, monthly or customer-specific transaction

or withdrawal limits or suspend withdrawals entirely, rendering the exchange of ether for fiat currency difficult or impossible.

Participation

in spot markets requires users to take on credit risk by transferring ether from a personal account to a third party’s account.

Digital asset exchanges do

not appear to be subject to, or may not comply with, regulation in a similar manner as other regulated trading platforms, such as national

securities exchanges or designated contract markets.

Many digital asset exchanges are unlicensed, unregulated, operate without extensive

supervision by governmental authorities, and do not provide the public with significant information regarding their ownership structure,

management team, corporate practices, cybersecurity, and regulatory compliance.

In particular, those located outside the United States

may be subject to significantly less stringent regulatory and compliance requirements in their local jurisdictions.

As a result, trading activity

on or reported by these digital asset exchanges is generally significantly less regulated than trading in regulated U.S.

securities and

commodities markets, and may reflect behavior that would be prohibited in regulated U.S.

trading venues.

Furthermore, many spot markets lack certain safeguards put in place by more traditional exchanges to enhance the stability of trading

on the exchange and prevent flash crashes, such as limit-down circuit breakers.

As a result, the prices of digital assets such as ether

on digital asset exchanges may be subject to larger and/or more frequent sudden declines than assets traded on more traditional exchanges.

Tools to detect and deter fraudulent or manipulative trading activities (such as market manipulation, front-running of trades, and wash-trading)

may not be available to or employed by digital asset exchanges or may not exist at all.

As a result, the marketplace may lose confidence

in, or may experience problems relating to, these venues.

ether exchange is immune from these risks.

While the Trust itself does not buy or sell ether on ether spot markets, the closure or temporary

shutdown of ether exchanges due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence

in the Ethereum network and can slow down the mass adoption of ether.

Further, spot market failures or that of any other major component

of the overall Ethereum ecosystem can have an adverse effect on ether markets and the price of ether and could therefore have a negative

impact on the performance of the Trust.

perception, a lack of stability in the ether spot markets, manipulation of ether spot markets by customers and/or the closure or temporary

shutdown of such exchanges due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence

in ether generally and result in greater volatility in the market price of ether and the Shares of the Trust.

Furthermore, the closure

or temporary shutdown of an ether spot market may impact the Trust’s ability to determine the value of its ether holdings or for

the Trust’s Authorized Participants to effectively arbitrage the Trust’s Shares.

use of cash creations and redemptions, as opposed to in-kind creations and redemptions, may adversely affect the arbitrage transactions

by Authorized Participants intended to keep the price of the Shares closely linked to the price of ether and, as a result, the price

of the Shares may fall or otherwise diverge from NAV.

Trust’s inability to facilitate in-kind creations and redemptions could result in the exchange-traded product arbitrage mechanism

failing to function as efficiently as it otherwise would, leading to the potential for the Shares to trade at premiums or discounts to

the NAV per Share, and such premiums or discounts could be substantial.

Furthermore, if cash creations or redemptions are unavailable,

either due to the Sponsor’s decision to reject or suspend such orders or otherwise, it will not be possible for Authorized Participants

to redeem or create Shares, in which case the arbitrage mechanism would be unavailable.

This could result in impaired liquidity for the

Shares, wider bid/ask spreads in secondary trading of the Shares and greater costs to investors and other market participants.

the Trust’s inability to facilitate in-kind creations and redemptions, and resulting reliance on cash creations and redemptions,

could cause the Sponsor to halt or suspend the creation or redemption of Shares during times of market volatility or turmoil, among other

consequences.

use of cash creations and redemptions, as opposed to in-kind creations and redemptions, could cause delays in trade execution due to

potential operational issues arising from implementing a cash creation and redemption model, which involves greater operational steps

(and therefore execution risk) than the originally contemplated in-kind creation and redemption model, or the potential unavailability

or exhaustion of the Trust’s ability to borrow ether or cash as trade credit (the “Trade Credits”), which the Trust

would not be able to use in connection with in-kind creations and redemptions.

Such delays could cause the execution price associated

with such trades to materially deviate from the Index price used to determine the NAV.

Even though the Authorized Participant is responsible

for the dollar cost of such difference in prices, Authorized Participants could default on their obligations to the Trust, or such potential

risks and costs could lead to Authorized Participants, who would otherwise be willing to purchase or redeem Baskets to take advantage

of any arbitrage opportunity arising from discrepancies between the price of the Shares and the price of the underlying ether, to elect

to not participate in the Trust’s Share creation and redemption processes.

This may adversely affect the arbitrage mechanism intended

to keep the price of the Shares closely linked to the price of ether, and as a result, the price of the Shares may fall or otherwise

Furthermore, many spot markets

lack certain safeguards put in place by more traditional exchanges to enhance the stability of trading on the exchange and prevent flash

crashes, such as limit-down circuit breakers.

As a result, the prices of digital assets such as ether on digital asset exchanges may be

subject to larger and/or more frequent sudden declines than assets traded on more traditional exchanges.

Tools to detect and deter fraudulent

or manipulative trading activities (such as market manipulation, front-running of trades, and wash-trading) may not be available to or

employed by digital asset exchanges or may not exist at all.

As a result, the marketplace may lose confidence in, or may experience problems

relating to, these venues.

No ether exchange is immune

from these risks.

While the Trust itself does not buy or sell ether on ether spot markets, the closure or temporary shutdown of ether

exchanges due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in the Ethereum

network and can slow down the mass adoption of ether.

Further, spot market failures or that of any other major component of the overall

Ethereum ecosystem can have an adverse effect on ether markets and the price of ether and could therefore have a negative impact on the

performance of the Trust.

Negative perception, a lack

of stability in the ether spot markets, manipulation of ether spot markets by customers and/or the closure or temporary shutdown of such

exchanges due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in ether generally

and result in greater volatility in the market price of ether and the Shares of the Trust.

Furthermore, the closure or temporary shutdown

of an ether spot market may impact the Trust’s ability to determine the value of its ether holdings or for the Trust’s Authorized

Participants to effectively arbitrage the Trust’s Shares.

The use of cash creations

and redemptions, as opposed to in-kind creations and redemptions, may adversely affect the arbitrage transactions by Authorized Participants

intended to keep the price of the Shares closely linked to the price of ether and, as a result, the price of the Shares may fall or otherwise

diverge from NAV.

If the arbitrage mechanism is not effective, purchases or sales of Shares on the secondary market could occur at a

premium or discount to NAV, which could harm Shareholders by causing them buy Shares at a price higher than the value of the underlying

ether held by the Trust or sell Shares at a price lower than the value of the underlying ether held by the Trust, causing Shareholders

to suffer losses.

the knowledge of the Sponsor, exchange-traded products for spot-market commodities other than ether, such as gold and silver, generally

employ in-kind creations and redemptions with the underlying asset.

The Sponsor believes that it is generally more efficient, and therefore

less costly, for spot commodity exchange-traded products to utilize in-kind orders rather than cash orders, because there are fewer steps

in the process and therefore there is less operational risk involved when an authorized participant can manage the buying and selling

of the underlying asset itself, rather than depend on an unaffiliated party such as the issuer or sponsor of the exchange-traded product.

As such, a spot commodity exchange-traded product that only employs cash creations and redemptions and does not permit in-kind creations

and redemptions is a novel product that has not been tested, and could be impacted by any resulting operational inefficiencies.

Participants may act in the same or similar capacity for other competing products.

Participants play a critical role in supporting the U.S.

Authorized Participants must

be registered broker-dealers.

Registered broker-dealers are subject to various requirements of the federal securities laws and rules,

including, financial responsibility rules such as the customer protection rule, the net capital rule and recordkeeping requirements.

May 15, 2025, the staff of the SEC’s Division of Trading and Markets stated that broker-dealers are permitted to facilitate in-kind

creations and redemptions in connection with spot exchange-traded products;

however, there is as yet no definitive regulatory guidance

on the specific details of how registered broker-dealers can comply with SEC rules with regard to transacting in or holding spot ether.

Absent further regulatory clarity regarding whether and how registered broker-dealers can hold and deal in ether under applicable broker-dealer

financial responsibility and other rules, there is a risk that registered broker-dealers participating in the in-kind creation or redemption

of Shares for ether may be unable to demonstrate compliance with such rules.

While compliance with rules such as the customer protection

rule, the net capital rule and recordkeeping requirements are primarily the broker-dealer’s responsibility, a national securities

exchange is required to enforce compliance by its member broker-dealers with applicable federal securities law and rules.

Authorized Participants at present have the ability (either acting themselves or through their affiliates) to support in-kind creation

and redemption activity.

Even with the SEC Staff’s

recent statement clarifying that in-kind creations and redemptions are permitted, the Trust’s limited ability to facilitate in-kind

creations and redemptions could result in the exchange-traded product arbitrage mechanism failing to function as efficiently as it otherwise

would, leading to the potential for the Shares to trade at premiums or discounts to the NAV per Share, and such premiums or discounts

could be substantial.

Furthermore, if cash creations or redemptions are unavailable, either due to the Sponsor’s decision to reject

or suspend such orders or otherwise, Authorized Participants will be limited in their ability to redeem or create Shares, in which case

the arbitrage mechanism may not function as efficiently.

This could result in impaired liquidity for the Shares, wider bid/ask spreads

in secondary trading of the Shares and greater costs to investors and other market participants.

In addition, the Trust’s limited

ability to facilitate in-kind creations and redemptions, and resulting relative reliance on cash creations and redemptions, could cause

the Sponsor to halt or suspend the creation or redemption of Shares during times of market volatility or turmoil, among other consequences.

Further, there can be no assurance that broker-dealers would be willing to serve as Authorized Participants with respect to the in-kind

creation and redemption of Shares.

Any of these factors could adversely affect the performance of the Trust and the value of the Shares.

The use of cash creations

and redemptions, as opposed to in-kind creations and redemptions, could cause delays in trade execution due to potential operational issues

arising from implementing a cash creation and redemption model, which involves greater operational steps (and therefore execution risk)

than the originally contemplated in-kind creation and redemption model, or the potential unavailability or exhaustion of the Trust’s

ability to borrow ether or cash as trade credit (the “Trade Credits”), which the Trust would not be able to use in connection

with in-kind creations and redemptions.

Such delays could cause the execution price associated with such trades to materially deviate

from the Index price used to determine the NAV.

Even though the Authorized Participants are responsible for the dollar cost of such difference

in prices, Authorized Participants could default on their obligations to the Trust, or such potential risks and costs could lead to Authorized

Participants, who would otherwise be willing to purchase or redeem Baskets to take advantage of any arbitrage opportunity arising from

discrepancies between the price of the Shares and the price of the underlying ether, to elect to not participate in the Trust’s

Share creation and redemption processes.

This may adversely affect the arbitrage mechanism intended to keep the price of the Shares closely

linked to the price of ether, and as a result, the price of the Shares may fall or otherwise diverge from NAV.

If the arbitrage mechanism

is not effective, purchases or sales of Shares on the secondary market could occur at a premium or discount to NAV, which could harm Shareholders

by causing them buy Shares at a price higher than the value of the underlying ether held by the Trust or sell Shares at a price lower

than the value of the underlying ether held by the Trust, causing Shareholders to suffer losses.

To the knowledge of the Sponsor,

exchange-traded products for spot-market commodities other than ether, such as gold and silver, generally employ in-kind creations and

redemptions with the underlying asset.

The Sponsor believes that it is generally more efficient, and therefore less costly, for spot commodity

exchange-traded products to utilize in-kind orders rather than cash orders, because there are fewer steps in the process and therefore

there is less operational risk involved when an authorized participant can manage the buying and selling of the underlying asset itself,

rather than depend on an unaffiliated party such as the issuer or sponsor of the exchange-traded product.

As such, a spot commodity exchange-traded

product that only employs cash creations and redemptions and does not permit in-kind creations and redemptions is a novel product that

has not been tested, and could be impacted by any resulting operational inefficiencies.

Authorized Participants

may act in the same or similar capacity for other competing products.

Authorized Participants play

a critical role in supporting the U.S.

spot ether exchange-traded product ecosystem.

Currently, the number of potential

Authorized Participants willing and capable of serving as Authorized Participants to the Trust or other competing products is limited.

Authorized Participants may act in the same or similar capacity for other competing products, including exchange-traded products offering

exposure to the spot ether market or other digital assets.

The Trust is therefore subject to risks associated with these competing products

utilizing the same Authorized Participants to support the trading activity of the Trust and liquidity in the Trust’s Shares.

the extent Authorized Participants exit the business or otherwise become unable to process creation and/or redemption orders and no other

Authorized Participants step forward to perform these services, Shares may trade at a material discount to NAV and possibly face delisting.

To the extent that exchange-traded products offering exposure to the spot ether market or other digital assets utilize substantially

the same Authorized Participants, this industry concentration may have the effect of magnifying the risks associated with the Authorized

Participants, as operational disruptions or adverse developments impacting the Authorized Participants may be felt on an industry-wide

basis, which, in turn, may adversely affect not only the Trust and the value of an investment in the Shares, but also these competing

products utilizing the same Authorized Participants and, more generally, exchange-traded products offering exposure to the spot ether

market or other digital assets.

These industry-wide adverse effects could result in a broader loss of confidence in exchange-traded products

offering exposure to the spot ether market or other digital assets, which could further impact the Trust and the value of an investment

in the Shares.

markets may be exposed to security breaches.

nature of the assets held at ether spot markets makes them appealing targets for hackers and a number of ether spot markets have been

victims of cybercrimes.

Over the past several years, some digital asset exchanges have been closed due to security breaches.

of these instances, the customers of such digital asset exchanges were not compensated or made whole for the partial or complete losses

of their account balances in such digital asset exchanges.

While, generally speaking, smaller digital asset exchanges are less likely

to have the infrastructure and capitalization that make larger digital asset exchanges more stable, larger digital asset exchanges are

more likely to be appealing targets for hackers and malware.

example, the collapse of Mt.

Gox, which filed for bankruptcy protection in Japan in late February 2014, demonstrated that even the largest

digital asset exchanges could be subject to abrupt failure with consequences for both users of digital asset exchanges and the digital

asset industry as a whole.

Currently, the number of potential Authorized Participants

willing and capable of serving as Authorized Participants to the Trust or other competing products is limited.

Authorized Participants

may act in the same or similar capacity for other competing products, including exchange-traded products offering exposure to the spot

ether market or other digital assets.

The Trust is therefore subject to risks associated with these competing products utilizing the same

Authorized Participants to support the trading activity of the Trust and liquidity in the Trust’s Shares.

To the extent Authorized Participants

exit the business or otherwise become unable to process creation and/or redemption orders and no other Authorized Participants step forward

to perform these services, Shares may trade at a material discount to NAV and possibly face delisting.

To the extent that exchange-traded

products offering exposure to the spot ether market or other digital assets utilize substantially the same Authorized Participants, this

industry concentration may have the effect of magnifying the risks associated with the Authorized Participants, as operational disruptions

or adverse developments impacting the Authorized Participants may be felt on an industry-wide basis, which, in turn, may adversely affect

not only the Trust and the value of an investment in the Shares, but also these competing products utilizing the same Authorized Participants

and, more generally, exchange-traded products offering exposure to the spot ether market or other digital assets.

These industry-wide

adverse effects could result in a broader loss of confidence in exchange-traded products offering exposure to the spot ether market or

other digital assets, which could further impact the Trust and the value of an investment in the Shares.

Spot markets may be

exposed to security breaches.

The nature of the assets held

at ether spot markets makes them appealing targets for hackers and a number of ether spot markets have been victims of cybercrimes.

the past several years, some digital asset exchanges have been closed due to security breaches.

In many of these instances, the customers

of such digital asset exchanges were not compensated or made whole for the partial or complete losses of their account balances in such

digital asset exchanges.

While, generally speaking, smaller digital asset exchanges are less likely to have the infrastructure and capitalization

that make larger digital asset exchanges more stable, larger digital asset exchanges are more likely to be appealing targets for hackers

For example, the collapse

Gox, which filed for bankruptcy protection in Japan in late February 2014, demonstrated that even the largest digital asset exchanges

could be subject to abrupt failure with consequences for both users of digital asset exchanges and the digital asset industry as a whole.

In particular, in the two weeks that followed the February 7, 2014, halt of bitcoin withdrawals from Mt.

the value of one bitcoin fell on other exchanges from around $795 on February 6, 2014, to $578 on February 20, 2014.

Additionally, in

January 2015, Bitstamp announced that approximately 19,000 bitcoin had been stolen from its operational or “hot” wallets.

Further, in August 2016, it was reported that almost 120,000 bitcoin worth around $78 million were stolen from Bitfinex, a large digital

asset exchange.

The value of bitcoin and other digital assets immediately decreased over 10% following reports of the theft at Bitfinex.

In July 2017, FinCEN assessed a $110 million fine against BTC-E, a now defunct digital asset exchange, for facilitating crimes such as

drug sales and ransomware attacks.

In addition, in December 2017, Yapian, the operator of Seoul-based cryptocurrency exchange Youbit,

suspended digital asset trading and filed for bankruptcy following a hack that resulted in a loss of 17% of Yapian’s assets.

the hack, Youbit users were allowed to withdraw approximately 75% of the digital assets in their exchange accounts, with any potential

further distributions to be made following Yapian’s pending bankruptcy proceedings.

In addition, in January 2018, the Japanese

digital asset exchange, Coincheck, was hacked, resulting in losses of approximately $535 million, and in February 2018, the Italian digital

asset exchange, Bitgrail, was hacked, resulting in approximately $170 million in losses.

In May 2019, one of the world’s largest

digital asset exchanges, Binance, was hacked, resulting in losses of approximately $40 million.

On February 21, 2025, Bybit, a digital

asset exchange, experienced a significant security breach resulting in the loss of nearly $1.5 billion worth of ether.

markets may be exposed to fraud and market manipulation.

blockchain infrastructure could be used by certain market participants to exploit arbitrage opportunities through schemes such as front-running,

spoofing, pump-and-dump and fraud across different systems, platforms or geographic locations.

As a result of reduced oversight, these

schemes may be more prevalent in digital asset markets than in the general market for financial products.

SEC has identified possible sources of fraud and manipulation in the digital asset market generally, including, among others:

Gox, the value of one bitcoin

fell on other exchanges from around $795 on February 6, 2014, to $578 on February 20, 2014.

Additionally, in January 2015, Bitstamp announced

that approximately 19,000 bitcoin had been stolen from its operational or “hot” wallets.

Further, in August 2016, it was reported

that almost 120,000 bitcoin worth around $78 million were stolen from Bitfinex, a large digital asset exchange.

The value of bitcoin and

other digital assets immediately decreased over 10% following reports of the theft at Bitfinex.

In July 2017, FinCEN assessed a $110 million

fine against BTC-E, a now defunct digital asset exchange, for facilitating crimes such as drug sales and ransomware attacks.

in December 2017, Yapian, the operator of Seoul-based cryptocurrency exchange Youbit, suspended digital asset trading and filed for bankruptcy

following a hack that resulted in a loss of 17% of Yapian’s assets.

Following the hack, Youbit users were allowed to withdraw approximately

75% of the digital assets in their exchange accounts, with any potential further distributions to be made following Yapian’s pending

bankruptcy proceedings.

In addition, in January 2018, the Japanese digital asset exchange, Coincheck, was hacked, resulting in losses

of approximately $535 million, and in February 2018, the Italian digital asset exchange, Bitgrail, was hacked, resulting in approximately

$170 million in losses.

In May 2019, one of the world’s largest digital asset exchanges, Binance, was hacked, resulting in losses

of approximately $40 million.

On February 21, 2025, Bybit, a digital asset exchange, experienced a significant security breach resulting

in the loss of nearly $1.5 billion worth of ether.

Spot markets may be

exposed to fraud and market manipulation.

The blockchain infrastructure

could be used by certain market participants to exploit arbitrage opportunities through schemes such as front-running, spoofing, pump-and-dump

and fraud across different systems, platforms or geographic locations.

As a result of reduced oversight, these schemes may be more prevalent

in digital asset markets than in the general market for financial products.

The SEC has identified possible

sources of fraud and manipulation in the digital asset market generally, including, among others:

(1) “wash trading”;

persons with a dominant position in digital assets manipulating digital asset pricing;

(3) hacking of a digital asset

network and trading platforms;

(3) hacking of a digital asset network and trading

(4) malicious control of digital asset networks;

(5) trading based on material, non-public information

(for example, plans of market participants to significantly increase or decrease their holdings in digital assets, new sources of demand

for digital assets, etc.) or based on the dissemination of false and misleading information;

(6) manipulative activity involving purported

“stablecoins,” including Tether;

(5) trading based on material, non-public information (for example, plans

of market participants to significantly increase or decrease their holdings in digital assets, new sources of demand for digital assets,

etc.) or based on the dissemination of false and misleading information;

(6) manipulative activity involving purported “stablecoins,”

including Tether;

and (7) fraud and manipulation at digital asset trading platforms.

the past several years, a number of digital asset spot markets have been closed or faced issues due to fraud.

In many of these instances,

the customers of such ether spot markets were not compensated or made whole for the partial or complete losses of their account balances

in such digital asset exchanges.

2019, there were reports claiming that 80.95% of bitcoin trading volume on digital asset exchanges was false or noneconomic in nature,

with specific focus on unregulated exchanges located outside of the United States.

Such reports alleged that certain overseas exchanges

have displayed suspicious trading activity suggestive of a variety of manipulative or fraudulent practices.

Other academics and market

observers have put forth evidence to support claims that manipulative trading activity has occurred on certain digital asset exchanges.

For example, in a 2017 paper titled “Price Manipulation in the Bitcoin Ecosystem” sponsored by the Interdisciplinary Cyber

Research Center at Tel Aviv University, a group of researchers used publicly available trading data, as well as leaked transaction data

from a 2014 Mt.

Gox security breach, to identify and analyze the impact of “suspicious trading activity” on Mt.

February and November 2013, which, according to the authors, caused the price of bitcoin to increase from around $150 to more than $1,000

over a two-month period.

In August 2017, it was reported that a trader or group of traders nicknamed “Spoofy” was placing

large orders on Bitfinex without actually executing them, presumably in order to influence other investors into buying or selling by

creating a false appearance that greater demand existed in the market.

In December 2017, an anonymous blogger (publishing under the pseudonym

Bitfinex’d) cited publicly available trading data to support his or her claim that a trading bot nicknamed “Picasso”

was pursuing a paint-the-tape-style manipulation strategy by buying and selling bitcoin and bitcoin cash between affiliated accounts

in order to create the appearance of substantial trading activity and thereby influence the price of such assets.

