Item 1A. Risk Factors
Item
1A. Risk Factors
You should carefully consider the risk factors discussed below as well as the risk factors discussed in “Risk Factors” in
our Registration Statement on Form S-1 (333-280557) declared effective on November 18, 2025, which could materially affect our business,
financial condition or future results. There have been no material changes in our risk factors from those disclosed therein.
The risks described below and in our Prospectus are not the only risks facing the Trust. You should also consider any risks and uncertainties
described under the caption “Risk Factors” in any applicable prospectus, prospectus supplement, registration statement or
other document that we file with the SEC before or after this date. Additional risks and uncertainties not currently known to us or that
we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
The
exclusive jurisdiction for certain types of actions and proceedings and waiver of trial by jury clauses set forth in the Trust Agreement
may have the effect of limiting a Shareholder’s rights to bring legal action against the Trust and could limit a purchaser’s ability
to obtain a favorable judicial forum for disputes with the Trust.
The Trust Agreement provides 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. The Trust has agreed that this shall not apply to causes of actions
for violations of U.S. 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.
Investors 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 the Shareholder.
The Trust Agreement also waives the right to trial by jury in any such claim, suit, action or proceeding, provided that causes of actions
for violations of the Exchange Act or the Securities Act will not be governed by the waiver of the right to trial by jury provision of
the Trust Agreement. If a lawsuit is brought against the Trust, it may be heard only by a judge or justice of the applicable trial court,
which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have,
including results that could be less favorable to the plaintiffs in any such action. By purchasing Shares in the Trust, Shareholders waive
a right to a trial by jury which may limit a Shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes
with the Trust.
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Tax Risk
The ongoing activities 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 or sale of SOL 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 cash 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 funds. 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.
SOL staking may result
in adverse tax consequences for Shareholders.
To the extent the Sponsor determines to stake a portion of the Trust’s SOL, the staking of the Trust’s SOL is expected to result in the
Trust’s receipt of amounts received in connection with staking in the form of additional SOL. 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 SOL staking activities could
result in beneficial owners of Shares incurring tax liability which may not correspond in amount or timing with a cash 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. The
U.S. federal income tax treatment of staking may change from that described in the Trust’s prospectus filed with the SEC on November 18,
2025, 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.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.