November 2022, FTX, one of the largest digital asset exchanges by volume at the time, halted customer withdrawals amid rumors of the

company’s liquidity issues and likely insolvency, which were subsequently corroborated by its CEO.

Shortly thereafter, FTX’s

CEO resigned and FTX and many of its affiliates filed for bankruptcy in the United States, while other affiliates have entered insolvency,

liquidation, or similar proceedings around the globe, following which the U.S.

Department of Justice brought criminal fraud and other

charges, and the SEC and CFTC brought civil securities and commodities fraud charges, against certain of FTX’s and its affiliates’

senior executives, including its former CEO.

Around the same time, there were reports that approximately $300-600 million of digital

assets were removed from FTX and the full facts remain unknown, including whether such removal was the result of a hack, theft, insider

activity, or other improper behavior.

potential consequences of a spot market’s failure or failure to prevent market manipulation could adversely affect the value of

Any market abuse, and a loss of investor confidence in ether, may adversely impact pricing trends in ether markets broadly,

as well as an investment in Shares of the Trust.

markets may be exposed to wash trading.

markets on which ether trades may be susceptible to wash trading.

Wash trading occurs when offsetting trades are entered into for other

than bona fide reasons, such as the desire to inflate reported trading volumes.

Wash trading may be motivated by non-economic reasons,

such as a desire for increased visibility on popular websites that monitor markets for digital assets so as to improve their attractiveness

to investors who look for maximum liquidity, or it may be motivated by the ability to attract listing fees from token issuers who seek

the most liquid and high-volume exchanges on which to list their coins.

Results of wash trading may include unexpected obstacles to trade

and erroneous investment decisions based on false information.

in the United States, there have been allegations of wash trading even on regulated venues.

Any actual or perceived false trading in

the digital asset exchange market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of ether

and/or negatively affect the market perception of ether.

the extent that wash trading either occurs or appears to occur in spot markets on which ether trades, investors may develop negative

perceptions about ether and the digital assets industry more broadly, which could adversely impact the price ether and, therefore, the

price of Shares.

Wash trading also may place more legitimate digital asset exchanges at a relative competitive disadvantage.

markets may be exposed to front-running.

markets on which ether trades may be susceptible to “front-running,” which refers to the process when someone uses technology

or market advantage to get prior knowledge of upcoming transactions.

Front-running is a frequent activity on centralized as well as decentralized

By using bots functioning on a millisecond-scale timeframe, bad actors are able to take advantage of the forthcoming price

movement and make economic gains at the cost of those who had introduced these transactions.

The objective of a front runner is to buy

a chunk of tokens at a low price and later sell them at a higher price while simultaneously exiting the position.

Front-running happens

via manipulations of gas prices or timestamps, also known as slow matching.

To extent that front-running occurs, it may result in investor

frustrations and concerns as to the price integrity of digital asset exchanges and digital assets more generally.

market value of ether is not based on any kind of claim, nor backed by any physical asset.

Instead, the market value depends on the expectation

of being usable in future transactions and continued interest from investors.

This strong correlation between an expectation and market

value is the basis for the current (and probable future) volatility of the market value of ether and may increase the likelihood of momentum

pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, is impacted

by appreciation in value.

Momentum pricing may result in speculation regarding future appreciation in the value of digital assets, which

inflates prices and leads to increased volatility.

As a result, ether may be more likely to fluctuate in value due to changing investor

confidence in future appreciation or depreciation in prices, which could adversely affect the price of ether, and, in turn, an investment

in the Trust.

value of an ether as represented by the Index may also be subject to momentum pricing due to speculation regarding future appreciation

in value, leading to greater volatility that could adversely affect the value of the Shares.

Momentum pricing of ether has previously

resulted, and may continue to result, in speculation regarding future appreciation or depreciation in the value of ether, further contributing

to volatility and potentially inflating prices at any given time.

Over the past several years,

a number of digital asset spot markets have been closed or faced issues due to fraud.

In many of these instances, the customers of such

ether spot markets were not compensated or made whole for the partial or complete losses of their account balances in such digital asset

In 2019, there were reports

claiming that 80.95% of bitcoin trading volume on digital asset exchanges was false or noneconomic in nature, with specific focus on unregulated

exchanges located outside of the United States.

Such reports alleged that certain overseas exchanges have displayed suspicious trading

activity suggestive of a variety of manipulative or fraudulent practices.

Other academics and market observers have put forth evidence

to support claims that manipulative trading activity has occurred on certain digital asset exchanges.

For example, in a 2017 paper titled

“Price Manipulation in the Bitcoin Ecosystem” sponsored by the Interdisciplinary Cyber Research Center at Tel Aviv University,

a group of researchers used publicly available trading data, as well as leaked transaction data from a 2014 Mt.

Gox security breach, to

identify and analyze the impact of “suspicious trading activity” on Mt.

Gox between February and November 2013, which, according

to the authors, caused the price of bitcoin to increase from around $150 to more than $1,000 over a two-month period.

In August 2017,

it was reported that a trader or group of traders nicknamed “Spoofy” was placing large orders on Bitfinex without actually

executing them, presumably in order to influence other investors into buying or selling by creating a false appearance that greater demand

existed in the market.

In December 2017, an anonymous blogger (publishing under the pseudonym Bitfinex’d) cited publicly available

trading data to support his or her claim that a trading bot nicknamed “Picasso” was pursuing a paint-the-tape-style manipulation

strategy by buying and selling bitcoin and bitcoin cash between affiliated accounts in order to create the appearance of substantial trading

activity and thereby influence the price of such assets.

In November 2022, FTX, one

of the largest digital asset exchanges by volume at the time, halted customer withdrawals amid rumors of the company’s liquidity

issues and likely insolvency, which were subsequently corroborated by its CEO.

Shortly thereafter, FTX’s CEO resigned and FTX and

many of its affiliates filed for bankruptcy in the United States, while other affiliates have entered insolvency, liquidation, or similar

proceedings around the globe, following which the U.S.

Department of Justice brought criminal fraud and other charges, and the SEC and

CFTC brought civil securities and commodities fraud charges, against certain of FTX’s and its affiliates’ senior executives,

including its former CEO.

Around the same time, there were reports that approximately $300-600 million of digital assets were removed

from FTX and the full facts remain unknown, including whether such removal was the result of a hack, theft, insider activity, or other

improper behavior.

The potential consequences

of a spot market’s failure or failure to prevent market manipulation could adversely affect the value of the Shares.

abuse, and a loss of investor confidence in ether, may adversely impact pricing trends in ether markets broadly, as well as an investment

in Shares of the Trust.

Spot markets may be

exposed to wash trading.

Spot markets on which ether

trades may be susceptible to wash trading.

Wash trading occurs when offsetting trades are entered into for other than bona fide reasons,

such as the desire to inflate reported trading volumes.

Wash trading may be motivated by non-economic reasons, such as a desire for increased

visibility on popular websites that monitor markets for digital assets so as to improve their attractiveness to investors who look for

maximum liquidity, or it may be motivated by the ability to attract listing fees from token issuers who seek the most liquid and high-volume

exchanges on which to list their coins.

Results of wash trading may include unexpected obstacles to trade and erroneous investment decisions

based on false information.

Even in the United States,

there have been allegations of wash trading even on regulated venues.

Any actual or perceived false trading in the digital asset exchange

market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of ether and/or negatively affect

the market perception of ether.

To the extent that wash trading

either occurs or appears to occur in spot markets on which ether trades, investors may develop negative perceptions about ether and the

digital assets industry more broadly, which could adversely impact the price ether and, therefore, the price of Shares.

Wash trading also

may place more legitimate digital asset exchanges at a relative competitive disadvantage.

Spot markets may be

exposed to front-running.

Spot markets on which ether

trades may be susceptible to “front-running,” which refers to the process when someone uses technology or market advantage

to get prior knowledge of upcoming transactions.

Front-running is a frequent activity on centralized as well as decentralized exchanges.

By using bots functioning on a millisecond-scale timeframe, bad actors are able to take advantage of the forthcoming price movement and

make economic gains at the cost of those who had introduced these transactions.

The objective of a front runner is to buy a chunk of tokens

at a low price and later sell them at a higher price while simultaneously exiting the position.

Front-running happens via manipulations

of gas prices or timestamps, also known as slow matching.

To extent that front-running occurs, it may result in investor frustrations

and concerns as to the price integrity of digital asset exchanges and digital assets more generally.

The market value of

ether is subject to momentum pricing.

The market value of ether

is not based on any kind of claim, nor backed by any physical asset.

Instead, the market value depends on the expectation of being usable

in future transactions and continued interest from investors.

This strong correlation between an expectation and market value is the basis

for the current (and probable future) volatility of the market value of ether and may increase the likelihood of momentum pricing.

Momentum pricing typically

is associated with growth stocks and other assets whose valuation, as determined by the investing public, is impacted by appreciation

Momentum pricing may result in speculation regarding future appreciation in the value of digital assets, which inflates prices

and leads to increased volatility.

As a result, ether may be more likely to fluctuate in value due to changing investor confidence in

future appreciation or depreciation in prices, which could adversely affect the price of ether, and, in turn, an investment in the Trust.

The value of an ether as represented

by the Index may also be subject to momentum pricing due to speculation regarding future appreciation in value, leading to greater volatility

that could adversely affect the value of the Shares.

Momentum pricing of ether has previously resulted, and may continue to result, in

speculation regarding future appreciation or depreciation in the value of ether, further contributing to volatility and potentially inflating

prices at any given time.

These dynamics may impact the value of an investment in Trust.

market observers have asserted that in time, the value of ether will fall to a fraction of its current value, or even to zero.

has not been in existence long enough for market participants to assess these predictions with any precision, but if these observers

are even partially correct, an investment in the Shares may turn out to be substantially worthless.

decline in the adoption of ether could negatively impact the Trust.

Sponsor will not have any strategy relating to the development of ether and the Ethereum network.

However, a lack of expansion in usage

of ether and the Ethereum network could adversely affect an investment in Shares.

further development and acceptance of the Ethereum network, which is part of a new and rapidly changing industry, is subject to a variety

of factors that are difficult to evaluate.

For example, the Ethereum network faces significant obstacles to increasing the usage of ether

without resulting in higher fees or slower transaction settlement times, and attempts to increase the volume of transactions may not

be effective.

The slowing, stopping or reversing of the development or acceptance or usage of the Ethereum network and associated smart

This may adversely affect the price of ether and therefore an investment in the Shares.

The further adoption of ether will

require growth in its usage and in the Ethereum network.

Some market observers have

asserted that in time, the value of ether will fall to a fraction of its current value, or even to zero.

Ether has not been in existence

long enough for market participants to assess these predictions with any precision, but if these observers are even partially correct,

an investment in the Shares may turn out to be substantially worthless.

A decline in the adoption

of ether or the Ethereum network could negatively impact the Trust.

The Sponsor will not have

any strategy relating to the development of ether and the Ethereum network.

However, a lack of expansion in usage of ether and the Ethereum

network could adversely affect an investment in Shares.

The further development and

acceptance of the Ethereum network, which is part of a new and rapidly changing industry, is subject to a variety of factors that are

difficult to evaluate.

For example, the Ethereum network faces significant obstacles to increasing the usage of ether without resulting

in higher fees or slower transaction settlement times, and attempts to increase the volume of transactions may not be effective.

stopping or reversing of the development or acceptance or usage of the Ethereum network and associated smart contracts.

This may adversely

affect the price of ether and therefore an investment in the Shares.

The further adoption of ether will require growth in its usage and

in the Ethereum network.

Adoption of ether will also require an accommodating regulatory environment.

use of digital assets such as ether to, among other things, buy and sell goods and services, is part of a new and rapidly evolving industry

that employs digital assets based upon computer-generated mathematical and/or cryptographic protocols.

Ether is a prominent, but not

unique, part of this industry.

The use of digital assets

such as ether to, among other things, buy and sell goods and services or facilitate cross-border payments, is part of a new and rapidly

evolving industry that employs digital assets based upon computer-generated mathematical and/or cryptographic protocols.

Ether is a prominent,

but not unique, part of this industry.

The growth of this industry is subject to a high degree of uncertainty, as new assets and technological

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of the network, to the extent that ether does not otherwise become a store of asset value or meet the needs of another commercial use.

there is limited use of ether in the retail, commercial, or payments spaces, and, on a relative basis, speculators make up a significant

portion of users.

Certain merchants and major retail and commercial businesses have only recently begun accepting ether and the Ethereum

network as a means of payment for goods and services.

This pattern may contribute to outsized price volatility, which in turn can make

ether less attractive to merchants and commercial parties as a means of payment.

A lack of expansion by ether into retail and commercial

markets or a contraction of such use may result in a reduction in the price of ether, which could adversely affect an investment in the

addition, there is no assurance that ether will maintain its value over the long-term.

The value of ether is subject to risks related

to its usage.

Even if growth in ether adoption occurs in the near or medium-term, there is no assurance that ether usage will continue

to grow over the long-term.

A contraction in use of ether may result in increased volatility or a reduction in the price of ether, which

would adversely impact the value of Shares.

nature of blockchain-recorded transactions.

transactions recorded on the Ethereum network are not, from an administrative perspective, reversible without the consent and active

participation of the recipient of the transaction or, in theory, control or consent of a majority of the Ethereum network’s aggregate

Once a transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of ether

or a theft of ether generally will not be reversible, and the Trust may not be capable of seeking compensation for any such transfer

It is possible that, through computer or human error, or through theft or criminal action, the Trust’s ether could be

transferred from custody accounts in incorrect quantities or to unauthorized third parties.

To the extent that the Trust is unable to

seek a corrective transaction with such third party or is incapable of identifying the third party that has received the Trust’s

ether through error or theft, the Trust will be unable to revert or otherwise recover incorrectly transferred ether.

To the extent that

the Trust is unable to seek redress for such error or theft, such loss could adversely affect the value of the Shares.

loss or destruction of a private key required to access ether may be irreversible.

assets, including ether, are controllable only by the possessor of both the unique public key and private key or keys relating to the

“digital wallet” in which the digital asset is held.

Private keys must be safeguarded and kept private in order to prevent

a third party from accessing the digital asset held in such wallet.

To the extent a private key is lost, destroyed or otherwise compromised

and no backup of the private key is accessible, the Trust will be unable to access, and will effectively lose, the ether held in the

related digital wallet.

In addition, if the Trust’s private keys are misappropriated and the Trust’s ether holdings are stolen,

including from or by the Ether Custodians, the Trust could lose some or all of its ether holdings, which would adversely impact an investment

in the Shares of the Trust.

Any loss of private keys relating to digital wallets used to store the Trust’s ether would adversely

affect the value of the Shares.

investment in the Trust is not a deposit and is not FDIC-insured.

Shareholders’ limited rights of legal recourse against the Trust,

Trustee, Sponsor, Administrator, Prime Broker and Custodians expose the Trust and its Shareholders to the risk of loss of the Trust’s

ether for which no person or entity is liable.

Trust is not a banking institution or otherwise a member of the Federal Deposit Insurance Corporation (“FDIC”) or Securities

Investor Protection Corporation (“SIPC”) and, therefore, deposits held with or assets held by the Trust are not subject to

the protections enjoyed by depositors with FDIC or SIPC member institutions.

In addition, neither the Trust nor the Sponsor insures the

Trust’s ether.

September 11, 2024, the Trust entered into separate custodial services agreements (each, a “Custodial Services Agreement”

and, collectively, including the agreement with Coinbase Custodian entered into between the Trust and Coinbase Custodian on May 8, 2024

(the “Coinbase Custody Agreement”), the “Custodial Services Agreements”) with each of (i) BitGo (the “BitGo

Custody Agreement”) and (ii) Anchorage (the “Anchorage Custody Agreement”).

While the Ether Custodians have advised

the Sponsor that they have insurance coverage that covers certain losses of the digital assets it custodies on behalf of its clients,

including the Trust’s ether, resulting from theft, Shareholders cannot be assured that the Ether Custodians will maintain adequate

insurance, that such coverage will cover losses with respect to the Trust’s ether, or that sufficient insurance proceeds will be

available to cover the Trust’s losses in full.

The Ether Custodians’ insurance may not cover the type of losses experienced

by the Trust.

Alternatively, the Trust may be forced to share such insurance proceeds with other clients or customers of the Ether Custodians,

which could reduce the amount of such proceeds that are available to the Trust.

In addition, the ether insurance market is limited, and

the level of insurance maintained by the Ether Custodians may be substantially lower than the assets of the Trust.

Today, there is limited use

of ether in the retail, commercial, or payments spaces, and, on a relative basis, speculators make up a significant portion of users.

Certain merchants and major retail and commercial businesses have only recently begun accepting ether and the Ethereum network as a means

of payment for goods and services.

This pattern may contribute to outsized price volatility, which in turn can make ether less attractive

to merchants and commercial parties as a means of payment.

A lack of expansion by ether into retail and commercial markets or a contraction

of such use may result in a reduction in the price of ether, which could adversely affect an investment in the Trust.

In addition, there is no assurance

that ether will maintain its value over the long-term.

The value of ether is subject to risks related to its usage.

Even if growth in

ether adoption occurs in the near or medium-term, there is no assurance that ether usage will continue to grow over the long-term.

A contraction

in use of ether may result in increased volatility or a reduction in the price of ether, which would adversely impact the value of Shares.

Irrevocable nature of

blockchain-recorded transactions.

Ether transactions recorded

on the Ethereum network are not, from an administrative perspective, reversible without the consent and active participation of the recipient

of the transaction or, in theory, control or consent of a majority of the Ethereum network’s aggregate hash rate.

Once a transaction

has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of ether or a theft of ether generally

will not be reversible, and the Trust may not be capable of seeking compensation for any such transfer or theft.

Although the Trust’s

transfers of ether will regularly be made to or from the Trust’s accounts with the Ether Custodians, it is possible that, through

computer or human error, or through theft or criminal action, the Trust’s ether could be transferred from the Trust’s accounts

with the Ether Custodians in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts.

To the extent that the Trust

is unable to successfully seek redress for such error or theft, such loss could adversely affect an investment in the Trust.

The loss or destruction

of a private key required to access ether may be irreversible.

Digital assets, including

ether, are controllable only by the possessor of both the unique public key and private key or keys relating to the “digital wallet”

in which the digital asset is held.

Private keys must be safeguarded and kept private in order to prevent a third party from accessing

the digital asset held in such wallet.

To the extent a private key is lost, destroyed or otherwise compromised and no backup of the private

key is accessible, the Trust will be unable to access, and will effectively lose, the ether held in the related digital wallet.

if the Trust’s private keys are misappropriated and the Trust’s ether holdings are stolen, including from or by the Ether

Custodians, the Trust could lose some or all of its ether holdings, which would adversely impact an investment in the Shares of the Trust.

Any loss of private keys relating to digital wallets used to store the Trust’s ether would adversely affect the value of the Shares.

An investment in the

Trust is not a deposit and is not FDIC-insured.

Shareholders’ limited rights of legal recourse against the Trust, Trustee, Sponsor,

Administrator, Prime Broker and Ether Custodians expose the Trust and its Shareholders to the risk of loss of the Trust’s ether

for which no person or entity is liable.

The Trust is not a banking

institution or otherwise a member of the Federal Deposit Insurance Corporation (“FDIC”) or Securities Investor Protection

Corporation (“SIPC”) and, therefore, deposits held with or assets held by the Trust are not subject to the protections enjoyed

by depositors with FDIC or SIPC member institutions.

In addition, neither the Trust nor the Sponsor insures the Trust’s ether.

While the Ether Custodians

have advised the Sponsor that they collectively have insurance coverage up to $685 million in the aggregate that covers losses of the

digital assets they custody on behalf of their clients, including the Trust’s ether, resulting from theft, Shareholders cannot be

assured that the Ether Custodians will maintain adequate insurance, that such coverage will cover losses with respect to the Trust’s

ether, or that sufficient insurance proceeds will be available to cover the Trust’s losses in full.

The Ether Custodians’

insurance may not cover the type of losses experienced by the Trust.

Alternatively, the Trust may be forced to share such insurance proceeds

with other clients or customers of the Ether Custodians, which could reduce the amount of such proceeds that are available to the Trust.

In addition, the ether insurance market is limited, and the level of insurance maintained by the Ether Custodians may be substantially

lower than the assets of the Trust.

While the Ether Custodians maintain certain capital reserve requirements depending on the assets under

custody, and such capital reserves may provide additional means to cover client asset losses, the Trust cannot be assured that the Ether

Custodians will maintain capital reserves sufficient to cover actual or potential losses with respect to the Trust’s digital assets.

The insurance maintained by each Ether Custodian is shared among all of such Ether Custodian’s customers, is not specific to the

Trust or to customers holding ether with such Ether Custodian, and may not be available or sufficient to protect the Trust from all possible

losses or sources of losses.

On September 11, 2024, the

Trust entered into separate custodial services agreements (each, a “Custodial Services Agreement” and, collectively, including

the agreement with Coinbase Custodian entered into between the Trust and Coinbase Custodian on May 8, 2024 (the “Coinbase Custody

Agreement”), and the agreement with BitGo entered into between the Trust and BitGo on December 12, 2025 (the “BitGo Custody

Agreement”), the “Custodial Services Agreements”) with each of (i) BitGo New York (the “BitGo New York Custody

Agreement”) and (ii) Anchorage (the “Anchorage Custody Agreement”).

While the Ether Custodians have advised the Sponsor

that they have insurance coverage that covers certain losses of the digital assets it custodies on behalf of its clients, including the

Trust’s ether, resulting from theft, Shareholders cannot be assured that the Ether Custodians will maintain adequate insurance,

that such coverage will cover losses with respect to the Trust’s ether, or that sufficient insurance proceeds will be available

to cover the Trust’s losses in full.

The Ether Custodians’ insurance may not cover the type of losses experienced by the Trust.

Alternatively, the Trust may be forced to share such insurance proceeds with other clients or customers of the Ether Custodians, which

could reduce the amount of such proceeds that are available to the Trust.

In addition, the ether insurance market is limited, and the

level of insurance maintained by the Ether Custodians may be substantially lower than the assets of the Trust.

While the Ether Custodians

maintain certain capital reserve requirements depending on the assets under custody, and such capital reserves may provide additional

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and may not be available or sufficient to protect the Trust from all possible losses or sources of losses.

under each of the Custodial Services Agreements, the respective Ether Custodian’s liability is limited.

With respect to the Coinbase

Custody Agreement, Coinbase Custodian’s liability is as follows, among others:

(i) other than with respect to claims and losses

arising from spot trading of ether, fraud or willful misconduct, or the Mutually Capped Liabilities (defined below), the Coinbase Custodian’s

aggregate liability under the Custodial Services Agreement shall not exceed the greater of (A) the greater of (x) $100 million and (y)

the aggregate fees paid by the Trust to the Coinbase Custodian in the 12 months prior to the event giving rise to the Coinbase Custodian’s

liability, and (B) the value of the affected ether or cash giving rise to the Coinbase Custodian’s liability;

(ii) the Coinbase

Custodian’s aggregate liability in respect of each cold storage address shall not exceed $100 million;

(iii) in respect of the

Coinbase Custodian’s obligations to indemnify the Trust and its affiliates against third-party claims and losses to the extent

arising out of or relating to, among others, the Coinbase Custodian’s gross negligence, violation of its confidentiality, data

protection and/or information security obligations, or violation of any law, rule or regulation with respect to the provision of its

services (the “Mutually Capped Liabilities”), the Coinbase Custodian’s liability shall not exceed the greater of (A)

$5 million and (B) the aggregate fees paid by the Trust to the Coinbase Custodian in the 12 months prior to the event giving rise to

the Coinbase Custodian’s liability;

and (iv) in respect of any incidental, indirect, special, punitive, consequential or similar

losses, the Coinbase Custodian is not liable, even if the Coinbase Custodian has been advised of or knew or should have known of the

possibility thereof.

In general, the Coinbase Custodian is not liable under the Custodial Services Agreement unless in the event of its

negligence, fraud, material violation of applicable law or willful misconduct.

The Coinbase Custodian is not liable for delays, suspension

of operations, failure in performance, or interruption of service to the extent it is directly due to a cause or condition beyond the

reasonable control of the Coinbase Custodian.

On December 12, 2025, the

Trust entered into the BitGo Custody Agreement with BitGo Bank & Trust, N.A., a federally chartered national trust bank.

to the BitGo Custody Agreement, BitGo will establish and maintain one or more segregated custody accounts, controlled and secured by BitGo,

on its books for the receipt, safekeeping, and maintenance of the Trust’s ether holdings.

The BitGo Custody Agreement also requires

BitGo to maintain reasonable insurance policies and coverage.

The BitGo Custody Agreement commenced on December 12, 2025, and will continue

for one year, unless earlier terminated in accordance with its terms or if either party notifies the other of its intention not to renew

at least 30 days prior to the expiration of the then-current term.

After the initial term, the BitGo Custody Agreement will automatically

renew for successive one-year periods, unless either party notifies the other of its intention not to renew with prior notice.

Furthermore, under the Custodial

Services Agreements, the Ether Custodians’ liability is limited.

With respect to the Coinbase Custody Agreement, the Coinbase Custodian’s

liability is as follows, among others:

(i) the Coinbase Custodian’s aggregate liability with respect to any breach of its obligations

under the Coinbase Custody Agreement shall not exceed the aggregate amount of fees paid by the Trust to the Coinbase Custodian in respect

of the Prime Broker Services in the 12 months prior to the event giving rise to such liability;

(ii) the Coinbase Custodian’s aggregate

liability under the Coinbase Custody Agreement shall not exceed the greater of (A) the aggregate fees paid by the Trust to the Coinbase

Custodian in respect of the custodial services in the 12 months prior to the event giving rise to the Coinbase Custodian’s liability,

and (B) the value of the supported ether on deposit in the Trust’s custodial account(s) giving rise to the Coinbase Custodian’s

liability at the time of the event giving rise to the Coinbase Custodian’s liability;

(iii) the Coinbase Custodian’s aggregate

liability in respect of each cold storage address shall not exceed $100 million;

(iv) in respect of any incidental, indirect, special,

punitive, consequential or similar losses, the Coinbase Custodian is not liable, even if the Coinbase Custodian has been advised of or

knew of or should have known of the possibility thereof;

and (v) in no event shall the Coinbase Custodian or its affiliates have any liability

to the Trust or any third party with respect to any breach of its obligations under the Coinbase Custody Agreement, express or implied,

which does not result solely from its gross negligence, fraud or willful misconduct.

Coinbase Custodian is not liable for delays, suspension

of operations, failure in performance, or interruption of service which result directly or indirectly from any cause or condition beyond

the reasonable control of the Coinbase Custodian.

In the event of potential losses incurred by the Trust as a result of the Coinbase Custodian

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the insurance maintained by the Coinbase Custodian may be insufficient to cover its liabilities to the Trust.

respect to the BitGo Custody Agreement, BitGo and its affiliates, including their officers, directors, agents, and employees, are not

liable for any lost profits, special, incidental, indirect, intangible, or consequential damages resulting from authorized or unauthorized

use of the Trust or Sponsor’s site or services.

With respect to the BitGo

Custody Agreement, the BitGo Custodian and its affiliates, including their officers, directors, agents, and employees, are not liable

for any lost profits, special, incidental, indirect, intangible, or consequential damages resulting from authorized or unauthorized use

of the Trust or Sponsor’s site or services.

This includes damages arising from any contract, tort, negligence, strict liability,

or other legal grounds, even if BitGo was previously advised of, knew, or should have known about the possibility of such damages.

this exclusion of liability does not extend to cases of BitGo’s fraud, willful misconduct, or gross negligence.

In situations of

gross negligence, BitGo’s liability is specifically limited to the value of the digital assets or fiat currency that were affected

by the negligence.

Additionally, the total liability of BitGo for direct damages is capped at the fees paid or payable to them under

the relevant agreement during the twelve-month period immediately preceding the first incident that caused the liability.

respect to the Anchorage Custody Agreement, except for Anchorage’s bad acts, confidentiality obligations under the Anchorage Custody

Agreement, indemnification obligations under Anchorage Custody Agreement, or obligations with respect to rights to or limits on use under

the Anchorage Custody Agreement, Anchorage is not liable for any losses, whether in contract, tort or otherwise, for any amount in excess

of fees paid by the Trust in the twelve (12) months prior to when the liability arises.

Moreover, Anchorage is not liable for (i) losses

which arise from its compliance with applicable laws, including sanctions laws administered by the Office of Foreign Assets Control (“OFAC”)

Department of the Treasury (the “U.S.

or other legal grounds, even if the BitGo Custodian was previously advised of, knew, or should have known about the possibility of such

However, this exclusion of liability does not extend to cases of the BitGo Custodian’s fraud, willful misconduct, or gross

In situations of gross negligence, the BitGo Custodian’s liability is specifically limited to the value of the digital

assets or fiat currency that were affected by the negligence.

Additionally, the total liability of the BitGo Custodian for direct damages

is capped at the fees paid or payable to them under the BitGo Custody Agreement during the twelve-month period immediately preceding the

first incident that caused the liability.

With respect to the Anchorage Custody Agreement, except for the Anchorage

Custodian’s bad acts, confidentiality obligations under the Anchorage Custody Agreement, indemnification obligations under Anchorage

Custody Agreement, or obligations with respect to rights to or limits on use under the Anchorage Custody Agreement, the Anchorage Custodian

is not liable for any losses, whether in contract, tort or otherwise, for any amount in excess of fees paid by the Trust in the twelve

(12) months prior to when the liability arises.

Moreover, the Anchorage Custodian is not liable for (i) losses which arise from its compliance

with applicable laws, including sanctions laws administered by the OFAC of the U.S.

Treasury Department;

or (ii) special, indirect or consequential damages,

or lost profits or loss of business arising in connection with the Anchorage Custody Agreement.

In addition, Anchorage is not liable

for any losses which arise as a result of the non-return of digital assets that the Trust has delegated to Anchorage or a third party

for on-chain services, such as staking, voting, vesting, and signaling, unless such losses occur as a result of Anchorage’s fraud

or intentional misconduct.

under the Prime Broker Agreement, the Prime Broker’s liability is limited as follows, among others:

(i) other than with respect

to claims and losses arising from spot trading of ether, fraud or willful misconduct, or the PB Mutually Capped Liabilities (defined

below), the Prime Broker’s aggregate liability shall not exceed the greater of (A) the greater of (x) $5 million and (y) the aggregate

fees paid by the Trust to the Prime Broker in the 12 months prior to the event giving rise to the Prime Broker’s liability, and

(B) the value of the cash or affected ether giving rise to the Prime Broker’s liability;

(ii) in respect of the Prime Broker’s

obligations to indemnify the Trust and its affiliates against third-party claims and losses to the extent arising out of or relating

to, among others, the Prime Broker’s gross negligence, violation of its confidentiality, data protection and/or information security

obligations, violation of any law, rule or regulation with respect to the provision of its services, or the full amount of the Trust’s

assets lost due to the insolvency of or security event at a Connected Trading Venue (the “PB Mutually Capped Liabilities”),

the Prime Broker’s liability shall not exceed the greater of (A) $5 million and (B) the aggregate fees paid by the Trust to the

Prime Broker in the 12 months prior to the event giving rise to the Prime Broker’s liability;

and (iii) in respect of any incidental,

indirect, special, punitive, consequential or similar losses, the Prime Broker is not liable, even if the Prime Broker has been advised

of or knew or should have known of the possibility thereof.

In general, with limited exceptions (such as for failing to execute an order),

the Prime Broker is not liable under the Prime Broker Agreement unless in the event of its gross negligence, fraud, material violation

of applicable law or willful misconduct.

The Prime Broker is not liable for delays, suspension of operations, failure in performance,

or interruption of service to the extent it is directly due to a cause or condition beyond the reasonable control of the Prime Broker.

These and the other limitations on the Prime Broker’s liability may allow it to avoid liability for potential losses or may be

insufficient to cover the value of such potential losses, even if the Prime Broker directly caused such losses.

Both the Trust and the

Prime Broker and its affiliates (including the Ether Custodians) are required to indemnify each other under certain circumstances.

in the event of an insolvency or bankruptcy of the Prime Broker (in the case of the Trading Balance) or the Ether Custodians (in the

case of the Cold Vault Balance) in the future, given that the contractual protections and legal rights of customers with respect to digital

assets held on their behalf by third parties are relatively untested in a bankruptcy of an entity such as the Ether Custodians or Prime

Broker in the virtual currency industry, there is a risk that customers’ assets — including the Trust’s assets —

may be considered the property of the bankruptcy estate of the Prime Broker (in the case of the Trading Balance) or the Ether Custodians

(in the case of the Cold Vault Balance), and customers — including the Trust — may be at risk of being treated as general

unsecured creditors of such entities and subject to the risk of total loss or markdowns on value of such assets.

Coinbase Custody Agreement contains an agreement by the parties to treat the ether credited to the Cold Vault Balance as financial assets

under Article 8 of the New York Uniform Commercial Code (“Article 8”), in addition to stating that the Ether Custodians will

serve as fiduciaries and custodians on the Trust’s behalf.

One of the Ether Custodian’s parent, Coinbase Global Inc., has

stated in its most recent public securities filings that in light of the inclusion in its custody agreements of provisions relating to

Article 8 it believes that a court would not treat custodied digital assets as part of its general estate in the event the Ether Custodians

were to experience insolvency.

However, due to the novelty of digital asset custodial arrangements courts have not yet considered this

type of treatment for custodied digital assets and it is not possible to predict with certainty how they would rule in such a scenario.

If the Ether Custodians became subject to insolvency proceedings and a court were to rule that the custodied ether were part of such

Ether Custodians’ general estate and not the property of the Trust, then the Trust would be treated as a general unsecured creditor

in the Ether Custodians’ insolvency proceedings and the Trust could be subject to the loss of all or a significant portion of its

Moreover, in the event of the bankruptcy of an Ether Custodian, an automatic stay could go into effect and protracted litigation

could be required in order to recover the assets held with the Ether Custodians, all of which could significantly and negatively impact

the Trust’s operations and the value of the Shares.

respect to the Prime Broker Agreement, there is a risk that the Trading Balance, in which the Trust’s ether and cash is held in

omnibus accounts by the Prime Broker, could be considered part of the Prime Broker’s bankruptcy estate in the event of the Prime

Broker’s bankruptcy.

The Prime Broker Agreement contains an Article 8 opt-in clause with respect to the Trust’s assets held

in the Trading Balance.

amount of ether that may be held in the Trading Balance will be limited to the amount necessary to process a given creation or redemption

transaction, as applicable, or to pay for Trust Expenses not assumed by the Sponsor in consideration for the Sponsor Fee.

Prime Broker is not required to hold any of the ether or cash in the Trust’s Trading Balance in segregation.

Within the Trading

Balance, the Prime Broker Agreement provides that the Trust does not have an identifiable claim to any particular ether (and cash).

the Trust’s Trading Balance represents an entitlement to a pro rata share of the ether (and cash) the Prime Broker has allocated

to the omnibus wallets the Prime Broker holds, as well as the accounts in the Prime Broker’s name that the Prime Broker maintains

at Connected Trading Venues (which are typically held on an omnibus, rather than segregated, basis).

If the Prime Broker suffers an insolvency

event, there is a risk that the Trust’s assets held in the Trading Balance could be considered part of the Prime Broker’s

bankruptcy estate and the Trust could be treated as a general unsecured creditor of the Prime Broker, which could result in losses for

the Trust and Shareholders.

Moreover, in the event of the bankruptcy of the Prime Broker, an automatic stay could go into effect and

protracted litigation could be required in order to recover the assets held with the Prime Broker, all of which could significantly and

negatively impact the Trust’s operations and the value of the Shares.

the Trust Agreement, the Trustee and the Sponsor will not be liable for any liability or expense incurred, including, without limitation,

as a result of any loss of ether by the Ether Custodians or Prime Broker, absent willful misconduct, gross negligence, reckless disregard

or bad faith on the part of the Trustee or the Sponsor or breach by the Sponsor of the Trust Agreement, as the case may be.

the recourse of the Trust or the Shareholders to the Trustee or the Sponsor, including in the event of a loss of ether by the Ether Custodians

or Prime Broker, is limited.

Shareholders’ recourse against the Sponsor, the Trustee, and the Trust’s other service providers for the services they provide

to the Trust, including, without limitation, those relating to the holding of ether or the provision of instructions relating to the

movement of ether, is limited.

For the avoidance of doubt, neither the Sponsor, the Trustee, nor any of their affiliates, nor any other

party has guaranteed the assets or liabilities, or otherwise assumed the liabilities, of the Trust, or the obligations or liabilities

of any service provider to the Trust, including, without limitation, the Ether Custodians and Prime Broker.

The Prime Broker Agreement

and Custodial Services Agreements provide that neither the Sponsor, the Trustee, nor their affiliates shall have any obligation of any

kind or nature whatsoever, by guaranty, enforcement or otherwise, with respect to the performance of any the Trust’s obligations,

agreements, representations or warranties under the Prime Broker Agreement or Custodial Services Agreements or any transaction thereunder.

Consequently, a loss may be suffered with respect to the Trust’s ether that is not covered by the Ether Custodians’ insurance

and for which no person is liable in damages.

or (ii) special, indirect or

consequential damages, or lost profits or loss of business arising in connection with the Anchorage Custody Agreement.

In addition, the

Anchorage Custodian is not liable for any losses which arise as a result of the non-return of digital assets that the Trust has delegated

to the Anchorage Custodian or a third party for on-chain services, such as staking, voting, vesting, and signaling, unless such losses

occur as a result of the Anchorage Custodian’s fraud or intentional misconduct.

Under the BitGo New York Custody

Agreement, the BitGo New York Custodian and its affiliates, including their officers, directors, agents, and employees, are not liable

for any lost profits, special, incidental, indirect, intangible, or consequential damages resulting from authorized or unauthorized use

of the Trust or Sponsor’s site or services.

This includes damages arising from any contract, tort, negligence, strict liability,

or other legal grounds, even if the BitGo New York Custodian was previously advised of, knew, or should have known about the possibility

of such damages.

However, this exclusion of liability does not extend to cases of the BitGo New York Custodian’s fraud, willful

misconduct, or gross negligence.

In situations of gross negligence, the BitGo New York Custodian’s liability is specifically limited

to the value of the digital assets or fiat currency that were affected by the negligence.

Additionally, the total liability of the BitGo

New York Custodian for direct damages is capped at the fees paid or payable to them under the BitGo New York Custody Agreement during

the twelve-month period immediately preceding the first incident that caused the liability.

Similarly, under the Prime

Broker Agreement, the Prime Broker’s liability is limited as follows, among others:

(i) the Prime Broker’s aggregate liability

shall not exceed the aggregate fees paid by the Trust to the Prime Broker in respect of the Prime Broker Services in the 12 months prior

to the event giving rise to the Prime Broker’s liability;

and (iii) in respect of any incidental, indirect, special, punitive, consequential

or similar losses, the Prime Broker is not liable, even if the Prime Broker has been advised of or knew of or should have known of the

possibility thereof.

In general, with limited exceptions, the Prime Broker is not liable under the Prime Broker Agreement unless in the

event of its gross negligence, fraud, or willful misconduct.

The Prime Broker is not liable for delays, suspension of operations, failure

in performance, or interruption of service which result directly or indirectly from any cause or condition beyond the reasonable control

of the Prime Broker.

These and the other limitations on the Prime Broker’s liability may allow it to avoid liability for potential

losses or may be insufficient to cover the value of such potential losses, even if the Prime Broker directly caused such losses.

Moreover, in the event of

an insolvency or bankruptcy of the Prime Broker (in the case of the Trading Balance) or the Ether Custodians (in the case of the Cold

Vault Balance) in the future, given that the contractual protections and legal rights of customers with respect to digital assets held

on their behalf by third parties are relatively untested in a bankruptcy of entities such as the Ether Custodians or Prime Broker in the

digital asset industry, there is a risk that customers’ assets — including the Trust’s assets — may be considered

the property of the bankruptcy estate of the Prime Broker (in the case of the Trading Balance) or the Ether Custodians (in the case of

the Cold Vault Balance), and customers — including the Trust — may be at risk of being treated as general unsecured creditors

of such entities and subject to the risk of total loss or markdowns on value of such assets.

The Coinbase Custody Agreement

contains an agreement by the parties thereto to treat the ether credited to the Trust’s Cold Vault Balance with Coinbase as financial

assets under Article 8 of the New York Uniform Commercial Code (“Article 8”), in addition to stating that the Coinbase Custodian

will serve as fiduciary and custodian on the Trust’s behalf.

The Coinbase Custodian’s parent, Coinbase Global Inc.

Global”), has stated in recent public securities filings that in light of the inclusion in its custody agreements of provisions

relating to Article 8 it believes that a court would not treat custodied digital assets as part of its general estates in the event the

Coinbase Custodian were to experience insolvency.

Due to the novelty of digital asset custodial arrangements courts have not yet considered

this type of treatment for custodied digital assets and it is not possible to predict with certainty how they would rule in such a scenario.

If the Ether Custodians become subject to insolvency proceedings and a court were to rule that the custodied ether were part of such Ether

Custodian’s general estate and not the property of the Trust, then the Trust would be treated as a general unsecured creditor in

the Ether Custodian’s insolvency proceedings and the Trust could be subject to the loss of all or a significant portion of its assets.

Moreover, in the event of the bankruptcy of an Ether Custodian, an automatic stay could go into effect and protracted litigation could

be required in order to recover the assets held with such Ether Custodian, all of which could significantly and negatively impact the

Trust’s operations and the value of the Shares.

With respect to the Prime

Broker Agreement, there is a risk that the Trading Balance, in which the Trust’s ether and cash is held in omnibus accounts by the

Prime Broker, could be considered part of the Prime Broker’s bankruptcy estate in the event of the Prime Broker’s bankruptcy.

The Prime Broker Agreement contains an Article 8 opt-in clause with respect to the Trust’s assets held in the Trading Balance.

The amount of ether that may be held in the Trading Balance is limited to

the amount necessary to process a given creation or redemption transaction, as applicable, or to pay for Trust Expenses not assumed by

the Sponsor in consideration for the Sponsor Fee.

The Prime Broker is not required

to hold any of the ether or cash in the Trust’s Trading Balance in segregation.

Within the Trading Balance, the Prime Broker Agreement

provides that the Trust does not have an identifiable claim to any particular ether (and cash).

Instead, the Trust’s Trading Balance

represents an entitlement to a pro rata share of the ether (and cash) the Prime Broker has allocated to the omnibus wallets the Prime

Broker holds, as well as the accounts in the Prime Broker’s name that the Prime Broker maintains at Connected Trading Venues (which

are typically held on an omnibus, rather than segregated, basis).

If the Prime Broker suffers an insolvency event, there is a risk that

the Trust’s assets held in the Trading Balance could be considered part of the Prime Broker’s bankruptcy estate and the Trust

could be treated as a general unsecured creditor of the Prime Broker, which could result in losses for the Trust and Shareholders.

in the event of the bankruptcy of the Prime Broker, an automatic stay could go into effect and protracted litigation could be required

in order to recover the assets held with the Prime Broker, all of which could significantly and negatively impact the Trust’s operations

and the value of the Shares.

Under the Trust Agreement,

the Trustee and the Sponsor will not be liable for any liability or expense incurred, including, without limitation, as a result of any

loss of ether by the Ether Custodians or Prime Broker, absent willful misconduct, gross negligence, or bad faith on the part of the Trustee

or the Sponsor, fraud of the Sponsor or material breach by the Sponsor of the Trust Agreement, as the case may be.

As a result, the recourse

of the Trust or the Shareholders to the Trustee or the Sponsor, including in the event of a loss of ether by the Ether Custodians or the

Prime Broker, is limited.

The Shareholders’ recourse

against the Sponsor, the Trustee, and the Trust’s other service providers for the services they provide to the Trust, including,

without limitation, those relating to the holding of ether or the provision of instructions relating to the movement of ether, is limited.

For the avoidance of doubt, neither the Sponsor, the Trustee, nor any of their affiliates, nor any other party has guaranteed the assets

or liabilities, or otherwise assumed the liabilities, of the Trust, or the obligations or liabilities of any service provider to the Trust,

including, without limitation, the Ether Custodians and Prime Broker.

The Prime Broker Agreement and Custodial Services Agreements provide

that neither the Sponsor, the Trustee, nor their affiliates shall have any obligation of any kind or nature whatsoever, by guaranty, enforcement

or otherwise, with respect to the performance of any the Trust’s obligations, agreements, representations or warranties under the

Prime Broker Agreement or Custodial Services Agreements or any transactions thereunder.

Consequently, a loss may be suffered with respect

to the Trust’s ether that is not covered by the Ether Custodians’ insurance policies and for which no person is liable in

As a result, the recourse of the Trust or the Shareholders, under applicable law, is limited.

of a critical banking relationship for, or the failure of a bank used by, the Trust or the Prime Broker could adversely impact the Trust’s

ability to create or redeem Baskets, or could cause losses to the Trust.

the extent that the Trust or Prime Broker faces difficulty establishing or maintaining banking relationships, the loss of the Trust or

Prime Broker’s banking partners, the imposition of operational restrictions by these banking partners and the inability for the

Trust or the Prime Broker to utilize other financial institutions may result in a disruption of creation and redemption activity of the

Trust or the Prime Broker, or cause other operational disruptions or adverse effects for the Trust or the Prime Broker.

In the future,

it is possible that the Trust or the Prime Broker could be unable to establish accounts at new banking partners or establish new banking

relationships, or that the banks with which the Trust or the Prime Broker is able to establish relationships may not be as large or well-capitalized

or subject to the same degree of prudential supervision as the existing providers.

Trust could also suffer losses in the event that a bank in which the Trust holds assets fails, becomes insolvent, enters receivership,

is taken over by regulators, enters financial distress, or otherwise suffers adverse effects to its financial condition or operational

Recently, some banks have experienced financial distress.

For example, on March 8, 2023, the California Department of Financial

Protection and Innovation (“DFPI”) announced that Silvergate Bank had entered voluntary liquidation, and on March 10, 2023,

Silicon Valley Bank, (“SVB”), was closed by the DFPI, which appointed the FDIC as receiver.

Similarly, on March 12, 2023,

the New York Department of Financial Services took possession of Signature Bank and appointed the FDIC as receiver.

A joint statement

Treasury Department, the Federal Reserve and the FDIC on March 12, 2023, stated that depositors in Signature and SVB will

have access to all of their funds, including funds held in deposit accounts, in excess of the insured amount.

On May 1, 2023, First Republic

Bank was closed by the DFPI.

Following a bidding process, the FDIC entered into a purchase and assumption agreement with JPMorgan Chase

Bank, National Association, to acquire the substantial majority of the assets and assume certain liabilities of First Republic Bank from

Prime Broker has historically maintained banking relationships with Silvergate Bank and Signature Bank.

While the Sponsor does not believe

there is a direct risk to the Trust’s assets from the failures of Silvergate Bank or Signature Bank, in the future, changing circumstances

and market conditions, some of which may be beyond the Trust’s or the Sponsor’s control, could impair the Trust’s ability

to access the Trust’s cash held with the Prime Broker.

If the Prime Broker were to experience financial distress or its financial

condition is otherwise affected by the failure of its banking partners, the Prime Broker’s ability to provide services to the Trust

could be affected.

Moreover, the future failure of a bank at which the Prime Broker maintains customer cash could result in losses to

the Trust, to the extent the balances are not subject to deposit insurance, notwithstanding the regulatory requirements to which the

Prime Broker is subject or other potential protections.

any of the Custodial Services Agreements or Prime Broker Agreement is terminated or any of the Ether Custodians or Prime Broker fails

to provide services as required, the Trustee may need to find and appoint a replacement Ether Custodian or Prime Broker, which could

pose a challenge to the safekeeping of the Trust’s ether, and the Trust’s ability to continue to operate may be adversely

Trust is dependent on the Ether Custodians and the Prime Broker to operate.

The Ether Custodians perform essential functions in terms

of safekeeping the Trust’s ether in the Cold Vault Balance, and the Prime Broker facilitates the selling of ether by the Trust

to pay the Sponsor’s Fee and, to the extent applicable, other Trust expenses, and in extraordinary circumstances, to liquidate

If any of the Ether Custodians or Coinbase Inc.

fails to perform the functions they perform for the Trust, the Trust may be

unable to operate or create or redeem Baskets, which could force the Trust to liquidate or adversely affect the price of the Shares.

March 22, 2023, the Prime Broker and its parent, Coinbase Global, Inc.

(such parent, “Coinbase Global” and together with

Coinbase Inc., the “Relevant Coinbase Entities”) received a “Wells Notice” from the SEC staff stating that the

SEC staff made a “preliminary determination” to recommend that the SEC file an enforcement action against the Relevant Coinbase

Entities alleging violations of the federal securities laws, including the Exchange Act and the Securities Act.

According to Coinbase

Global’s public reporting company disclosure, based on discussions with the SEC staff, the Relevant Coinbase Entities believe these

potential enforcement actions would relate to aspects of the Relevant Coinbase Entities’ Coinbase Prime service, spot market, staking

service Coinbase Earn, and Coinbase Wallet, and the potential civil action may seek injunctive relief, disgorgement, and civil penalties.

On June 6, 2023, the SEC filed a complaint against the Relevant Coinbase Entities in federal district court in the Southern District

of New York, alleging, inter alia:

Loss of a critical banking

relationship for, or the failure of a bank used by, the Trust or the Prime Broker could adversely impact the Trust’s ability to

create or redeem Baskets, or could cause losses to the Trust.

To the extent that the Trust

or the Prime Broker faces difficulty establishing or maintaining banking relationships, the loss of the Trust or the Prime Broker’s

banking partners, the imposition of operational restrictions by these banking partners and the inability for the Trust or the Prime Broker

to utilize other financial institutions may result in a disruption of creation and redemption activity of the Trust or the Prime Broker,

or cause other operational disruptions or adverse effects for the Trust or the Prime Broker.

In the future, it is possible that the Trust

or the Prime Broker could be unable to establish accounts at new banking partners or establish new banking relationships, or that the

banks with which the Trust or the Prime Broker is able to establish relationships may not be as large or well-capitalized or subject to

the same degree of prudential supervision as the existing providers.

The Trust could also suffer

losses in the event that a bank in which the Trust holds assets fails, becomes insolvent, enters receivership, is taken over by regulators,

enters financial distress, or otherwise suffers adverse effects to its financial condition or operational status.

Recently, some banks

have experienced financial distress.

For example, on March 8, 2023, the California Department of Financial Protection and Innovation (“DFPI”)

announced that Silvergate Bank had entered voluntary liquidation, and on March 10, 2023, Silicon Valley Bank, (“SVB”), was

closed by the DFPI, which appointed the FDIC as receiver.

Similarly, on March 12, 2023, the New York Department of Financial Services

took possession of Signature Bank and appointed the FDIC as receiver.

A joint statement by the U.S.

Treasury Department, the Federal Reserve

and the FDIC on March 12, 2023, stated that depositors in Signature and SVB will have access to all of their funds, including funds held

in deposit accounts, in excess of the insured amount.

On May 1, 2023, First Republic Bank was closed by the DFPI, which appointed the

FDIC as receiver.

Following a bidding process, the FDIC entered into a purchase and assumption agreement with JPMorgan Chase Bank, National

Association, to acquire the substantial majority of the assets and assume certain liabilities of First Republic Bank from the FDIC.

The Prime Broker has historically

maintained banking relationships with Silvergate Bank and Signature Bank.

While the Sponsor does not believe there is a direct risk to

the Trust’s assets from the failures of Silvergate Bank or Signature Bank, in the future, changing circumstances and market conditions,

some of which may be beyond the Trust’s or the Sponsor’s control, could impair the Trust’s ability to access the Trust’s

cash held with the Prime Broker.

If the Prime Broker were to experience financial distress or its financial condition is otherwise affected

by the failure of its banking partners, the Prime Broker’s ability to provide services to the Trust could be affected.

the future failure of a bank at which the Prime Broker maintains customer cash could result in losses to the Trust, to the extent the

balances are not subject to deposit insurance, notwithstanding the regulatory requirements to which the Prime Broker is subject or other

potential protections.

If any of the Custodial

Services Agreements or the Prime Broker Agreement are terminated or the Ether Custodians or the Prime Broker fail to provide services

as required, the Trustee may need to find and appoint a replacement custodian or prime broker, which could pose a challenge to the safekeeping

of the Trust’s ether, and the Trust’s ability to continue to operate may be adversely affected.

The Trust is dependent on

the Ether Custodians as well as the Prime Broker to operate.

The Ether Custodians perform essential functions in terms of safekeeping

the Trust’s ether in the Cold Vault Balance, and the Prime Broker facilitates the selling of ether by the Trust to pay the Sponsor’s

Fee and, to the extent applicable, other Trust expenses, and in extraordinary circumstances, to liquidate the Trust.

If any of the Ether

Custodians or the Prime Broker fail to perform the functions they perform for the Trust, the Trust may be unable to operate or create

or redeem Baskets, which could force the Trust to liquidate or adversely affect the price of the Shares.

In March 2023, the Prime Broker

and Coinbase Global (together with Coinbase Inc., the “Relevant Coinbase Entities” received a “Wells Notice” from

the SEC staff stating that the SEC staff made a “preliminary determination” to recommend that the SEC file an enforcement

action against the Relevant Coinbase Entities alleging violations of the federal securities laws, including the Exchange Act and the Securities

According to Coinbase Global’s public reporting company disclosure, based on discussions with the SEC staff, the Relevant Coinbase

Entities believe these potential enforcement actions would relate to aspects of the Relevant Coinbase Entities’ Coinbase Prime service,

spot market, staking service Coinbase Earn, and Coinbase Wallet, and the potential civil action may seek injunctive relief, disgorgement,

and civil penalties.

In June 2023, the SEC filed a complaint against the Relevant Coinbase Entities in federal district court in the Southern

District of New York, alleging, inter alia:

(i) that Coinbase Inc.

has violated the Exchange Act by failing to register with the SEC as a national

securities exchange, broker-dealer, and clearing agency, in connection with activities involving certain identified digital assets that

the SEC’s complaint alleges are securities, (ii) that Coinbase Inc.

has violated the Securities Act by failing to register with

the SEC the offer and sale of its staking program, and (iii) that Coinbase Global is jointly and severally liable as a control person

has violated the Exchange Act by failing to register with the SEC as

a national securities exchange, broker-dealer, and clearing agency, in connection with activities involving certain identified digital

assets that the SEC’s complaint alleges are securities, (ii) that Coinbase Inc.

has violated the Securities Act by failing to register

with the SEC the offer and sale of its staking program, and (iii) that Coinbase Global is jointly and severally liable as a control person

under the Exchange Act for Coinbase Inc.’s violations of the Exchange Act to the same extent as Coinbase Inc.

4 unchanged sentences

action against the two entities.

The SEC’s complaint against the Relevant Coinbase Entities does not allege that ether is a security

nor does it allege that Coinbase Inc’s activities involving ether caused the alleged registration violations, and Coinbase Custodian

was not named as a defendant.

In the event of any future SEC or other governmental, regulatory or other enforcement action or litigation,

Coinbase Inc., as Prime Broker, could be required, as a result of a judicial determination, or could choose, to restrict or curtail the

services it offers, or its financial condition and ability to provide services to the Trust could be affected.

If the Prime Broker were

to be required or choose, as a result of a regulatory action or litigation, to restrict or curtail the services it offers, it could negatively

affect the Trust’s ability to operate or process creations or redemptions of Baskets, which could force the Trust to liquidate

or adversely affect the price of the Shares.

While Coinbase Custodian was not named in the complaint, if Coinbase Global, as the parent

of Coinbase Custodian, is required, as a result of a judicial determination, or could choose, to restrict or curtail the services its

subsidiaries provide to the Trust, or its financial condition is negatively affected, it could negatively affect the Trust’s ability

Alternatively,

the Trust could replace Coinbase Custodian as a custodian with custody of the Trust’s ether, pursuant to the Coinbase Custody Agreement.

Similarly, Coinbase Custodian or Coinbase Inc.

could terminate services under the Prime Broker Agreement respectively upon providing

the applicable notice to the Trust for any reason, or immediately for Cause (as defined below).

Transferring maintenance responsibilities

of the Trust’s account at Coinbase Custodian to another custodian will likely be complex and could subject the Trust’s ether

to the risk of loss during the transfer, which could have a negative impact on the performance of the Shares or result in loss of the

Trust’s assets.

The SEC’s complaint against the Relevant Coinbase Entities did not allege that ether is offered

or sold as a security nor did it allege that Coinbase Inc’s activities involving ether caused the alleged registration violations,

and the Coinbase Custodian was not named as a defendant.

In the event of any future SEC or other governmental, regulatory or other enforcement

action or litigation, Coinbase Inc., as Prime Broker, could be required, as a result of a judicial determination, or could choose, to

restrict or curtail the services it offers, or its financial condition and ability to provide services to the Trust could be affected.

If the Prime Broker were to be required or choose, as a result of a regulatory action or litigation, to restrict or curtail the services

it offers, it could negatively affect the Trust’s ability to operate or process creations or redemptions of Baskets, which could

force the Trust to liquidate or adversely affect the price of the Shares.

While Coinbase Custodian was not named in the complaint, if

Coinbase Global, as the parent of Coinbase Custodian, is required, as a result of a judicial determination, or could choose, to restrict

or curtail the services its subsidiaries provide to the Trust, or its financial condition is negatively affected, it could negatively

affect the Trust’s ability to operate.

Alternatively, the Trust could

replace the Coinbase Custodian as an Ether Custodian, pursuant to the Coinbase Custody Agreement.

Similarly, Coinbase Custodian or Coinbase

could terminate services under the Prime Broker Agreement respectively upon providing the applicable notice to the Trust for any

reason, or immediately for Cause (as such term is defined in the Prime Broker Agreement).

Transferring maintenance responsibilities of

the Trust’s accounts with the Ether Custodians to another custodian would likely be complex and could subject the Trust’s

ether to the risk of loss during the transfer, which could have a negative impact on the performance of the Shares or result in loss of

the Trust’s assets.

As Prime Broker, Coinbase Inc.

7 unchanged sentences

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 (d) a security or technology issue occurred and

is continuing that results in Coinbase Inc.

being unable to provide trading services or accept the Trust’s order, in each case,

subject to certain protections for the Trust.

Also, if Coinbase Custodian or Coinbase Inc.

become insolvent, suffer business failure,

cease business operations, default on or fail to perform their obligations under their contractual agreements with the Trust, or abruptly

discontinue the services they provide to the Trust for any reason, the Trust’s operations would be adversely affected.

Trustee may not be able to find a party willing to serve as an ether custodian of the Trust’s ether or as the Trust’s prime

broker under the same terms as the current Custodial Service Agreements or Prime Broker Agreement or at all.

To the extent that Trustee

is not able to find a suitable party willing to serve as an ether custodian or prime broker, the Trustee may be required to terminate

the Trust and liquidate the Trust’s ether.

In addition, to the extent that the Trustee finds a suitable party but must enter into

a new custodian agreement or prime broker agreement that is less favorable for the Trust or Trustee, the value of the Shares could be

adversely affected.

agreement with the Trade Credit Lender permits to be outstanding at any one time, or (d) a security or technology issue occurred and is

continuing that results in Coinbase Inc.

being unable to provide trading services or accept the Trust’s order, in each case, subject

to certain protections for the Trust.

Also, if the Coinbase Custodian or Coinbase Inc.

become insolvent, suffer business failure, cease

business operations, default on or fail to perform their obligations under their contractual agreements with the Trust, or abruptly discontinue

the services they provide to the Trust for any reason, the Trust’s operations would be adversely affected.

The Trustee may not be able

to find a party willing to serve as an ether custodian of the Trust’s ether or as the Trust’s prime broker under the same

terms as the current Custodial Service Agreements or Prime Broker Agreement or at all.

To the extent that Trustee is not able to find

a suitable party willing to serve as an ether custodian or prime broker, the Trustee may be required to terminate the Trust and liquidate

the Trust’s ether.

In addition, to the extent that the Trustee finds a suitable party but must enter into a modified custodial services

agreement or prime broker agreement that is less favorable for the Trust or Trustee, the value of the Shares could be adversely affected.

If the Trust is unable to find a replacement prime broker, its operations could be adversely affected.

Ether Custodians and Prime Broker may act in the same or similar capacity for other competing products.

the number of digital assets intermediaries with the reputation and operational capability to serve as custodian and/or prime broker

to the Trust or other competing products is limited.

The Ether Custodians and Prime Broker may act in the same or similar capacity for

other competing products, including exchange-traded products offering exposure to the spot ether market or other digital assets.

Trust is therefore subject to risks associated with these competing products utilizing the same service providers for ether custodial

and prime brokerage services.

the extent that exchange-traded products offering exposure to the spot ether market or other digital assets utilize substantially the

same service providers for ether custodial and prime brokerage services, this industry concentration may result in the development of

fewer other digital assets intermediaries with the reputation and operational capability to provide ether custodial and prime brokerage

services to the Trust or other competing products.

This, in turn, could make it difficult for the Trust to find and appoint a replacement

ether custodian or prime broker, to the extent the Sponsor deems such action necessary.

industry concentration also may have the effect of magnifying the risks associated with the Ether Custodians and Prime Broker, as operational

disruptions or adverse developments impacting the Ether Custodians or the Prime Broker may be felt on an industry-wide basis.

of confidence or breach of the Ether Custodians or Prime Broker may adversely affect not only the Trust and the value of an investment

in the Shares, but also these competing products utilizing the same service providers for ether custodial and prime brokerage services

and, more generally, exchange-traded products offering exposure to the spot ether market or other digital assets.

These industry-wide

adverse effects could result in a broader loss of confidence in exchange-traded products offering exposure to the spot ether market or

other digital assets, which could further impact the Trust and the value of an investment in the Shares.

Prime Broker routes orders through Connected Trading Venues in connection with trading services under the Prime Broker Agreement.

loss or failure of any such Connected Trading Venues may adversely affect the Prime Broker’s business and cause losses for the

connection with trading services under the Prime Broker Agreement, the Prime Broker routinely routes customer orders to Connected Trading

Venues, which are third-party exchanges or other trading venues (including the trading venue operated by the Prime Broker).

In connection

with these activities, the Prime Broker may hold ether with such Connected Trading Venues in order to effect customer orders, including

the Trust’s orders.

However, the Prime Broker has represented to the Sponsor that no customer cash is held at Connected Trading

If the Prime Broker were to experience a disruption in the Prime Broker’s access to these Connected Trading Venues, the

Prime Broker’s trading services under the Prime Broker Agreement could be adversely affected to the extent that the Prime Broker

is limited in its ability to execute order flow for its customers, including the Trust.

In addition, while the Prime Broker has policies

and procedures to help mitigate the Prime Broker’s risks related to routing orders through third-party trading venues, if any of

these third-party trading venues experience any technical, legal, regulatory, or other adverse events, such as shutdowns, delays, system

failures, suspension of withdrawals, illiquidity, insolvency, or loss of customer assets, the Prime Broker might not be able to fully

recover the customer’s ether that the Prime Broker has deposited with these third parties.

As a result, the Prime Broker’s

business, operating results and financial condition could be adversely affected, potentially resulting in its failure to provide services

to the Trust or perform its obligations under the Prime Broker Agreement, and the Trust could suffer resulting losses or disruptions

to its operations.

The failure of a Connected Trading Venue at which the Prime Broker maintains customer ether, including ether associated

with the Trust, could result in losses to the Trust, notwithstanding the regulatory requirements to which the Prime Broker is subject

or other potential protections.

disruption of the Internet may affect Ethereum operations, which may adversely affect the Ethereum industry and an investment in the

functionality of the Ethereum network relies on the Internet.

A significant disruption of Internet connectivity (i.e., affecting large

numbers of users or geographic regions) could disrupt the Ethereum network’s functionality and operations until the disruption

in the Internet is resolved.

A disruption in the Internet could adversely affect an investment in the Trust or the ability of the Trust

In particular, some variants of digital assets have experienced a number of denial-of-service attacks, which have led to

temporary delays in block creation and digital asset transfers.

While in certain cases in response to an attack, an additional “hard

fork” (discussed below) has been introduced to increase the cost of certain network functions, the relevant network has continued

to be the subject of additional attacks.

Moreover, it is possible that as ether increases in value, it may become a bigger target for

hackers and subject to more frequent hacking and denial-of-service attacks.

changes to the Ethereum network’s protocols and software could, if accepted and authorized by the Ethereum network community, adversely

affect an investment in the Trust.

Ethereum network uses a cryptographic protocol to govern the interactions within the Ethereum network.

A loose community of core developers

has evolved to informally manage the source code for the protocol.

Membership in the community of core developers evolves over time,

largely based on self-determined participation in the resource section dedicated to the Ethereum network on Github.com.

The core developers

can propose amendments to the Ethereum network’s source code that, if accepted by miners and users, could alter the protocols and

software of the Ethereum network and the properties of ether.

These alterations occur through software upgrades and could potentially

include changes to the irreversibility of transactions and limitations on the issuance of new ether, which could undermine the appeal

and market value of ether.

Alternatively, software upgrades and other changes to the protocols of the Ethereum network could fail to

work as intended or could introduce bugs, security risks, or otherwise adversely affect, the Ethereum network.

As a result, the Ethereum

network could be subject to new protocols and software in the future that may adversely affect an investment in the Trust.

open-source structure of the Ethereum network protocol means that the core developers and other contributors are generally not directly

compensated for their contributions in maintaining and developing the Ethereum network protocol.

A failure to properly monitor and upgrade

the Ethereum network protocol could damage the Ethereum network and an investment in the Trust.

Ethereum network operates based on an open-source protocol maintained by a group of core developers and other contributors, largely on

the GitHub resource section dedicated to development of the Ethereum network.

As the Ethereum network protocol is not sold or made available

subject to licensing or subscription fees and its use does not generate revenues for its development team, the core developers are generally

not compensated for maintaining and updating the source code for the Ethereum network protocol.

Consequently, there is a lack of financial

incentive for developers to maintain or develop the Ethereum network and the core developers may lack the resources to adequately address

emerging issues with the Ethereum network protocol.

Although the Ethereum network is currently supported by the core developers, there

can be no guarantee that such support will continue or be sufficient in the future.

Alternatively, entities whose interests are at odds

with other participants in the Ethereum network may seek to obtain control over the Ethereum network by influencing core developers.

For example, malicious actors could attempt to bribe a core developer or group of core developers to propose certain changes to the network

core developers.

addition, a bad actor could also attempt to interfere with the operation of the Ethereum network by attempting to exercise a malign influence

over a core developer.

To the extent that material issues arise with the Ethereum network protocol and the core developers and open-source

contributors are unable to address the issues adequately or in a timely manner, the Ethereum network and an investment in the Trust may

be adversely affected.

Decentralized

governance of the Ethereum network could have a negative impact on the performance of the Trust.

of decentralized networks, such as the Ethereum network, is achieved through voluntary consensus and open competition.

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, a seemingly

simple technical issue once divided the Bitcoin network community:

namely, whether to increase the block size of the blockchain or implement

another change to increase the scalability of bitcoin, known as “segregated witness,” and help it continue to grow.

Factors — The Ethereum network faces scaling challenges and efforts to increase the volume of transactions may not be successful.”

The Ether Custodians

and the Prime Broker may act in the same or similar capacity for other competing products.

Currently, the number of digital

assets intermediaries with the reputation and operational capability to serve as custodian and/or prime broker to the Trust or other competing

products is limited.

The Ether Custodians and Prime Broker may act in the same or similar capacity for other competing products, including

exchange-traded products offering exposure to the spot ether market or other digital assets.

The Trust is therefore subject to risks associated

with these competing products utilizing the same service providers for ether custodial and prime brokerage services.

To the extent that exchange-traded

products offering exposure to the spot ether market or other digital assets utilize substantially the same service providers for ether

custodial and prime brokerage services, this industry concentration may result in the development of fewer other digital assets intermediaries

with the reputation and operational capability to provide ether custodial and prime brokerage services to the Trust or other competing

This, in turn, could make it difficult for the Trust to find and appoint a replacement ether custodian or prime broker, to the

extent the Sponsor deems such action necessary.

This industry concentration

also may have the effect of magnifying the risks associated with the Ether Custodians and Prime Broker, as operational disruptions or

adverse developments impacting the Ether Custodians or the Prime Broker may be felt on an industry-wide basis.

A loss of confidence in

or breach of the Ether Custodians or breach of an Ether Custodian or the Prime Broker may adversely affect not only the Trust and the

value of an investment in the Shares, but also these competing products utilizing the same service providers for ether custodial and prime

brokerage services and, more generally, exchange-traded products offering exposure to the spot ether market or other digital assets.

industry-wide adverse effects could result in a broader loss of confidence in exchange-traded products offering exposure to the spot ether

market or other digital assets, which could further impact the Trust and the value of an investment in the Shares.

The Prime Broker routes

orders through Connected Trading Venues in connection with trading services under the Prime Broker Agreement.

The loss or failure of any

such Connected Trading Venues may adversely affect the Prime Broker’s business and cause losses for the Trust.

In connection with trading

services under the Prime Broker Agreement, the Prime Broker routinely routes customer orders to Connected Trading Venues, which are third-party

exchanges or other trading venues (including the trading venue operated by the Prime Broker).

In connection with these activities, the

Prime Broker may hold ether with such Connected Trading Venues in order to effect customer orders, including the Trust’s orders.

However, the Prime Broker has represented to the Sponsor that no customer cash is held at Connected Trading Venues.

If the Prime Broker

were to experience a disruption in the Prime Broker’s access to these Connected Trading Venues, the Prime Broker’s trading

services under the Prime Broker Agreement could be adversely affected to the extent that the Prime Broker is limited in its ability to

execute order flow for its customers, including the Trust.

In addition, while the Prime Broker has policies and procedures to help mitigate

the Prime Broker’s risks related to routing orders through third-party trading venues, if any of these third-party trading venues

experience any technical, legal, regulatory, or other adverse events, such as shutdowns, delays, system failures, suspension of withdrawals,

illiquidity, insolvency, or loss of customer assets, the Prime Broker might not be able to fully recover the customer’s ether that

the Prime Broker has deposited with these third parties.

As a result, the Prime Broker’s business, operating results and financial

condition could be adversely affected, potentially resulting in its failure to provide services to the Trust or perform its obligations

under the Prime Broker Agreement, and the Trust could suffer resulting losses or disruptions to its operations.

The failure of a Connected

Trading Venue at which the Prime Broker maintains customer ether, including ether associated with the Trust, could result in losses to

the Trust, notwithstanding the regulatory requirements to which the Prime Broker is subject or other potential protections.

A disruption of the

Internet may affect Ethereum operations, which may adversely affect the Ethereum industry and an investment in the Trust.

The functionality of the Ethereum

network relies on the Internet.

A significant disruption of Internet connectivity (i.e., affecting large numbers of users or geographic

regions) could disrupt the Ethereum network’s functionality and operations until the disruption in the Internet is resolved.

in the Internet could adversely affect an investment in the Trust or the ability of the Trust to operate.

In particular, some variants

of digital assets have experienced a number of denial-of-service attacks, which have led to temporary delays in block creation and digital

asset transfers.

While in certain cases in response to an attack, an additional “hard fork” (discussed below) has been introduced

to increase the cost of certain network functions, the relevant network has continued to be the subject of additional attacks.

it is possible that as ether increases in value, it may become a bigger target for hackers and subject to more frequent hacking and denial-of-service

Potential changes to

the Ethereum network’s protocols and software could, if accepted and authorized by the Ethereum network community, adversely affect

an investment in the Trust.

The Ethereum network uses

a cryptographic protocol to govern the interactions within the Ethereum network.

A loose community of core developers has evolved to informally

manage the source code for the protocol.

Membership in the community of core developers evolves over time, largely based on self-determined

participation in the resource section dedicated to the Ethereum network on Github.com.

The core developers can propose amendments to the

Ethereum network’s source code that, if accepted by miners and users, could alter the protocols and software of the Ethereum network

and the properties of ether.

These alterations occur through software upgrades and could potentially include changes to the irreversibility

of transactions and limitations on the issuance of new ether, which could undermine the appeal and market value of ether.

Alternatively,

software upgrades and other changes to the protocols of the Ethereum network could fail to work as intended or could introduce bugs, security

risks, or otherwise adversely affect, the Ethereum network.

As a result, the Ethereum network could be subject to new protocols and software

in the future that may adversely affect an investment in the Trust.

The open-source structure

of the Ethereum network protocol means that the core developers and other contributors are generally not directly compensated for their

contributions in maintaining and developing the Ethereum network protocol.

A failure to properly monitor and upgrade the Ethereum network

protocol could damage the Ethereum network and an investment in the Trust.

The Ethereum network operates

based on an open-source protocol maintained by a group of core developers and other contributors, largely on the GitHub resource section

dedicated to development of the Ethereum network.

As the Ethereum network protocol is not sold or made available subject to licensing

or subscription fees and its use does not generate revenues for its development team, the core developers are generally not compensated

for maintaining and updating the source code for the Ethereum network protocol.

Consequently, there is a lack of financial incentive for

developers to maintain or develop the Ethereum network and the core developers may lack the resources to adequately address emerging issues

with the Ethereum network protocol.

Although the Ethereum network is currently supported by the core developers, there can be no guarantee

that such support will continue or be sufficient in the future.

Alternatively, entities whose interests are at odds with other participants

in the Ethereum network may seek to obtain control over the Ethereum network by influencing core developers.

For example, malicious actors

could attempt to bribe a core developer or group of core developers to propose certain changes to the network core developers.

In addition, a bad actor could

also attempt to interfere with the operation of the Ethereum network by attempting to exercise a malign influence over a core developer.

To the extent that material issues arise with the Ethereum network protocol and the core developers and open-source contributors are unable

to address the issues adequately or in a timely manner, the Ethereum network and an investment in the Trust may be adversely affected.

Decentralized governance

of the Ethereum network could have a negative impact on the performance of the Trust.

Governance of decentralized

networks, such as the Ethereum network, is achieved through voluntary consensus and open competition.

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, a seemingly simple technical issue

once divided the Bitcoin network community:

namely, whether to increase the block size of the blockchain or implement another change to

increase the scalability of bitcoin, known as “segregated witness,” and help it continue to grow.

See “ Risk Factors—The

Ethereum network faces scaling challenges and efforts to increase the volume of transactions may not be successful .”

To the extent lack of clarity

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Authorized Participants, as broker-dealers, and the Ether Custodians, as a limited

purpose trust company subject to New York Banking Law, are subject to the U.S.

Bank Secrecy Act (as amended) (“BSA”) and U.S.

purpose trust company subject to New York Banking Law, in the case of the Coinbase Custodian and BitGo New York Custodian, and the National

Bank Act of 1864, in the case of the BitGo Custodian and Anchorage Custodian, are subject to the U.S.

Bank Secrecy Act (as amended) (“BSA”)

economic sanctions laws.

In addition, the Trust will only accept creations and redemption requests from regulated Authorized Participants

who themselves are subject to applicable sanctions and anti-money laundering laws and have compliance programs that are designed to ensure

compliance with those laws.

In addition, Ether Counterparties will be contractually obligated that all ether they deliver to the Trust

will be from lawful sources.

The Trust will not hold any ether except those that have been delivered by an Ether Counterparty in connection

with creation requests.

In addition, the Trust will only accept creations and redemption requests from regulated Authorized

Participants who themselves are subject to applicable sanctions and anti-money laundering laws and have compliance programs that are designed

to ensure compliance with those laws.

In addition, Ether Counterparties will be contractually obligated that all ether they deliver to

the Trust will be from lawful sources.

The Trust will not hold any ether except those that have been delivered by an Ether Counterparty

in connection with creation requests.

The Ether Custodians have

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to ensure that the origins of that ether are not illicit.

In accordance with their regulatory

obligations, the Authorized Participants conduct customer due diligence and enhanced due diligence on their counterparties, which enable

them to determine each counterparty’s AML and other risks and assign an appropriate risk rating.

As part of their counterparty

onboarding processes, the Authorized Participants use third-party services to screen prospective counterparties against various watch

lists, including the Specially Designated Nationals List of the OFAC and countries and territories identified as non-cooperative by the

Financial Action Task Force.

There is no guarantee that

8 unchanged sentences

The actual or perceived

use of ether and other digital assets in illicit transactions, which may adversely affect the ether industry and an investment in the

use of ether and other digital assets in illicit transactions may adversely affect the ether industry and an investment in the Trust.

Recent years have seen digital

1 unchanged sentence

an investment fraud currency.

Although the number of cases involving cryptocurrencies for the financing of terrorism remains limited,

criminals have nonetheless become more sophisticated in their use of digital assets.

Although the number of cases involving digital assets for the financing of terrorism remains limited, criminals

have nonetheless become more sophisticated in their use of digital assets.

Although ether transaction

3 unchanged sentences

Further, identifying users can be made even more difficult where a user utilizes

a tumbling or mixing services (e.g., Tornado Cash) to further obfuscate transaction details.

a tumbling or mixing service (e.g., Tornado Cash) to further obfuscate transaction details.

The ether industry and an

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the economic benefit of a “fork” or an “airdrop” could adversely impact an investment in the Trust.

The only digital asset to

be held by the Trust will be ether.

The only digital asset to be held by the Trust is ether.

From time to time, the Trust

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amend its listing rules.

If such regulatory approval is received, the Trust will notify the owners of the beneficial interests of Shares

in a prospectus supplement, in its periodic Exchange Act reports, as applicable, and on the Sponsor’s website.

Investors should be aware

110 unchanged sentences

Ethereum may become subject

to an occurrence similar to a fork, which is known as an “airdrop.” In an airdrop, the promotors of a new digital asset announce

to an occurrence similar to a fork, which is known as an “airdrop.” In an airdrop, the promoters of a new digital asset announce

to holders of another digital asset that they will be entitled to claim a certain amount of the new digital asset for free, based on the

33 unchanged sentences

the switch to proof-of-stake validation, the Ethereum network is currently vulnerable to several types of attacks including:

● “>33% attack” where, if a validator or group

of validators were to gain control of more than 33% of the total staked ETH on the Ethereum network, a malicious actor could temporarily

impede or delay block confirmation or even cause a temporary fork in the blockchain.

● “>50% attack” where, if a validator or group

of validators acting in concert were to gain control of more than 50% of the total staked ETH on the Ethereum network, a malicious actor

would be able to gain full control of the Ethereum network and the ability to manipulate the blockchain on a forward-looking basis, including

censoring transactions following the achievement of threshold, double-spending and fraudulent block propagation, while the attacker maintains

the threshold.

In theory, the minority non-attackers might reach social consensus to reject blocks proposed by the malicious majority

attacker, reducing the attacker’s ability to engage in malicious activity, but there can be no assurance this would happen or that

non-attackers would be able to coordinate effectively.

● “>66% attack” where, if a validator or group

of validators acting in concert were to gain control of more than 66% of the total staked ETH on the Ethereum network, a malicious actor

could permanently and irreversibly manipulate the blockchain, including censorship, double-spending and fraudulent block propagation,

both on a forward- and backward-looking basis.

The attacker could unilaterally finalize their preferred chain without the votes of any

other stakers, and could also reverse past finalized blocks.

The attacker can simply vote for their preferred fork and then finalize

it, simply because they can vote with a dishonest supermajority.

“>33% attack” where, if a validator or group of validators were to gain control of more than 33% of the total staked ETH on the Ethereum network, a malicious actor could temporarily impede or delay block confirmation or even cause a temporary fork in the blockchain.

“>50% attack” where, if a validator or group of validators acting in concert were to gain control of more than 50% of the total staked ETH on the Ethereum network, a malicious actor would be able to gain full control of the Ethereum network and the ability to manipulate the blockchain on a forward-looking basis, including censoring transactions following the achievement of threshold, double-spending and fraudulent block propagation, while the attacker maintains the threshold.

In theory, the minority non-attackers might reach social consensus to reject blocks proposed by the malicious majority attacker, reducing the attacker’s ability to engage in malicious activity, but there can be no assurance this would happen or that non-attackers would be able to coordinate effectively.

“>66% attack” where, if a validator or group of validators acting in concert were to gain control of more than 66% of the total staked ETH on the Ethereum network, a malicious actor could permanently and irreversibly manipulate the blockchain, including censorship, double-spending and fraudulent block propagation, both on a forward- and backward-looking basis.

The attacker could unilaterally finalize their preferred chain without the votes of any other stakers, and could also reverse past finalized blocks.

The attacker can simply vote for their preferred fork and then finalize it, simply because they can vote with a dishonest supermajority.

At 50% of the staked ether,

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extended downtimes.

If validators’ staked ether are slashed by the Ethereum network, their assets may be confiscated, withdrawn,

or burnt by the network, resulting in losses to them.

Furthermore, the Ethereum network requires the payment of base fees and the practice

of paying tips is common, and such fees can become significant as the amount and complexity of the transaction grows, depending on the

degree of network congestion and the price of ether.

Any cybersecurity attacks, security issues, hacks, penalties, slashing events, or

other problems could damage validators’ willingness to participate in validation, discourage existing and future validators from

serving as such, and adversely impact the Ethereum network’s adoption or the price of ether.

Any disruption of validation on the

Ethereum network could interfere with network operations and cause the Ethereum network to be less attractive to users and application

developers than competing blockchain networks, which could cause the price of ether to decrease.

Such penalties include the reduction of staking rewards for malicious actors and poorly performing validators and

the “blacklisting” of such actors which may result in ether tokenholders no longer delegating their stakes to such actors

thereby resulting in such actors not being selected to validate in the future.

Should any of the Trust’s Staking Services Providers

engage in malicious activity or perform poorly, then such Staking Services Providers may be blacklisted which could negatively impact

the Trust’s abilities to engage in Staking Activities and/or otherwise result in the Trust earning reduced staking rewards.

If validators’

staked ether are slashed by the Ethereum network, their assets may be confiscated, withdrawn, or burnt by the network, resulting in losses

Furthermore, the Ethereum network requires the payment of base fees and the practice of paying tips is common, and such fees

can become significant as the amount and complexity of the transaction grows, depending on the degree of network congestion and the price

Any cybersecurity attacks, security issues, hacks, penalties, slashing events, or other problems could damage validators’

willingness to participate in validation, discourage existing and future validators from serving as such, and adversely impact the Ethereum

network’s adoption or the price of ether.

Any disruption of validation on the Ethereum network could interfere with network operations

and cause the Ethereum network to be less attractive to users and application developers than competing blockchain networks, which could

cause the price of ether to decrease.

The Sponsor’s

receipt of a portion of staking rewards may create conflicts of interest.

The Sponsor’s Staking Portion is comprised of an aggregate of

25% of the Staking Consideration.

Of the Sponsor’s Staking Portion, the Sponsor pays the Staking Services Provider for its services

under the Staking Services Agreement and the Trust’s ether custodians in connection with staking activities.

The Trust receives

and retains the remainder of the gross Staking Consideration.

This arrangement creates a financial incentive for the Sponsor to maximize

the amount of ether staked by the Trust, as higher levels of staked ether would generally result in greater staking rewards to the Sponsor.

However, the Sponsor’s interest in maximizing staking rewards may conflict with the Trust’s need to maintain sufficient liquid

ether to meet redemption requests and other operational requirements.

If the Sponsor directs the Trust to stake excessive amounts of ether

relative to the Trust’s liquidity needs, the Trust could become unable to timely meet redemption requests in amounts that are greater

than the portion of the Trust’s ether that remains unstaked, leading to temporary delays in settlement and, in extreme scenarios,

the temporary unavailability of the Trust’s redemption program.

While the Trust’s staking

policies are designed to balance expected yield against potential risks and is based on various factors including historical redemption

patterns and liquidity analysis, the Sponsor has sole discretion in determining the amount of ether to stake.

Shareholders have no ability

to influence or override the Sponsor’s determinations regarding staking levels.

The Sponsor’s financial interest in staking

rewards may cause it to prioritize staking income over maintaining adequate liquidity reserves, particularly during periods when staking

yields are attractive relative to the costs and risks of maintaining liquid ether reserves.

Any inability to meet redemption

requests in a timely manner due to excessive staking could harm Authorized Participants’ ability to effectively arbitrage the Trust’s

Shares, potentially causing the Shares to trade at significant premiums or discounts to NAV.

This could result in Shareholders being

unable to exit their positions at fair value or being forced to accept delays in redemption processing, either of which could cause substantial

losses to Shareholders.

The Ethereum network

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asset network is less susceptible to manipulation or capture.

As of December 31, 2024,

the Ethereum network handled approximately 15 transactions per second.

In an effort to increase the volume of transactions that can be

processed on a given digital asset network, many digital assets are being upgraded with various features to increase the speed and throughput

of digital asset transactions.

As corresponding increases in throughput lag behind growth in the use of digital asset networks, average

fees and settlement times may increase considerably.

For example, the Ethereum network has been, at times, at capacity, which has led

to increased transaction fees.

In December 2017, the popularity of the blockchain-based game Cryptokitties led to significant network

congestion on the Ethereum network.

The game, which allows players to trade and create virtual kitties, represented by non-fungible tokens

(“NFTs”), was reported by some sources to have accounted for more than 10% of the entire Ethereum network traffic at the

time causing increases in transaction fees and delays in transaction processing times, and driving Ethereum network traffic to a reported

then-all time high.

Since January 1, 2020, ether transaction fees have increased from $0.08 average daily transaction fees per ether

transaction, to a high of up to approximately $[200] (in ether) average daily transaction fees per transaction on [April 30, 2022].

of December 31, 2024, ether transaction fees stood at $[●] (in Ether) per transaction, on average.

Increased fees and decreased

settlement speeds could preclude certain uses for ether (e.g., micropayments), and could reduce demand for, and the price of, ether,

which could adversely impact the value of the Shares.

As of December 31, 2024, the

Ethereum network handled approximately 15 transactions per second.

In an effort to increase the volume of transactions that can be processed

on a given digital asset network, many digital assets are being upgraded with various features to increase the speed and throughput of

digital asset transactions.

As corresponding increases in throughput lag behind growth in the use of digital asset networks, average fees

and settlement times may increase considerably.

For example, the Ethereum network has been, at times, at capacity, which has led to increased

transaction fees.

In December 2017, the popularity of the blockchain-based game Cryptokitties led to significant network congestion on

the Ethereum network.

The game, which allows players to trade and create virtual kitties, represented by non-fungible tokens (“NFTs”),

was reported by some sources to have accounted for more than 10% of the entire Ethereum network traffic at the time causing increases

in transaction fees and delays in transaction processing times, and driving Ethereum network traffic to a reported then-all time high.

Since January 1, 2020, ether transaction fees have increased from $0.08 average daily transaction fees per ether transaction, to a high

of up to approximately $200 (in ether) average daily transaction fees per transaction on April 30, 2022.

As of December 31, 2025, ether

transaction fees stood at $0.15 (in Ether) per transaction, on average.

Increased fees and decreased settlement speeds could preclude

certain uses for ether (e.g., micropayments), and could reduce demand for, and the price of, ether, which could adversely impact the value

of the Shares.

In the second half of 2020,

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Increased fees and decreased

settlement speeds could preclude use cases for ether and could reduce demand for and the price of ether, which could adversely impact

the value of the Shares.

The implementation of Ethereum

2.0 has increased the speed and efficiency of the Ethereum network.

However, there is no guarantee that any of the mechanisms in place

or being explored for increasing the scale of settlement of Ethereum network transactions will be effective, or how long these mechanisms

will take to become effective, which could adversely impact an investment in the Shares.

settlement speeds could preclude certain use cases for ether (e.g., micropayments), and can reduce demand for and the price of ether,

which could adversely impact the value of the Shares.

There is no guarantee that any of the mechanisms in place or being explored for

increasing the scale of settlement of transactions in ether will be effective, or how long these mechanisms will take to become effective,

which could adversely impact an investment in the Shares.

Smart contracts are

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are strong arguments that ether is not a “security” under the federal securities laws.

See Risk Factors — Future legal

or regulatory developments may negatively affect the value of ether or require the Trust or the Sponsor to become registered with the

SEC or CFTC, which may cause the Trust to incur unforeseen expenses or liquidate.

Regulatory changes or guidance that result in other

virtual currencies not meeting the definition of “security” will reduce advantages associated with ether’s current regulatory

status, which could adversely impact an investment in the Shares.

Promoters of other digital assets claim that those digital assets have

solved certain of the purported drawbacks of the Ethereum network, for example, allowing faster settlement times, reducing transaction

fees, or reducing electricity usage in connection with validating.

If these digital assets are successful, such success could reduce demand

for ether and adversely affect the value of ether and an investment in the Trust.

It is currently unclear which digital assets, if any,

will become and remain dominant, as the sector continues to innovate and evolve.

Changes in the viability of any digital asset ecosystem

may adversely impact pricing and liquidity of ether and, therefore, of the Trust.

See “ Risk Factors—Future

legal or regulatory developments may negatively affect the value of ether or require the Trust or the Sponsor to become registered with

the SEC or CFTC, which may cause the Trust to incur unforeseen expenses or liquidate .” Regulatory changes or guidance that result

in other virtual currencies not meeting the definition of “security” will reduce advantages associated with ether’s

current regulatory status, which could adversely impact an investment in the Shares.

Promoters of other digital assets claim that those

digital assets have solved certain of the purported drawbacks of the Ethereum network, for example, allowing faster settlement times,

reducing transaction fees, or reducing electricity usage in connection with validating.

If these digital assets are successful, such success

could reduce demand for ether and adversely affect the value of ether and an investment in the Trust.

It is currently unclear which digital

assets, if any, will become and remain dominant, as the sector continues to innovate and evolve.

Changes in the viability of any digital

asset ecosystem may adversely impact pricing and liquidity of ether and, therefore, of the Trust.

Competition from central

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incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could have an advantage in competing

with, or replacing, ether and other cryptocurrencies as a medium of exchange or store of value.

with, or replacing, ether and other digital assets as a medium of exchange or store of value.

Central banks and other governmental entities

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be affected due to stablecoins, the activities of stablecoin issuers and their regulatory treatment.

While the Trust does not invest in stablecoins, it may nonetheless

be exposed to these and other risks that stablecoins pose for the ether market through its investment in ether.

Stablecoins are digital

assets designed to have a stable value over time as compared to typically volatile digital assets, and are typically marketed as being

pegged to a fiat currency, such as the U.S.

Although the prices of stablecoins are intended to be stable, in many cases their

prices fluctuate, sometimes significantly.

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, some

have argued that some stablecoins, particularly Tether, are improperly issued without sufficient backing in a way that could cause artificial

rather than genuine demand for ether, raising its price, and also argue that those associated with certain stablecoins are involved in

laundering money.

On February 17, 2021 the New York Attorney General entered an agreement 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 that it maintained sufficient U.S.

reserves to back every Tether stablecoin in circulation with the “equivalent amount of corresponding fiat currency” held by

Tether were untrue.

Stablecoins are reliant on the U.S.

banking system

treasuries, and the failure of either to function normally could impede the function of stablecoins, and therefore could adversely

affect the value of the Shares.

Given the role that stablecoins play in global digital asset markets, their fundamental liquidity can

have a dramatic impact on the broader digital asset market, including the market for ether.

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 regulatory concerns about stablecoin issuers or intermediaries, such as ether spot markets, that support stablecoins,

could impact individuals’ willingness to trade on trading venues that rely on stablecoins and could impact the price of ether, and

in turn, an investment in the Shares.

While the Trust does not invest

in stablecoins, it may nonetheless be exposed to these and other risks that stablecoins pose for the ether market through its investment

Stablecoins are digital assets designed to have a stable value over time as compared to typically volatile digital assets, and

are typically marketed as being pegged to a fiat currency, such as the U.S.

Although the prices of stablecoins are intended to

be stable, in many cases their prices fluctuate, sometimes significantly.

This volatility has in the past apparently impacted the price

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, some have argued that some stablecoins, particularly Tether, are improperly issued without sufficient

backing in a way that could cause artificial rather than genuine demand for ether, raising its price, and also argue that those associated

with certain stablecoins are involved in laundering money.

On February 17, 2021 the New York Attorney General entered into an agreement

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.

In October 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 that it maintained

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.

Stablecoins are reliant on

banking system and U.S.

treasuries, and the failure of either to function normally could impede the function of stablecoins,

and therefore could adversely affect the value of the Shares.

Given the role that stablecoins play in global digital asset markets, their

fundamental liquidity can have a dramatic impact on the broader digital asset market, including the market for ether.

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 regulatory concerns about stablecoin issuers or intermediaries, such as ether spot markets, that support

stablecoins, could impact individuals’ willingness to trade on trading venues that rely on stablecoins and could impact the price

of ether, and in turn, an investment in the Shares.

Operational cost

may exceed the award for validating transaction, and increased transaction fees may adversely affect the usage of the Ethereum network.

may exceed the award for validating transaction fees, and increased transaction fees may adversely affect the usage of the Ethereum network.

If transaction confirmation

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following risks could materially adversely affect the value of the Shares:

● A reduction in the processing power expended by validators

on the Ethereum network could increase the likelihood of a malicious actor or botnet (a volunteer or hacked collection of computers controlled

by networked software coordinating the actions of the computers) obtaining control.

● Validators have historically accepted relatively low transaction

confirmation fees on most digital asset networks.

If validators demand higher transaction fees for recording transactions in the Ethereum

blockchain or a software upgrade automatically charges fees for all transactions on the Ethereum network, the cost of using ether may

increase and the marketplace may be reluctant to accept ether as a means of payment.

Alternatively, validators could collude in an anti-competitive

manner to reject low transaction fees on the Ethereum network and force users to pay higher fees, thus reducing the attractiveness of

the Ethereum network.

Higher transaction confirmation fees resulting through collusion or otherwise may adversely affect the attractiveness

of the Ethereum network, the value of ether and the value of the Shares.

● To the extent that any validators cease to record transactions

that do not include the payment of a transaction fee in blocks or do not record a transaction because the transaction fee is too low,

such transactions will not be recorded on the Ethereum blockchain until a block is validated by a validator who does not require the

payment of transaction fees or is willing to accept a lower fee.

Any widespread delays or disruptions in the recording of transactions

could result in a loss of confidence in the Ethereum network and could prevent the Trust from completing transactions associated with

the day-to-day operations of the Trust, including creations and redemptions of the Shares in exchange for ether with Authorized Participants.

● During the course of the block validation processes, validators

exercise the discretion to select which transactions to include within a block and in what order to include these transactions.

the standard block reward and transaction fees, validators have the ability to extract what is known as Maximal Extractable Value (“MEV”)

by strategically choosing, reordering, or excluding certain transactions during block production in return for increased transaction

fees or other forms of profit for such validators.

In blockchain networks that facilitate DeFi protocols in particular, such as the Ethereum

network, users may attempt to gain an advantage over other users by offering additional fees to validators for effecting the order or

inclusions of transactions within a block.

Certain software solutions, such as MEV Boost by Flashbots, have been developed which facilitate

validators and other parties in the ecosystem in capturing MEV.

The presence of MEV may incentivize associated practices such as sandwich

attacks or front running that can have negative repercussions on DeFi users.

A “sandwich attack” is executed by placing two

transactions around a large, detected transaction to capitalize on the expected price impact.

For instance, a market participant might

identify a sizable transaction within the mempool that will significantly alter an asset’s price on a decentralized exchange.

participant could then for example orchestrate a transaction bundle:

one transaction to acquire the asset prior to the detected transaction,

followed by the large transaction itself, and a final transaction to sell the asset after the market price has increased due to the large

transaction’s execution.

Such transaction bundles can be submitted to validators through mechanisms like MEV-Boost, with validators

receiving a share of the profits as an incentive to include the specific transaction bundle in the block.

In the context of MEV, “front

running” is said to occur when a user spots a transaction in the publicly visible so-called memory pool (“mempool”)

of pending but unexecuted transactions awaiting validation, and then pays a high transaction fee to a validator to have their transaction

executed on a priority basis in a manner designed to profit from the pending but unexecuted transaction that is still in the mempool.

MEV may also compromise the predictability of transaction execution, which may deter usage of the network as a whole.

Although based

on widely available information given that transactions in the mempool are publicly visible, any potential perception of MEV as unfair

manipulation may also discourage users and other stakeholders from engaging with DeFi protocols or the Ethereum network in general.

addition, it’s possible regulators or legislators could enact rules which restrict practices associated with MEV, which could diminish

the popularity of the Ethereum network among users and validators.

Any of these or other outcomes related to MEV may adversely affect

the value of ether and the value of the Shares.

● A reduction in the processing

power expended by validators on the Ethereum network could increase the likelihood of a malicious actor or botnet (a volunteer or hacked

collection of computers controlled by networked software coordinating the actions of the computers) obtaining control.

● Validators have historically

accepted relatively low transaction confirmation fees on most digital asset networks.

If validators demand higher transaction fees for

recording transactions in the Ethereum blockchain or a software upgrade automatically charges fees for all transactions on the Ethereum

network, the cost of using ether may increase and the marketplace may be reluctant to accept ether as a means of payment.

Alternatively,

validators could collude in an anti-competitive manner to reject low transaction fees on the Ethereum network and force users to pay

higher fees, thus reducing the attractiveness of the Ethereum network.

Higher transaction confirmation fees resulting through collusion

or otherwise may adversely affect the attractiveness of the Ethereum network, the value of ether and the value of the Shares.

● To the extent that any validators

cease to record transactions that do not include the payment of a transaction fee in blocks or do not record a transaction because the

transaction fee is too low, such transactions will not be recorded on the Ethereum blockchain until a block is validated by a validator

who does not require the payment of transaction fees or is willing to accept a lower fee.

Any widespread delays or disruptions in the

recording of transactions could result in a loss of confidence in the Ethereum network and could prevent the Trust from completing transactions

associated with the day-to-day operations of the Trust, including creations and redemptions of the Shares in exchange for ether with

Authorized Participants.

● During the course of the block

validation processes, validators exercise the discretion to select which transactions to include within a block and in what order to

include these transactions.

Beyond the standard block reward and transaction fees, validators have the ability to extract what is known

as Maximal Extractable Value (“MEV”) by strategically choosing, reordering, or excluding certain transactions during block

production in return for increased transaction fees or other forms of profit for such validators.

In blockchain networks that facilitate

DeFi protocols in particular, such as the Ethereum network, users may attempt to gain an advantage over other users by offering additional

fees to validators for effecting the order or inclusions of transactions within a block.

Certain software solutions, such as MEV Boost

by Flashbots, have been developed which facilitate validators and other parties in the ecosystem in capturing MEV.

The presence of MEV

may incentivize associated practices such as sandwich attacks or front running that can have negative repercussions on DeFi users.

“sandwich attack” is executed by placing two transactions around a large, detected transaction to capitalize on the expected

price impact.

For instance, a market participant might identify a sizable transaction within the mempool that will significantly alter

an asset’s price on a decentralized exchange.

The participant could then for example orchestrate a transaction bundle:

one transaction

to acquire the asset prior to the detected transaction, followed by the large transaction itself, and a final transaction to sell the

asset after the market price has increased due to the large transaction’s execution.

Such transaction bundles can be submitted

to validators through mechanisms like MEV-Boost, with validators receiving a share of the profits as an incentive to include the specific

transaction bundle in the block.

In the context of MEV, “front running” is said to occur when a user spots a transaction

in the publicly visible so-called memory pool (“mempool”) of pending but unexecuted transactions awaiting validation, and

then pays a high transaction fee to a validator to have their transaction executed on a priority basis in a manner designed to profit

from the pending but unexecuted transaction that is still in the mempool.

MEV may also compromise the predictability of transaction execution,

which may deter usage of the network as a whole.

Although based on widely available information given that transactions in the mempool

are publicly visible, any potential perception of MEV as unfair manipulation may also discourage users and other stakeholders from engaging

with DeFi protocols or the Ethereum network in general.

In addition, it’s possible regulators or legislators could enact rules

which restrict practices associated with MEV, which could diminish the popularity of the Ethereum network among users and validators.

Any of these or other outcomes related to MEV may adversely affect the value of ether and the value of the Shares.

Validators may cease

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asset markets, or legal restrictions.

It is also possible that an ether spot market or governmental authority may suspend or restrict

trading in ether altogether.

Therefore, it may not always be possible to execute a buy or sell order at the desired price or to liquidate

an open position due to market conditions on spot markets, regulatory issues affecting ether or other issues affecting counterparties.

It is also possible that an ether spot market or regulatory or governmental authority may suspend

or restrict trading in ether altogether.

Therefore, it may not always be possible to execute a buy or sell order at the desired price

or to liquidate an open position due to market conditions on spot markets, regulatory issues affecting ether or other issues affecting

counterparties.

Ether is a new asset with a very limited trading history.

Therefore, the markets for ether may be less liquid and more volatile than other

markets for more established products.

Therefore, the markets for ether may be less liquid and more

volatile than other markets for more established products.

Shares of the Trust are intended

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These factors include, but are not limited to, the following factors:

● Unanticipated problems or issues with respect to the mechanics

of the Trust’s operations and the trading of the Shares may arise, in particular due to the fact that the mechanisms and procedures

governing the creation and offering of the Shares and storage of ether have been developed specifically for this product;

● The Trust could experience difficulties in operating and maintaining

its technical infrastructure, including in connection with expansions or updates to such infrastructure, which are likely to be complex

and could lead to unanticipated delays, unforeseen expenses and security vulnerabilities;

● The Trust could experience unforeseen issues relating to the

performance and effectiveness of the security procedures used to protect the Trust’s account with the Ether Custodians, or the

security procedures may not protect against all errors, software flaws or other vulnerabilities in the Trust’s technical infrastructure,

which could result in theft, loss or damage of its assets;

● Service providers may decide to terminate their relationships

with the Trust due to concerns that the introduction of privacy enhancing features to the Ethereum network may increase the potential

for ether to be used to facilitate crime, exposing such service providers to potential reputational harm.

● Unanticipated problems or issues

with respect to the mechanics of the Trust’s operations and the trading of the Shares may arise, in particular due to the fact

that the mechanisms and procedures governing the creation and offering of the Shares and storage of ether have been developed specifically

for this product;

● The Trust could experience difficulties

in operating and maintaining its technical infrastructure, including in connection with expansions or updates to such infrastructure,

which are likely to be complex and could lead to unanticipated delays, unforeseen expenses and security vulnerabilities;

● The Trust could experience unforeseen

issues relating to the performance and effectiveness of the security procedures used to protect the Trust’s account with the Ether

Custodians, or the security procedures may not protect against all errors, software flaws or other vulnerabilities in the Trust’s

technical infrastructure, which could result in theft, loss or damage of its assets;

Service providers may decide to terminate their relationships with the Trust due to concerns that the introduction of privacy enhancing features to the Ethereum network may increase the potential for ether to be used to facilitate crime, exposing such service providers to potential reputational harm.

Any of these factors could

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custody of digital assets presents inherent and unique risks relating to access loss, theft and means of recourse in such scenarios.

risks are applicable to the Trust’s use of Coinbase Custodian.

The Trust may change the custodial

arrangements described in this report at any time without notice to Shareholders.

arrangements described in this report at any time without prior notice to Shareholders.

The Trust is subject

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A loss of confidence

or breach of the Ether Custodians may adversely affect the Trust and the value of an investment in the Shares.

in or breach of an Ether Custodian may adversely affect the Trust and the value of an investment in the Shares.

Custody and security services

for the Trust’s ether are provided by the Ether Custodians, although the Trust may retain other ether custodians at a later date.

Ether held by the Trust may be custodied or secured in different ways.

Over time, the Trust may change the custody or security arrangement

for all or a portion of its holdings.

The Sponsor will decide the appropriate custody and arrangements based on, among other factors,

the availability of experienced ether custodians and the Trust’s ability to securely safeguard the ether.

for the Trust’s ether are provided by the Ether Custodians, although the Trust may retain one or more additional ether custodians

at a later date.

Ether held by the Trust may be custodied or secured in different ways (for example, a portion of the Trust’s ether

holdings may be custodied by the Ether Custodians and another portion by another third-party custodian).

Over time, the Trust may change

the custody or security arrangement for all or a portion of its holdings.

The Sponsor will decide the appropriate custody and arrangements

based on, among other factors, the availability of experienced ether custodians and the Trust’s ability to securely safeguard the

The Trust expects that the

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The Sponsor could decide to

replace one or more of the Ether Custodians as a custodian of the Trust’s ether or the Prime Broker as the provider of prime brokerages

to the Trust.

Transferring maintenance responsibilities of the Trust’s accounts with the Ether Custodians and the Prime Broker to

another party will likely be complex and could subject the Trust’s ether to the risk of loss during the transfer, which could have

a negative impact on the performance of the Shares or result in loss of the Trust’s assets.

replace any of the Ether Custodians as custodians of the Trust’s ether or the Prime Broker as the provider of prime brokerages to

Transferring maintenance responsibilities of the Trust’s accounts with the Ether Custodians and the Prime Broker to another

party will likely be complex and could subject the Trust’s ether to the risk of loss during the transfer, which could have a negative

impact on the performance of the Shares or result in loss of the Trust’s assets.

The Sponsor may not be able

to find a party willing to serve as an ether custodian under the same terms as the current Custodial Services Agreements, or as a prime

broker under the same terms as the current Prime Broker Agreement.

To the extent that Sponsor is not able to find a suitable party willing

to serve as an ether custodian or a prime broker, as applicable, the Sponsor may be required to terminate the Trust and liquidate the

Trust’s ether.

to find a party willing to serve as an Ether custodian under the same terms as the current Custodial Services Agreements, or as a the

Prime Broker under the same terms as the current Prime Broker Agreement.

To the extent that Sponsor is not able to find a suitable party

willing to serve as an Ether custodian or the Prime Broker, as applicable, the Sponsor may be required to terminate the Trust and liquidate

the Trust’s ether.

In addition, to the extent that the Sponsor finds a suitable party but must enter into a modified custodial services

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Under the Coinbase Custody

Agreement, Coinbase Custodian’s liability is limited to the greater of (i) the market value of the Trust’s ether held by the

Ether Custodian at the time the events giving rise to the liability occurred and (ii) the fair market value of the Trust’s ether

held by the Ether Custodian at the time that the Ether Custodian notifies the Sponsor or Trustee in writing, or the Sponsor or the Trustee

otherwise has actual knowledge of the events giving rise to the liability.

Agreement, the Coinbase Custodian’s liability is limited to the greater of (i) the market value of the Trust’s ether held

by the Ether Custodian at the time the events giving rise to the liability occurred and (ii) the fair market value of the Trust’s

ether held by the Ether Custodian at the time that the Ether Custodian notifies the Sponsor or Trustee in writing, or the Sponsor or the

Trustee otherwise has actual knowledge of the events giving rise to the liability.

Under the BitGo Custody Agreement,

BitGo and its affiliates, including their officers, directors, agents, and employees, are not liable for any lost profits, special, incidental,

indirect, intangible, or consequential damages resulting from authorized or unauthorized use of the Trust or Sponsor’s site or services.

This includes damages arising from any contract, tort, negligence, strict liability, or other legal grounds, even if BitGo was previously

advised of, knew, or should have known about the possibility of such damages.

However, this exclusion of liability does not extend to

cases of BitGo’s fraud, willful misconduct, or gross negligence.

In situations of gross negligence, BitGo’s liability is specifically

limited to the value of the digital assets or fiat currency that were affected by the negligence.

Additionally, the total liability of

BitGo for direct damages is capped at the fees paid or payable to them under the relevant agreement during the twelve-month period immediately

preceding the first incident that caused the liability.

In addition, BitGo shall not

be liable for delays, suspension of operations, whether temporary or permanent, failure in performance, or interruption of service which

results directly or indirectly from any cause or condition beyond the reasonable control of BitGo, including, but not limited to, any

delay or failure due to an act of God, natural disasters, act of civil or military authorities, act of terrorists, including, but not

limited to, cyber-related terrorist acts, hacking, government restrictions, exchange or market rulings, civil disturbance, war, strike

or other labor dispute, fire, interruption in telecommunications or Internet services or network provider services, failure of equipment

and/or software, other catastrophe or any other occurrence which is beyond the reasonable control of BitGo.

the BitGo Custodian and its affiliates, including their officers, directors, agents, and employees, are not liable for any lost profits,

special, incidental, indirect, intangible, or consequential damages resulting from authorized or unauthorized use of the Trust or Sponsor’s

site or services.

This includes damages arising from any contract, tort, negligence, strict liability, or other legal grounds, even if

the BitGo Custodian was previously advised of, knew, or should have known about the possibility of such damages.

However, this exclusion

of liability does not extend to cases of the BitGo Custodian’s fraud, willful misconduct, or gross negligence.

In situations of

gross negligence, the BitGo Custodian’s liability is specifically limited to the value of the digital assets or fiat currency that

were affected by the negligence.

Additionally, the total liability of the BitGo Custodian for direct damages is capped at the fees paid

or payable to them under the relevant agreement during the twelve-month period immediately preceding the first incident that caused the

In addition, the BitGo Custodian

shall not be liable for delays, suspension of operations, whether temporary or permanent, failure in performance, or interruption of service

which results directly or indirectly from any cause or condition beyond the reasonable control of the BitGo Custodian, including, but

not limited to, any delay or failure due to an act of God, natural disasters, act of civil or military authorities, act of terrorists,

including, but not limited to, cyber-related terrorist acts, hacking, government restrictions, exchange or market rulings, civil disturbance,

war, strike or other labor dispute, fire, interruption in telecommunications or Internet services or network provider services, failure

of equipment and/or software, other catastrophe or any other occurrence which is beyond the reasonable control of the BitGo Custodian.

Under the Anchorage Custody

Agreement, except for Anchorage’s bad acts, confidentiality obligations under the Anchorage Custody Agreement, indemnification obligations

under Anchorage Custody Agreement, or obligations with respect to rights to or limits on use under the Anchorage Custody Agreement, Anchorage

is not liable for any losses, whether in contract, tort or otherwise, for any amount in excess of fees paid by the Trust in the twelve

(12) months prior to when the liability arises.

Moreover, Anchorage is not liable for (i) losses which arise from its compliance with

applicable laws, including sanctions laws administered by OFAC;

or (ii) special, indirect or consequential damages, or lost profits or

loss of business arising in connection with the Anchorage Custody Agreement.

In addition, Anchorage is not be liable for any losses which

arise as a result of the non-return of digital assets that the Trust has delegated to Anchorage or a third party for on-chain services,

such as staking, voting, vesting, and signaling, unless such losses occur as a result of Anchorage’s fraud or intentional misconduct.

In addition, Anchorage shall

not be liable for the failure to perform or any delay in the performance of its obligations under the Anchorage Custody Agreement to the

extent such failure or delay is caused by or results from a circumstance beyond its reasonable control and that could not have been prevented

or avoided by the exercise of due diligence, as long as the fact of the occurrence of such event is duly proven or is reasonably provable,

including, but not limited to natural catastrophes, fire, explosions, pandemic or local epidemic, war or other action by a state actor,

public power outages, civil unrests and conflicts, labor strikes or extreme shortages, acts of terrorism or espionage, Domain Name System

server issues outside Anchorage’s direct control, technology attacks (e.g., DoS, DDoS, MitM), cyber-attack or malfunction on the

blockchain network or protocol, or governmental action rendering performance illegal or impossible.

Anchorage shall not be held liable

by the Trust for such non-performance or delay.

Agreement, except for the Anchorage Custodian’s bad acts, confidentiality obligations under the Anchorage Custody Agreement, indemnification

obligations under the Anchorage Custody Agreement, or obligations with respect to rights to or limits on use under the Anchorage Custody

Agreement, the Anchorage Custodian is not liable for any losses, whether in contract, tort or otherwise, for any amount in excess of fees

paid by the Trust in the twelve (12) months prior to when the liability arises.

Moreover, the Anchorage Custodian is not liable for (i)

losses which arise from its compliance with applicable laws, including sanctions laws administered by OFAC;

or (ii) special, indirect

or consequential damages, or lost profits or loss of business arising in connection with the Anchorage Custody Agreement.

the Anchorage Custodian is not liable for any losses which arise as a result of the non-return of digital assets that the Trust has delegated

to the Anchorage Custodian or a third party for on-chain services, such as staking, voting, vesting, and signaling, unless such losses

occur as a result of the Anchorage Custodian’s fraud or intentional misconduct.

In addition, the Anchorage

Custodian shall not be liable for the failure to perform or any delay in the performance of its obligations under the Anchorage Custody

Agreement to the extent such failure or delay is caused by or results from a circumstance beyond its reasonable control and that could

not have been prevented or avoided by the exercise of due diligence, as long as the fact of the occurrence of such event is duly proven

or is reasonably provable, including, but not limited to natural catastrophes, fire, explosions, pandemic or local epidemic, war or other

action by a state actor, public power outages, civil unrests and conflicts, labor strikes or extreme shortages, acts of terrorism or espionage,

Domain Name System server issues outside the Anchorage Custodian’s direct control, technology attacks (e.g., DoS, DDoS, MitM), cyber-attack

or malfunction on the blockchain network or protocol, or governmental action rendering performance illegal or impossible.

The Anchorage

Custodian shall not be held liable by the Trust for such non-performance or delay.

Under the BitGo New York Custody

Agreement, the BitGo New York Custodian and its affiliates, including their officers, directors, agents, and employees, are not liable

for any lost profits, special, incidental, indirect, intangible, or consequential damages resulting from authorized or unauthorized use

of the Trust or Sponsor’s site or services.

This includes damages arising from any contract, tort, negligence, strict liability,

or other legal grounds, even if the BitGo New York Custodian was previously advised of, knew, or should have known about the possibility

of such damages.

However, this exclusion of liability does not extend to cases of the BitGo New York Custodian’s fraud, willful

misconduct, or gross negligence.

In situations of gross negligence, the BitGo New York Custodian’s liability is specifically limited

to the value of the digital assets or fiat currency that were affected by the negligence.

Additionally, the total liability of the BitGo

New York Custodian for direct damages is capped at the fees paid or payable to them under the BitGo New York Custody Agreement during

the twelve-month period immediately preceding the first incident that caused the liability.

In addition, the BitGo New

York Custodian shall not be liable for delays, suspension of operations, whether temporary or permanent, failure in performance, or interruption

of service which results directly or indirectly from any cause or condition beyond the reasonable control of the BitGo New York Custodian,

including, but not limited to, any delay or failure due to an act of God, natural disasters, act of civil or military authorities, act

of terrorists, including, but not limited to, cyber-related terrorist acts, hacking, government restrictions, exchange or market rulings,

civil disturbance, war, strike or other labor dispute, fire, interruption in telecommunications or Internet services or network provider

services, failure of equipment and/or software, other catastrophe or any other occurrence which is beyond the reasonable control of the

BitGo New York Custodian.

Under the Trust Agreement,

the Trustee and the Sponsor will not be liable for any liability or expense incurred absent gross negligence or willful misconduct on

the part of the Trustee or the Sponsor or breach by the Sponsor of the Trust Agreement, as they case may be.

the part of the Trustee or the Sponsor or breach by the Sponsor of the Trust Agreement, as the case may be.

As a result, the recourse

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could adversely affect the value of the Shares.

Amendment of Trust Agreement

without shareholder consent.

Subject to certain exceptions

set forth in the Trust Agreement, the Trust Agreement can be amended by the Sponsor in its sole discretion and without the shareholders’

consent by making an amendment, an agreement supplemental to the Trust Agreement, or an amended and restated trust agreement, which amendments

may materially adversely affect the interests of the Shareholders.

Potential conflicts

of interest may arise among the Sponsor or its affiliates and the Trust.

The Sponsor and its affiliates have no fiduciary duties to the

Trust and its shareholders other than as provided in the Trust Agreement, which may permit them to favor their own interests to the detriment

of the Trust and its shareholders.

The Sponsor will manage the

affairs of the Trust.

Conflicts of interest may arise among the Sponsor and its affiliates, on the one hand, and the Trust and its shareholders,

on the other hand.

As a result of these conflicts, the Sponsor may favor its own interests and the interests of its affiliates over the

Trust and its shareholders.

These potential conflicts include, among others, the following:

● The Sponsor has no fiduciary

duties to, and is allowed to take into account the interests of parties other than, the Trust and its shareholders in resolving conflicts

of interest, provided the Sponsor does not act in bad faith;

● The Trust has agreed to indemnify

the Sponsor and its affiliates pursuant to the Trust Agreement;

● The Sponsor is responsible for

allocating its own limited resources among different clients and potential future business ventures, to each of which it owes fiduciary

● The Sponsor and its staff also

service affiliates of the Sponsor, including several other digital asset investment vehicles, and their respective clients and cannot

devote all of its, or their, respective time or resources to the management of the affairs of the Trust;

● The Sponsor, its affiliates

and their respective officers and employees are not prohibited from engaging in other businesses or activities, including those that

might be in direct competition with the Trust;

● Affiliates of the Sponsor have

substantial direct investments in ether that they are permitted to manage taking into account their own interests without regard to the

interests of the Trust or its shareholders, and any increases, decreases or other changes in such investments could affect the value

of the Shares.

By purchasing the Shares,

shareholders agree and consent to the provisions set forth in the Trust Agreement.

Further, the Sponsor may have

a conflict with respect to any future transactions that may be entered into with either the Sponsor’s ultimate parent company, FalconX,

a leading institutional digital asset prime brokerage, or with any of the other affiliates of FalconX.

Unforeseeable risks.

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The Sponsor may make this decision for a number of reasons, including, but not limited to the following:

● Third parties may be able to purchase and sell ether on public

or private markets not included among the Constituent Exchanges, and such transactions may take place at prices materially higher or

lower than the Index price.

● There may be variances in the prices of ether on the various

Constituent Exchanges, including as a result of differences in fee structures or administrative procedures on different Constituent Exchanges.

● The prices on each Constituent Exchange or pricing source

may not be equal to the value of an ether as represented by the Index.

● To the extent the Index price differs materially from the

actual prices available on a Constituent Exchange, or the global market price of ether, the price of the Shares may no longer track,

whether temporarily or over time, the global market price of ether, which could adversely affect an investment in the Trust by reducing

investors’ confidence in the Shares’ ability to track the market price of ether.

● To the extent market prices differ materially from the Index

price, investors may lose confidence in the Shares’ ability to track the market price of ether, which could adversely affect the

value of the Shares.

Third parties may be able to purchase and sell ether on public or private markets not included among the Constituent Exchanges, and such transactions may take place at prices materially higher or lower than the Index price.

There may be variances in the prices of ether on the various Constituent Exchanges, including as a result of differences in fee structures or administrative procedures on different Constituent Exchanges.

The prices on each Constituent Exchange or pricing source may not be equal to the value of an ether as represented by the Index.

To the extent the Index price differs materially from the actual prices available on a Constituent Exchange, or the global market price of ether, the price of the Shares may no longer track, whether temporarily or over time, the global market price of ether, which could adversely affect an investment in the Trust by reducing investors’ confidence in the Shares’ ability to track the market price of ether.

To the extent market prices differ materially from the Index price, investors may lose confidence in the Shares’ ability to track the market price of ether, which could adversely affect the value of the Shares.

The Sponsor, however, is under no obligation

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Regulatory Risk

Ether’s status

as being offered or sold as a “security” under U.S.

federal securities laws remains unsettled.

The SEC has asserted its belief

that a number of digital assets are properly classified as “securities” under U.S.

federal securities laws in a number of

complaints against the issuers of such assets, or against platforms trading or transacting in such assets.

Courts have agreed that such

assets may have been offered or sold in transactions that constituted securities, or have agreed that the SEC has a plausible case that

such assets may have been offered or sold in transactions that constituted securities.

In future litigation, other courts might disagree

with the assessment that these or other digital assets, such as ether, are offered or sold as securities depending on the characteristics

of the transaction.

To the extent that a court were to find that the Trust had engaged in unregistered sales of securities, the Trust

would be subject to penalties, disgorgement and other sanctions, which would significantly negatively impact the Trust and the value of

In accordance with the Sponsor’s

internal policies and procedures, the Sponsor engaged in a review process to determine whether ether has been offered or sold as a security

and based off the review it has determined it has not.

The Sponsor has reviewed publicly available materials relating to ether.

other things, the Sponsor has reviewed publicly available materials relating to the circumstances around the creation of ether, the market

and technological needs that the Ether network was intended to address, the Ether network’s role in enabling blockchain interoperability

and cross-blockchain communications, and the Ether network’s consensus mechanism.

Based on the Sponsor’s review of these materials,

the Sponsor believes there is a reasonable basis to conclude that at this time offers and sales of ether would not constitute offers and

sales of a “security” as that term is defined under Section 2(a)(1) of the Securities Act.

This determination is a risk-based

judgement by the Sponsor that is attendant with legal risk as it is possible regulatory agencies or courts could disagree with this determination.

If ether is determined to

be offered or sold as a security by a federal court or transactions in ether are determined to be securities transactions by a federal

court, the Trust could be considered an unregistered “investment company” under the 1940 Act, which could necessitate the

Trust’s liquidation.

In this case, the Trust and the Sponsor may be deemed to have participated in an illegal offering of investment

company securities and there is no guarantee that the Sponsor will be able to register the Trust under the 1940 Act at such time or take

such other actions as may be necessary to ensure the Trust’s activities comply with applicable law, which could force the Sponsor

to liquidate the Trust.

It may also become more difficult

for ether to be traded, cleared and custodied as compared to other digital assets that are not considered to be offered or sold as securities,

which could in turn negatively affect the liquidity and general acceptance of ether and cause users to migrate to other digital assets.

Further, if any other digital asset with widespread markets is determined to be offered or sold as a “security” under federal

or state securities laws by the SEC or any other agency, or in a proceeding in a court of law or otherwise, it may have material adverse

consequences for ether as a digital asset due to negative publicity or a decline in the general acceptance of digital assets.

digital asset trading platforms that feature digital assets that are determined to be offered or sold as securities may face penalties

or be required to shut down if they do not have the licenses required to facilitate electronic markets in securities, which could result

in a reduction of the liquidity of ether markets.

As such, any determination that ether or any other digital asset is offered or sold

as a security under federal or state securities laws may adversely affect the price of ether and, as a result, the value of the Shares.

To the extent that ether is

deemed to fall within the definition of being offered or sold as a security under U.S.

federal securities laws, the Trust and the Sponsor

may be subject to additional requirements under the 1940 Act and the Advisers Act.

The Sponsor or the Trust may be required to register

as an investment adviser under the Advisers Act.

Such additional registration may result in extraordinary, recurring and/or non-recurring

expenses of the Trust, thereby materially and adversely impacting the Shares.

If the Sponsor and/or the Trust determines not to comply

with such additional regulatory and registration requirements, the Sponsor may terminate the Trust.

Any such termination could result

in the liquidation of the Trust’s ether at a time that is disadvantageous to Shareholders.

There is a lack of consensus

regarding the regulation of digital assets, including ether.

Regulation of digital assets continues to evolve across different jurisdictions

worldwide, which may cause uncertainty and insecurity as to the legal and tax status of a given digital asset.

As ether and digital assets

have grown in both popularity and market size, the U.S.

Congress and a number of U.S.

federal and state agencies (including FinCEN, SEC,

OCC, CFTC, FINRA, the Consumer Financial Protection Bureau (“CFPB”), the Department of Justice, the Department of Homeland

Security, the Federal Bureau of Investigation, the IRS, state financial institution regulators, and others) have been examining the operations

of digital asset networks, digital asset users and the digital asset spot market.

Many of these state and federal agencies have brought

enforcement actions and issued advisories and rules relating to digital asset markets.

Ongoing and future regulatory actions with respect

to digital assets generally or any single digital asset in particular may alter, perhaps to a materially adverse extent, the nature of

an investment in the Shares and/or the ability of the Trust to continue to operate.

Regulation of digital assets

continues to evolve across different jurisdictions worldwide, which may cause uncertainty and insecurity as to the legal and tax status

of a given digital asset.

As ether and digital assets have grown in both popularity and market size, the U.S.

Congress and a number of

federal and state agencies (including FinCEN, SEC, OCC, CFTC, FINRA, the Consumer Financial Protection Bureau (“CFPB”),

the Department of Justice, the Department of Homeland Security, the Federal Bureau of Investigation, the IRS, state financial institution

regulators, and others) have been examining the operations of digital asset networks, digital asset users and the digital asset spot market.

Many of these state and federal agencies have brought enforcement actions and issued advisories and rules relating to digital asset markets.

Ongoing and future regulatory actions with respect to digital assets generally or any single digital asset in particular may alter, perhaps

to a materially adverse extent, the nature of an investment in the Shares and/or the ability of the Trust to continue to operate.

For example, certain events

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of the digital asset industry, with a specific focus on intermediaries such as digital asset exchanges, platforms, and custodians.

and state legislatures and regulatory agencies may introduce and enact new laws and regulations to regulate crypto asset intermediaries,

and state legislatures and regulatory agencies may introduce and enact new laws and regulations to regulate digital-asset intermediaries,

such as digital asset exchanges and custodians.

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which in some cases provided services to the digital assets industry, or similar future events, may amplify and/or accelerate these trends.

On January 3, 2023, the federal banking agencies issued a joint statement on crypto-asset risks to banking organizations following events

which exposed vulnerabilities in the crypto-asset sector, including the risk of fraud and scams, legal uncertainties, significant volatility,

On January 3, 2023, the federal banking agencies issued a joint statement on digital-asset risks to banking organizations following events

which exposed vulnerabilities in the digital-asset sector, including the risk of fraud and scams, legal uncertainties, significant volatility,

and contagion risk.

Although banking organizations are not prohibited from crypto-asset related activities, the agencies have expressed

significant safety and soundness concerns with business models that are concentrated in crypto-asset related activities or have concentrated

Although banking organizations are not prohibited from digital-asset related activities, the agencies have expressed

significant safety and soundness concerns with business models that are concentrated in digital-asset related activities or have concentrated

exposures to the crypto-asset sector.

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affect us or the crypto asset business.

In August 2021, the chair

of the SEC stated that he believed investors using digital asset trading platforms are not adequately protected, and that activities on

the platforms can implicate the securities laws, commodities laws and banking laws, raising a number of issues related to protecting investors

and consumers, guarding against illicit activity, and ensuring financial stability.

The chair expressed a need for the SEC to have additional

authorities to prevent transactions, products, and platforms from “falling between regulatory cracks,” as well as for more

resources to protect investors in “this growing and volatile sector.” The chair called for federal legislation centering on

digital asset trading, lending, and decentralized finance (“DeFi”) platforms, seeking “additional plenary authority”

to write rules for digital asset trading and lending.

It is not possible to predict whether Congress will grant additional authorities

to the SEC or other regulators, what the nature of such additional authorities might be, how they might impact the ability of digital

asset markets to function or how any new regulations that may flow from such authorities might impact the value of digital assets generally

and ether held by the Trust specifically.

The consequences of increased federal regulation of digital assets and digital asset activities

could have a material adverse effect on the Trust and the Shares.

It is not possible to predict

whether Congress will grant additional authorities to the SEC or other regulators, what the nature of such additional authorities might

be, how they might impact the ability of digital asset markets to function or how any new regulations that may flow from such authorities

might impact the value of digital assets generally and ether held by the Trust specifically.

The consequences of increased federal regulation

of digital assets and digital asset activities could have a material adverse effect on the Trust and the Shares.

FinCEN requires any administrator

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applicable to money transmitters.

In 2015, FinCEN assessed a $700,000 fine against a sponsor of a digital asset for violating several

requirements of the BSA by acting as a money services business and selling the digital asset without registering with FinCEN, and by failing

to implement and maintain an adequate anti-money laundering program.

In 2017, FinCEN assessed a $110 million fine against BTC-e, a now

defunct digital asset exchange, for similar violations.

The requirement that exchangers that do business in the U.S.

and comply with anti-money laundering regulations may increase the cost of buying and selling ether and therefore may adversely affect

the price of bitcoin and an investment in the Shares.

In a March 2018 letter from FinCEN’s assistant secretary for legislative affairs

Senator Ron Wyden, the assistant secretary indicated that under current law both the developers and the exchanges involved in

the sale of tokens in an initial coin offering may be required to register with FinCEN as money transmitters and comply with the anti-money

laundering regulations applicable to money transmitters.

OFAC has added digital currency

In a March 2018 letter from FinCEN’s assistant secretary for legislative affairs to U.S.

Ron Wyden, the assistant secretary indicated that under current law both the developers and the exchanges involved in the sale of tokens

in an initial coin offering may be required to register with FinCEN as money transmitters and comply with the anti-money laundering regulations

applicable to money transmitters.

OFAC has added digital asset

addresses to the list of Specially Designated Nationals whose assets are blocked, and with whom U.S.

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for malign and illegal activities.”

On February 15, 2022, Representative

In February 2022, Representative

Warren Davidson introduced the “Keep Your Coins Act,” which is intended “[t]o prohibit Federal agencies from restricting

the use of convertible virtual currency by a person to purchase goods or services for the person’s own use, and for other purposes.”

That same day, Congressman Josh Gottheimer also announced a discussion draft of the “Stablecoin Innovation and Protection Act,”

which is intended to define “qualified stablecoins” to differentiate them from “more volatile cryptocurrencies.”

On March 9, 2022, former President

Biden signed an Executive Order on Ensuring Responsible Development of Digital Assets (the “Executive Order”), which outlined

a unified federal regulatory approach to addressing the risks and benefits of digital assets.

The Executive Order articulated various

policy objectives related to digital assets, including investor protections, financial and national security risks, and responsible development

and use of digital assets.

The Executive Order directed federal government departments and agencies to produce various reports, frameworks,

analyses, and regulatory and legislative recommendations to the Biden Administration.

The policies and objectives of the Executive Order

are very broad, and, at this time, it is unclear what impact it may have on the regulation of ether and other digital assets.

The consequences

of increased federal regulation of digital assets and digital asset activities could have a material adverse effect on the Trust and the

On January 23, 2025, President Trump issued an executive order titled “Executive Order on Strengthening American Leadership

in Digital Financial Technology” that outlined the administration’s commitment to strengthening U.S.

leadership in the digital

asset space and established an inter-agency working group for artificial intelligence and crypto that is tasked with proposing a regulatory

framework governing the issuance and operation of digital assets, including stablecoins, in the United States.

On March 17, 2022, Senators

Elizabeth Warren, Jack Reed, Mark Warner, and Jon Tester introduced the Digital Asset Sanctions Compliance Enhancement Act in an attempt

to ensure blacklisted Russian individuals and businesses do not use cryptocurrency to evade economic sanctions.

On March 28, 2022, Representative

In March 2022, Senators Elizabeth

Warren, Jack Reed, Mark Warner, and Jon Tester introduced the Digital Asset Sanctions Compliance Enhancement Act in an attempt to ensure

blacklisted Russian individuals and businesses do not use digital assets to evade economic sanctions.

In January 2025, President

Trump issued an executive order titled “Executive Order on Strengthening American Leadership in Digital Financial Technology”

that outlined the administration’s commitment to strengthening U.S.

leadership in the digital asset space and established an inter-agency

working group for artificial intelligence and digital assets that is tasked with proposing a regulatory framework governing the issuance

and operation of digital assets, including stablecoins, in the United States.

In March 2022, Representative

Stephen Lynch, along with co-sponsors Jesús G.

García, Rashida Tlaib, Ayanna Pressley, and Alma Adams, introduced H.R.

the Electronic Currency and Secure Hardware Act (“ECASH Act”), which would direct the Secretary of the U.S.

Treasury Department

(not the Federal Reserve) to develop and issue a digital analogue to the U.S.

dollar, or “e-cash,” which is intended to “replicate

and preserve the privacy, anonymity-respecting, and minimal transactional data-generating properties of physical currency instruments

such as coins and notes to the greatest extent technically and practically possible,” all without requiring a bank account.

would be legal tender, payable to the bearer and functionally identical to physical U.S.

coins and notes, “capable of instantaneous,

final, direct, peer-to-peer, offline transactions using secured hardware devices that do not involve or require subsequent or final settlement

on or via a common or distributed ledger, or any other additional approval or validation by the United States Government or any other

third party payments processing intermediary,” including fully anonymous transactions, and “interoperable with all existing

financial institutions and payment systems and generally accepted payments standards and network protocols, as well as other public payments

On April 6, 2022, Senator

Pat Toomey released a draft of his Stablecoin Transparency of Reserves and Uniform Safe Transactions Act, or Stablecoin TRUST Act.

draft bill contemplates a “payment stablecoin,” which is convertible directly to fiat currency by the issuer.

Only an insured

depositary institution, a money transmitting business (authorized by its respective state authority) or a new “national limited

payment stablecoin issuer” would be eligible to issue payment stablecoins.

Additionally, payment stablecoins would be exempt from

the federal securities requirements, including the Securities Act, the Exchange Act and the 1940 Act.

On June 7, 2022, Senators

Kirsten Gillibrand and Cynthia Lummis introduced the “Responsible Financial Innovation Act,” which was drafted to “create

a complete regulatory framework for digital assets that encourages responsible financial innovation, flexibility, transparency and robust

the Electronic Currency and Secure Hardware Act, which would direct the Secretary of the U.S.

Treasury Department (not the Federal Reserve)

to develop and issue a digital analogue to the U.S.

dollar, or “e-cash,” which is intended to “replicate and preserve

the privacy, anonymity-respecting, and minimal transactional data-generating properties of physical currency instruments such as coins

and notes to the greatest extent technically and practically possible,” all without requiring a bank account.

E-cash would be legal

tender, payable to the bearer and functionally identical to physical U.S.

coins and notes, “capable of instantaneous, final, direct,

peer-to-peer, offline transactions using secured hardware devices that do not involve or require subsequent or final settlement on or

via a common or distributed ledger, or any other additional approval or validation by the United States Government or any other third

party payments processing intermediary,” including fully anonymous transactions, and “interoperable with all existing financial

institutions and payment systems and generally accepted payments standards and network protocols, as well as other public payments programs.”

In April 2022, Senator Pat

Toomey released a draft of his Stablecoin Transparency of Reserves and Uniform Safe Transactions Act, or Stablecoin TRUST Act.

bill contemplates a “payment stablecoin,” which is convertible directly to fiat currency by the issuer.

Only an insured depository

institution, a money transmitting business (authorized by its respective state authority) or a new “national limited payment stablecoin

issuer” would be eligible to issue payment stablecoins.

Additionally, payment stablecoins would be exempt from the federal securities

requirements, including the Securities Act, the Exchange Act and the 1940 Act.

In June 2022, Senators Kirsten

Gillibrand and Cynthia Lummis introduced the “Responsible Financial Innovation Act,” which was drafted to “create a

complete regulatory framework for digital assets that encourages responsible financial innovation, flexibility, transparency and robust

consumer protections while integrating digital assets into existing law.” Importantly, the legislation would assign regulatory authority

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ether, would be regulated by the CFTC.

In 2023 and 2024, Congress

continued to consider several stand-alone digital asset bills, including a formal process to determine when digital assets will be treated

as either securities to be regulated by the SEC or commodities under the purview of the CFTC, what type of federal/state regulatory regime

will exist for payment stablecoins and the how the BSA will apply to cryptocurrency providers.

In May 2024, the Financial Innovation and

Technology for the 21st Century Act (“FIT for the 21st Century Act”) advanced through the United States House of Representatives

in a vote along bipartisan lines.

The FIT for the 21st Century

Act would require the SEC and the CFTC to jointly issue rules or guidance that would outline their process for removing from the SEC’s

regulatory jurisdiction a digital asset that they deem inconsistent with the CEA and federal securities laws.

The bill, in part, would

also provide a certification process for blockchains to be recognized as decentralized, which would allow the SEC to challenge claims

made by token issuers about meeting the outlined standards.

In 2023, Congress continued

to consider several stand-alone digital asset bills, including a formal process to determine when digital assets will be treated as either

securities to be regulated by the SEC or commodities under the purview of the CFTC, what type of federal/state regulatory regime will

exist for payment stablecoins and the how the BSA will apply to digital asset providers.

The Financial Innovation and Technology for the

21st Century Act (“FIT21”) advanced through the United States House of Representatives in a vote along bipartisan lines.

FIT21 would require the SEC

and the CFTC to jointly issue rules or guidance that would outline their process in delisting a digital asset that they deem inconsistent

with the CEA, federal securities laws and FIT21.

The bill, in part, would also provide a certification process for blockchains to be recognized

as decentralized, which would allow the SEC to challenge claims made by token issuers about meeting the outlined standards.

Legislative efforts have also

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are not securities for purposes of those federal securities laws.

On February 4, 2025, Sen.

Bill Hagerty introduced the Guiding and Establishing National Innovation for U.S.

Stablecoins of 2025 Act – the GENIUS

Act – cosponsored by Senate Banking Chair Tim Scott and Sens.

In February 2025, Sen.

Hagerty introduced the Guiding and Establishing National Innovation for U.S.

Stablecoins of 2025 Act – the GENIUS Act

– cosponsored by Senate Banking Chair Tim Scott and Sens.

Kirsten Gillibrand and Cynthia Lummis, which would establish a U.S.

regulatory framework for payment stablecoins.

Like the McHenry bill, the GENIUS Act contemplates a regulatory framework where payment

stablecoin issuers may be either a subsidiary of an insured bank, an uninsured depository institution or trust bank, or a nonbank, and

primarily regulated at either the federal or state level.

It would also prescribe stablecoin reserve requirements and require bank-like

regulation for both bank and nonbank stablecoin issuers.

framework for payment stablecoins.

The GENIUS Act was passed by the U.S.

Senate in June 2025 and by the U.S.

House of Representatives

in July 2025.

It was signed into law by President Trump in July 2025.

Like the McHenry Bill, the GENIUS Act provides for a regulatory

framework where payment stablecoin issuers may be either a subsidiary of an insured bank, an uninsured depository institution or trust

bank, or a nonbank, and primarily regulated at either the federal or state level.

It also provides for stablecoin reserve requirements

and require bank-like regulation for both bank and nonbank stablecoin issuers.

Several other bills have advanced

through Congress to curb crypto as a payment gateway for illicit activity and money laundering.

The “Blockchain Regulatory Clarity

Act” would provide clarity to the regulatory classification of digital assets, providing market certainty for innovators and clear

jurisdictional boundaries for regulators by affirming that blockchain developers and other related service providers that do not custody

customer funds are not money transmitters.

The “Financial Technology Protection Act,” another bipartisan measure, would set

up an independent Financial Technology Working Group to combat terrorism and illicit financing in cryptocurrency.

through Congress to curb digital assets as a payment gateway for illicit activity and money laundering.

The “Blockchain Regulatory

Clarity Act” would provide clarity to the regulatory classification of digital assets, providing market certainty for innovators

and clear jurisdictional boundaries for regulators by affirming that blockchain developers and other related service providers that do

not custody customer funds are not money transmitters.

The “Financial Technology Protection Act,” another bipartisan measure,

would set up an independent Financial Technology Working Group to combat terrorism and illicit financing in digital assets.

The “Blockchain

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In a similar effort to prevent

money laundering and stop crypto-facilitated crime and sanctions violations, bipartisan legislation was introduced to require DeFi services

to meet the same anti-money laundering and economic sanctions compliance obligations as other financial companies.

DeFi generally refers

to applications that facilitate peer-to-peer financial transactions that are recorded on blockchains.

By design, DeFi provides anonymity,

which can allow malicious and criminal actors to evade traditional financial regulatory tools.

Noting that transparency and sensible rules

are vital for protecting the financial system from crime, the “Crypto-Asset National Security Enhancement and Enforcement (‘CANSEE’)

Act” was introduced.

The CANSEE Act would end special treatment for DeFi by applying the same national security laws that apply

to banks and securities brokers, casinos and pawn shops, and other cryptocurrency companies like centralized trading platforms.

DeFi services

would be forced to meet basic obligations, most notably to maintain anti-money laundering programs, conduct due diligence on their customers,

and report suspicious transactions to FinCEN.

money laundering and stop digital assets-facilitated crime and sanctions violations, bipartisan legislation was introduced to require

DeFi services to meet the same anti-money laundering and economic sanctions compliance obligations as other financial companies.

generally refers to applications that facilitate peer-to-peer financial transactions that are recorded on blockchains.

By design, DeFi

provides anonymity, which can allow malicious and criminal actors to evade traditional financial regulatory tools.

Noting that transparency

and sensible rules are vital for protecting the financial system from crime, the “Crypto-Asset National Security Enhancement and

Enforcement (‘CANSEE’) Act” was introduced.

The CANSEE Act would end special treatment for DeFi by applying the same

national security laws that apply to banks and securities brokers, casinos and pawn shops, and other digital asset companies like centralized

trading platforms.

DeFi services would be forced to meet basic obligations, most notably to maintain anti-money laundering programs, conduct

due diligence on their customers, and report suspicious transactions to FinCEN.

Under regulations from the

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In addition, a determination

that ether is offered and sold as a security under U.S.

that ether is offered or sold as a security under U.S.

or foreign law could adversely affect an investment in the Trust.

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the ability of the Trust to continue to operate.

Additionally, changes to current regulatory determinations of ether’s status as

not being a security, changes to regulations surrounding ether futures or related products, or actions by a United States or foreign government

or quasi-governmental agencies exerting regulatory authority over ether, the Ethereum network, ether trading, or related activities impacting

other parts of the digital asset market, may adversely impact ether and therefore may have an adverse effect on the value of your investment

in the Trust.

Additionally, changes to current regulatory determinations that ether is not offered

or sold as a security, changes to regulations surrounding digital asset futures or derivatives or other related products, or actions by

a United States or foreign government or quasi-governmental agencies exerting regulatory authority over ether, the Ethereum network, ether

trading, or related activities impacting other parts of the digital asset market, may adversely impact ether and therefore may have an

adverse effect on the value of your investment in the Trust.

A number of jurisdictions

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to ether spot markets, trading venues and service providers that fall within such jurisdictions’ regulatory scope.

Countries may, in the

future, explicitly restrict, outlaw or curtail the acquisition, use, trade or redemption of ether.

Countries may,

in the future, explicitly restrict, outlaw or curtail the acquisition, use, trade or redemption of ether.

Such laws, regulations or directives

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CFTC regulatory jurisdiction.

Alternatively, in the future ether might be classified by the SEC as a “security” under U.S.

Alternatively, in the future ether might be classified by the SEC or one or more federal courts as being

offered or sold as a “security” under U.S.

federal securities laws.

In the face of such developments, the required registrations and compliance steps may result in extraordinary,

nonrecurring expenses to the Trust.

In particular, the Trust may be required to rapidly unwind its entire position in ether at potentially

unfavorable prices and potentially terminate, in the event that ether were determined to fall under the definition of a security under

In the face of such developments, the required registrations

and compliance steps may result in extraordinary, nonrecurring expenses to the Trust.

In particular, the Trust may be required to rapidly

unwind its entire position in ether at potentially unfavorable prices and potentially terminate, in the event that ether were determined

to fall under the definition of being offered or sold as securities under U.S.

securities laws.

If the Sponsor decides to terminate the Trust in response to the changed regulatory circumstances, the Trust may

be dissolved or liquidated at a time that is disadvantageous to Shareholders.

As of the date of this Prospectus, the Sponsor is not aware

of any rules that have been proposed to regulate ether as a commodity interest or a security.

If the Sponsor decides to terminate the

Trust in response to the changed regulatory circumstances, the Trust may be dissolved or liquidated at a time that is disadvantageous

to Shareholders.

As of the date of this report, the Sponsor is not aware of any rules that have been proposed to regulate ether as a commodity

interest or as being offered or sold as a security.

To the extent that ether is

determined to be a security, the Trust and the Sponsor may also be subject to additional regulatory requirements, including under the

1940 Act, and the Sponsor may be required to register as an investment adviser under the Advisers Act.

If the Sponsor determines not to

comply with such additional regulatory and registration requirements, the Sponsor will terminate the Trust.

Any such termination could

result in the liquidation of the Trust’s ether at a time that is disadvantageous to Shareholders.

Alternatively, compliance with

these requirements could result in additional expenses to the Trust or significantly limit the ability of the Trust to pursue its investment

determined to be offered or sold as a security, the Trust and the Sponsor may also be subject to additional regulatory requirements, including

under the 1940 Act, and the Sponsor may be required to register as an investment adviser under the Advisers Act.

If the Sponsor determines

not to comply with such additional regulatory and registration requirements, the Sponsor will terminate the Trust.

Any such termination

could result in the liquidation of the Trust’s ether at a time that is disadvantageous to Shareholders.

Alternatively, compliance

with these requirements could result in additional expenses to the Trust or significantly limit the ability of the Trust to pursue its

investment objective.

To the extent that ether is

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result in extraordinary, recurring and/or nonrecurring expenses to the Authorized Participant, Trust or Sponsor or increased commissions

for the Authorized Participant’s clients, thereby reducing the liquidity of the Shares.

for an Authorized Participant’s clients, thereby reducing the liquidity of the Shares.

To the extent that the activities

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promulgated by FinCEN under the authority of the BSA, such Authorized Participant, the Trust or the Sponsor may be required to comply

with FinCEN regulations, including those that would mandate the Authorized Participant to implement anti-money laundering programs, make

with FinCEN regulations, including those that would mandate such Authorized Participant to implement anti-money laundering programs, make

certain reports to FinCEN and maintain certain records.

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Such additional regulatory

obligations may cause the Authorized Participant, the Trust or the Sponsor to incur extraordinary expenses.

If the Authorized Participant,

obligations may cause an Authorized Participant, the Trust or the Sponsor to incur extraordinary expenses.

If an Authorized Participant,

the Trust or the Sponsor decide to seek the required licenses, there is no guarantee that they will receive them in a timely manner.

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licenses, it may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and penalties,

all of which could harm the reputation of the Authorized Participant, the Trust or the Sponsor and affect the value of the Shares.

all of which could harm the reputation of an Authorized Participant, the Trust or the Sponsor and affect the value of the Shares.

an Authorized Participant, the Trust, or the Sponsor may not be able to acquire necessary state licenses or be capable of complying with

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digital asset activity in a timely manner.

The Authorized Participant may also instead decide to terminate its role as Authorized Participant

An Authorized Participant may also instead decide to terminate its role as an Authorized Participant

of the Trust, or the Sponsor may decide to terminate the Trust.

Termination by the Authorized Participant may decrease the liquidity of

Termination by an Authorized Participant may decrease the liquidity of

the Shares, which may adversely affect the value of the Shares, and any termination of the Trust in response to the changed regulatory

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of the Trust may generate tax liabilities for Shareholders.

It is expected that each Shareholder

will include in the computation of their taxable income their proportionate share of the taxable income and expenses of the Trust, including

gains and losses realized in connection with the use of ether to pay Trust expenses.

The Trust does not anticipate making distributions

to Shareholders, so any tax liability that a Shareholder incurs as a result of holding Shares will need to be satisfied from some other

source of funds.

It is expected that each Shareholder will include in the computation of

their taxable income their proportionate share of the taxable income and expenses of the Trust, including gains and losses realized in

connection with the use or sale of ether to pay Trust expenses or facilitate redemption transactions, as well as any amounts received

in connection with staking, as applicable.

The Trust expects to make distributions at least quarterly to Shareholders, but even if it

did not, any tax liability that a Shareholder incurs as a result of holding Shares will need to be satisfied from some other source of

If a Shareholder sells Shares in order to raise funds to satisfy such a tax liability, the sale itself may generate additional

taxable gain or loss.

Ether staking may result

in adverse tax consequences for Shareholders.

To the extent the Sponsor determines to stake a portion of the Trust’s

ether, the staking of the Trust’s ether is expected to result in the Trust’s receipt of amounts received in connection with

staking in the form of additional ether.

Any such rewards are expected to be treated as ordinary income for U.S.

federal income tax purposes.

Thus, the Trust’s receipt of rewards derived from ether staking activities could result in beneficial owners of Shares incurring

tax liability which may not correspond in amount or timing with a distribution from the Trust.

Additionally, the Trust’s receipt

of amounts received in connection with staking could have implications for investors sensitive to unrelated business taxable income, U.S.

withholding taxes or taxable income effectively connected with a U.S.

trade or business.

federal income tax treatment of staking

may change from that described in this report, possibly with retroactive effect.

The treatment of staking

in a grantor trust for U.S.

federal income tax purposes is still developing.

As a grantor trust, the Trust can undertake only certain types of activities.

For example, generally, the Trust cannot vary its investment portfolio to take advantage of market fluctuations.

The Trust may receive

income from investment activities that do not require such decision-making.

On November 10, 2025, the Treasury Department and IRS issued

guidance providing a safe harbor for certain staking activities with an investment trust treated as a grantor trust for U.S.

federal income

tax purposes.

The requirements under the safe harbor and under existing law are subject to interpretation.

If the Trust were viewed as

undertaking the types of activities that would not be allowable for U.S.

federal income tax purposes, then the Trust could lose its income

tax status as a grantor trust, and the Trust could be reclassified as a partnership.

If the Trust were reclassified as a partnership,

a more complex reporting regime would apply, and Shareholders would receive a Form K-1.

If the Trust were reclassified as a partnership

but did not satisfy a safe harbor or exception to the publicly traded partnership rules, it could be reclassified as a corporation, which

would subject the Trust to corporate level tax, and the Shareholder’s return on investment would likely be affected.

The tax treatment of

ether and transactions involving ether for United States federal income tax purposes may change.

Under current Internal Revenue

Service (the “IRS”) guidance, ether is treated as property, not as currency, for U.S.

federal income tax purposes and transactions

involving payment in ether in return for goods and services are treated as barter exchanges.

Such exchanges result in capital gain or

loss measured by the difference between the price at which ether is exchanged and the taxpayer’s basis in the ether.

However, because

ether is a new technological innovation, because IRS guidance has taken the form of administrative pronouncements that may be modified

without prior notice and comment, and because there is as yet little case law on the subject, the U.S.

federal income tax treatment of

an investment in ether or in transactions relating to investments in ether may change from that described in this prospectus, possibly

with retroactive effect.

Under current IRS guidance, ether is treated as property, not as currency,

federal income tax purposes and transactions involving payment in ether in return for goods and services are treated as barter

Such exchanges result in capital gain or loss measured by the difference between the price at which ether is exchanged and

the taxpayer’s basis in the ether.

However, because ether is a new technological innovation, because IRS guidance has taken the

form of administrative pronouncements that may be modified without prior notice and comment, and because there is as yet little case law

on the subject, the U.S.

federal income tax treatment of an investment in ether or in transactions relating to investments in ether may

change from that described in this report, possibly with retroactive effect.

Any such change in the U.S.

federal income tax treatment of ether may have a negative effect on prices of ether

and may adversely affect the value of the Shares.

In this regard, the IRS has indicated that it has made it a priority to issue additional

guidance related to the taxation of virtual currency transactions, such as transactions involving ether.

federal income tax treatment

of ether may have a negative effect on prices of ether and may adversely affect the value of the Shares.

In this regard, the IRS has indicated

that it has made it a priority to issue additional guidance related to the taxation of digital asset transactions, such as transactions

involving ether.

In addition, the IRS and U.S.

Treasury Department have promulgated final Treasury regulations regarding the tax information reporting rules for crypto currency transactions.

Treasury Department have promulgated final Treasury regulations regarding the tax information

reporting rules for digital asset transactions.

While the U.S.

Treasury Department and the IRS have started to issue such additional guidance, whether any future guidance will adversely

affect the U.S.

federal income tax treatment of an investment in ether or in transactions relating to investments in ether is unknown.

Moreover, future developments that may arise with respect to digital currencies may increase the uncertainty with respect to the treatment

of digital currencies for U.S.

Treasury Department and the IRS have started to issue such additional guidance,

whether any future guidance will adversely affect the U.S.

federal income tax treatment of an investment in ether or in transactions relating

to investments in ether is unknown.

Moreover, future developments that may arise with respect to digital assets may increase the uncertainty

with respect to the treatment of digital assets for U.S.

federal income tax purposes.

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Ethereum blockchain and the Trust claims the new forked asset, the Trust could hold both the original ether and the new “forked”

Under current IRS guidance, a hard fork resulting in the receipt of new units of cryptocurrency is a taxable event giving rise

to ordinary income equal to the value of the new cryptocurrency.

The Trust Agreement will require that, if such a transaction occurs,

the Trust will as soon as possible direct the Ether Custodians to distribute the new forked asset in-kind to the Sponsor, as agent for

the Shareholders, and the Sponsor will arrange to sell the new forked asset and for the proceeds to be distributed to the Shareholders.

Such a sale will give rise to gain or loss, for U.S.

federal income tax purposes, if the amount realized on the sale differs from the

value of the new forked asset at the time it was received by the Trust.

A hard fork may therefore give rise to additional tax liabilities

for Shareholders.

Under current IRS guidance, a hard fork resulting in the receipt of new units of digital assets is a taxable event giving rise

to ordinary income equal to the value of the new digital asset.

The Trust Agreement will require that, if such a transaction occurs, the

Trust will as soon as possible direct the Ether Custodians to distribute the new forked asset in-kind to the Sponsor, as agent for the

Shareholders, and the Sponsor will arrange to sell the new forked asset and for the proceeds to be distributed to the Shareholders.

a sale will give rise to gain or loss, for U.S.

federal income tax purposes, if the amount realized on the sale differs from the value

of the new forked asset at the time it was received by the Trust.

A hard fork may therefore give rise to additional tax liabilities for

Shareholders.

The intended tax treatment

of the Trust will limit the flexibility of the Trust’s investment decisions.

The Trust is intended to be

a grantor trust for U.S.

federal income tax purposes.

A grantor trust is not permitted to vary the investment portfolio of the Shareholders

to take advantage of market fluctuations.

Thus, the Sponsor may allow the Trust to hold when an actively managed fund would sell.

Sponsor may distribute proceeds when an actively managed fund would reinvest the proceeds.

In addition, a fund treated as a grantor trust

may not participate in trading or lending activity without raising a risk of change in status.

This means that the returns of the Trust

may be less than a successfully actively managed fund.

The Exchange on which

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The Trust’s Shares are

listed for trading on the Exchange under the market symbol “CETH”.

listed for trading on the Exchange under the market symbol “TETH”.

Trading in Shares may be halted due to market conditions

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that the courts of the state of Delaware and any federal courts located in Wilmington, Delaware will be the exclusive jurisdiction for

any claims, suits, actions or proceedings, provided that causes of actions for violations of the Exchange Act or the Securities Act will

not be governed by the exclusive jurisdiction provision of the Trust Agreement.

By purchasing Shares in the Trust, Shareholders waive

certain claims that the courts of the state of Delaware and any federal courts located in Wilmington, Delaware is an inconvenient venue

or is otherwise inappropriate.

As such, Shareholder could be required to litigate a matter relating to the Trust in a Delaware court,

even if that court may otherwise be inconvenient for the Shareholder.

any claims, suits, actions or proceedings.

However, pursuant to the Trust Agreement, this shall not apply to causes of actions for violations

federal or state securities laws.

Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts

over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

By purchasing Shares in the Trust,

Shareholders waive certain claims that the courts of the state of Delaware and any federal courts located in Wilmington, Delaware is an

inconvenient venue or is otherwise inappropriate.

As such, Shareholders could be required to litigate a matter relating to the Trust in

a Delaware court, even if that court may otherwise be inconvenient for such Shareholders.

The Trust Agreement also waives

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may limit a Shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Trust.

Section 22 of the Securities

Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the

Securities Act or the rules and regulations thereunder.

Investors cannot waive compliance with the federal securities laws and the rules

and regulations thereunder.

Further, there is uncertainty as to whether a court would enforce the exclusive forum jurisdiction for actions

arising under the Securities Act or Exchange Act.

Shareholders may be

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suspend the right of creation or redemption or may postpone the redemption or purchase settlement date, for (1) any period during which

an emergency exists as a result of which the fulfilment of a purchase order or the redemption distribution is not reasonably practicable

an emergency exists as a result of which the fulfillment of a purchase order or the redemption distribution is not reasonably practicable

(for example, as a result of a significant technical failure, power outage, or network error), or (2) such other period as the Sponsor

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In addition, the Trust may reject

a redemption order if the order is not in proper form as described in the Authorized Participant Agreement or if the fulfilment of the

a redemption order if the order is not in proper form as described in the Authorized Participant Agreement or if the fulfillment of the

order might be unlawful.

Any such postponement, suspension or rejection could adversely affect a redeeming Authorized Participant.

of creation privileges may adversely impact how the Shares are traded and arbitraged on the secondary market, which could cause them to

trade at levels materially different (premiums and discounts) from the fair value of their underlying holdings.

of creation privileges may adversely impact how the Shares are traded and arbitraged on the secondary market, which could cause them

to trade at levels materially different (premiums and discounts) from the fair value of their underlying holdings.

Shareholders may be

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those employed by the Index, including ether investments that are “fair valued,” may differ from the value established by

Shareholders may be

adversely affected by the amendment of the Trust Agreement without Shareholder consent.

Subject to certain exceptions

set forth in the Trust Agreement, the Trust Agreement can be amended by the Sponsor in its sole discretion and without the shareholders’

consent by making an amendment, an agreement supplemental to the Trust Agreement, or an amended and restated trust agreement, which amendments

may materially adversely affect the interests of Shareholders.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors