{"url_path":"/sec/ethv/10-q/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors.**","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-14","source_url":"https://www.sec.gov/Archives/edgar/data/1860788/0000930413-26-001609-index.html","accession_number":"0000930413-26-001609","cik":"0001860788","ticker":"ETHV","issuer_name":"VanEck Ethereum ETF","edgar_url":"https://www.sec.gov/Archives/edgar/data/1860788/0000930413-26-001609-index.html","primary_entity_key":"0001860788","primary_entity_name":"VanEck Ethereum ETF"},"word_count":4149,"has_tables":true,"body_markdown":"**Item 1A. Risk Factors.**\n\n \n\n*Digital asset markets in the United States exist in a state\nof regulatory uncertainty, and adverse legislative or regulatory developments could significantly harm the value of ETH or the\nShares, such as by banning, restricting or imposing onerous conditions or prohibitions on the use of ETH, validating activity,\ndigital wallets, the provision of services related to trading and providing custody services for ETH, the operation of the Ethereum\nnetwork, or the digital asset markets generally*\n\n \n\nThere is a lack of consensus regarding\nthe regulation of digital assets, including ETH, and their markets. As a result of the growth in the size of the digital asset\nmarket, as well as the 2022 Events, the U.S. Congress and a number of U.S. federal and state agencies (including FinCEN, SEC, Office\nof the Comptroller of the Currency (the “OCC”), CFTC, FINRA, the Consumer Financial Protection Bureau (“CFPB”),\nthe Department of Justice, the Department of Homeland Security, the Federal Bureau of Investigation, the Internal Revenue Service\n(“IRS”), state financial institution regulators, and others) have been examining the operations of digital asset networks,\ndigital asset users and the digital asset markets. Many of these state and federal agencies have brought enforcement actions or\nissued consumer advisories regarding the risks posed by digital assets to investors. Ongoing and future regulatory actions with\nrespect to digital assets generally or ETH in particular may alter, perhaps to a materially adverse extent, the nature of an investment\nin the Shares or the ability of the Trust to continue to operate.\n\n \n\nThe 2022 Events, including among others\nthe bankruptcy filings of FTX and its subsidiaries, Three Arrows Capital, Celsius Network, Voyager Digital, Genesis, BlockFi and\nothers, and other developments in the digital asset markets, have resulted in calls for heightened scrutiny and regulation of the\ndigital asset industry, with a specific focus on intermediaries such as digital asset platforms, platforms, and custodians. Federal\nand state legislatures and regulatory agencies may introduce and enact new laws and regulations to regulate crypto asset intermediaries,\nsuch as digital asset platforms and custodians. The March 2023 collapses of Silicon Valley Bank, Silvergate Bank, and Signature\nBank, which in some cases provided services to the digital asset industry, may amplify and/or accelerate these trends.\n\n \n\nU.S. federal and state regulators, as well\nas the White House, have issued reports and releases concerning crypto assets, including ETH and crypto asset markets. Further,\nin 2023 the House of Representatives formed two new subcommittees: the Digital Assets, Financial Technology and Inclusion Subcommittee\nand the Commodity Markets, Digital Assets, and Rural Development Subcommittee, each of which were formed in part to analyze issues\nconcerning crypto assets and demonstrate a legislative intent to develop and consider the adoption of federal legislation designed\nto address the perceived need for regulation of and concerns surrounding the crypto industry. However, the extent and content of\nany forthcoming laws and regulations are not yet ascertainable with certainty, and it may not be ascertainable in the near future.\nWe cannot predict how these and other related events will affect us or the crypto asset business.\n\n \n\nThere remains substantial uncertainty regarding\nthe regulation of digital assets, including ETH, and their markets, notwithstanding certain recent federal interpretive actions\nintended to provide additional clarity. On March 17, 2026, the SEC issued an interpretive release (the “Interpretive Release”)\nregarding the application of the federal securities laws to certain types of digital assets and certain transactions involving\ndigital assets., and the CFTC concurrently provided guidance that it and its staff will administer the Commodity Exchange Act consistent\nwith that interpretation. Among other things, the Interpretive Release introduces a taxonomy for crypto addresses how a non-security\ncrypto asset may become subject to, and may cease to be subject to, an investment contract; and clarifies the application of the\nfederal securities laws to airdrops, protocol mining, protocol staking and the wrapping of a non-security crypto asset. Although\nthe March 17, 2026 interpretive guidance may provide greater clarity in certain respects, this guidance is not binding law, may\nbe revised, and does not eliminate uncertainty, particularly with respect to the regulatory treatment of specific activities or\ntransactions involving crypto assets. In August 2021, the chair of the SEC stated that he believed investors using digital asset\ntrading platforms are not adequately protected, and that activities on the platforms can implicate the securities laws, commodities\nlaws and banking laws, raising a number of issues related to protecting investors and consumers, guarding against illicit activity,\nand ensuring financial stability. The chair expressed a need for the SEC to have additional authorities to prevent transactions,\nproducts, and platforms from “falling between regulatory cracks,” as well as for more resources to protect investors\nin “this growing and volatile sector.” The chair called for federal legislation centering on digital asset trading,\nlending, and decentralized finance platforms, seeking “additional plenary authority” to write rules for digital asset\ntrading and lending. It is not possible to predict whether, or when, any of these developments will lead to Congress granting additional\nauthorities to the CFTC, SEC or other regulators, what the nature of such additional authorities might be, how additional legislation\nand/or regulatory oversight might impact the ability of digital asset markets\n\n13\n\nto function or how any new regulations or changes\nto existing regulations might impact the value of digital assets generally and ETH held by the Trust specifically. The consequences\nof increased federal regulation of digital assets and digital asset activities could have a material adverse effect on the Trust\nand the Shares.\n\n \n\nFinCEN requires any administrator or exchanger\nof convertible virtual currency (“CVC”) to register with FinCEN as a money transmitter and comply with the anti- money\nlaundering regulations applicable to money transmitters. Entities which fail to comply with such regulations are subject to fines,\nmay be required to cease operations, and could have potential criminal liability. For example, in 2015, FinCEN assessed a $700,000\nfine against a sponsor of a digital asset for violating several requirements of the Bank Secrecy Act by acting as an MSB and selling\nthe digital asset without registering with FinCEN, and by failing to implement and maintain an adequate anti-money laundering program.\nIn 2017, FinCEN assessed a $110,000,000 fine against BTC-e, a now defunct digital asset exchange, for similar violations. The requirement\nthat exchangers that do business in the United States register with FinCEN and comply with anti- money laundering regulations may\nincrease the cost of buying and selling ETH and therefore may adversely affect the price of ETH and an investment in the Shares.\n\n \n\nThe Office of Foreign Assets Control (“OFAC”)\nof the U.S. Department of the Treasury (the “U.S. Treasury Department”) has added digital currency addresses, including\naddresses on the Ethereum Blockchain, to the list of Specially Designated Nationals whose assets are blocked, and with whom U.S.\npersons are generally prohibited from dealing. Such actions by OFAC, or by similar organizations in other jurisdictions, may introduce\nuncertainty in the market as to whether ETH that has been associated with such addresses in the past can be easily sold. This “tainted”\nETH may trade at a substantial discount to untainted ETH. Reduced fungibility in the ETH markets may reduce the liquidity of ETH\nand therefore adversely affect their price.\n\n \n\nIn February 2020, then-U.S. Treasury Secretary\nSteven Mnuchin stated that digital assets were a “crucial area” on which the U.S. Treasury Department has spent significant\ntime. Secretary Mnuchin announced that the U.S. Treasury Department is preparing significant new regulations governing digital\nasset activities to address concerns regarding the potential use for facilitating money laundering and other illicit activities.\nIn December 2020, FinCEN, a bureau within the U.S. Treasury Department, proposed a rule that would require financial institutions\nto submit reports, keep records, and verify the identity of customers for certain transactions to or from so-called “unhosted”\nwallets, also commonly referred to as self-hosted wallets. In January 2021, then U.S. Treasury Secretary nominee Janet Yellen stated\nher belief that regulators should “look closely at how to encourage the use of digital assets for legitimate activities while\ncurtailing their use for malign and illegal activities.”\n\n \n\nUnder regulations from the New York State\nDepartment of Financial Services (“NYDFS”), businesses involved in digital asset business activity for third parties\nin or involving New York, excluding merchants and consumers, must apply for a license, commonly known as a BitLicense, from the\nNYDFS and must comply with anti-money laundering, cybersecurity, consumer protection, and financial and reporting requirements,\namong others. As an alternative to a BitLicense, a firm can apply for a charter to become a limited purpose trust company under\nNew York law qualified to engage in certain digital asset business activities. Other states have considered or approved digital\nasset business activity statutes or rules, passing, for example, regulations or guidance indicating that certain digital asset\nbusiness activities constitute money transmission requiring licensure.\n\n \n\nThe inconsistency in applying money transmitting\nlicensure requirements to certain businesses may make it more difficult for these businesses to provide services, which may affect\nconsumer adoption of ETH and its price. In an attempt to address these issues, the Uniform Law Commission passed a model law in\nJuly 2017, the Uniform Regulation of Virtual Currency Businesses Act, which has many similarities to the BitLicense and features\na multistate reciprocity licensure feature, wherein a business licensed in one state could apply for accelerated licensure procedures\nin other states. It is still unclear, however, how many states, if any, will adopt some or all of the model legislation.\n\n \n\nLaw enforcement agencies have often relied\non the transparency of blockchains to facilitate investigations. However, certain privacy-enhancing features have been, or are\nexpected to be, introduced to a number of digital asset networks. If the Ethereum network were to adopt any of these privacy-enhancing\nfeatures, these features may provide law enforcement agencies with less visibility into transaction-level data. Europol, the European\nUnion’s law enforcement agency, released a report in October 2017 noting the increased use of privacy-enhancing digital assets\nlike Zcash and Monero in criminal activity on the internet. In May 2022, OFAC banned all U.S. persons from using Blender.io, a\ndigital asset mixing application that operates on the Ethereum Blockchain to obfuscate the origin, destination and counterparties\nof blockchain transactions, by adding certain digital asset wallet addresses associated with Blender.io to its Specially Designated\nNationals list. Blender.io receives a variety of transactions and mixes them together before transmitting them to their ultimate\ndestinations. On March 23, 2022, Lazarus Group, a state-sponsored cyber hacking group associated with North Korea, carried out\na major virtual currency heist from a blockchain project linked to the online game Axie Infinity; Blender.io was used in processing\nsome of the illicit proceeds. The U.S. Treasury Department’s press release announcing the sanctions on Blender.io observed\nthat, while most virtual currency activity is licit, virtual currency can be used for illicit activity, including sanctions evasion,\nthrough mixers, peer-to-peer exchangers, darknet markets, and exchanges. This includes the facilitation of heists, ransomware schemes,\nand other cybercrimes.\n\n14\n\nOn October 19, 2023, FinCEN published proposed rulemaking to apply the authorities in Section 311 of the\nUSA PATRIOT Act to impose requirements on financial institutions that engage in CVC transactions with CVC mixers. The proposed\nrule, if adopted, would require covered financial institutions to report to FinCEN any CVC transactions they process that involves\nCVC mixing within or involving a jurisdiction outside the United States. The term “CVC mixing” covers more than just\ntransactions that involve CVC mixers like Tornado Cash, and seemingly could cover a broader range of conduct involving technologies,\nservices, or methods that have the effect of obfuscating the source, destination, or amount of a CVC transaction, whether or not\nthe obfuscation was intentional. If the rule were to be adopted as proposed and if the Ethereum Blockchain were to be deemed to\nor were to adopt features which come within the rule’s ambit, it could cause covered financial institutions - such as many\ndigital asset platforms, or the Trust’s service providers, such as the Cash Custodian - to reduce support for or cease offering\nservices for ETH or to the Trust, which could impair the utility of ETH, the value of the Shares and the Trust’s ability\nto operate in compliance with new laws and regulations.\n\n \n\n*A Determination That ETH Or Any Other Digital Asset Is A\n“Security” May Adversely Affect The Value Of ETH And The Value Of The Shares, And Result In Potentially Extraordinary,\nNonrecurring Expenses To, Or Termination Of, The Trust.*\n\n \n\nDepending on its characteristics, a digital asset may be considered\na “security” under the federal securities laws. The test for determining whether a particular digital asset is a “security”\nis complex and difficult to apply, and the outcome is difficult to predict. Public, though non-binding, statements made in the\npast by senior officials at the SEC and endorsed by its previous Chairman in a letter to a member of Congress appeared to indicate\nthat the SEC did not consider ETH to be a security at that time. The SEC has brought enforcement actions against the issuers and\npromoters of several other digital assets on the basis that the digital assets in question are securities. The CFTC has for years\nconsidered ETH to be a commodity subject to its regulatory jurisdiction, supported by certain federal district court decisions,\nand ETH Futures have been listed for years on CFTC-regulated exchanges while cleared ETH swaps have been listed for trading on\nCFTC-regulated swap execution facilities not registered with the SEC without being deemed “mixed swaps” subject to\njoint CFTC and SEC jurisdiction to the Sponsor’s knowledge.\n\n \n\nWhether a digital asset is a security under the federal securities\nlaws depends on whether it is included in the lists of instruments making up the definition of “security” in the 1933\nAct, the Exchange Act and the Investment Company Act. Digital assets as such do not appear in any of these lists,\nalthough each list includes the terms “investment contract” and “note,” and the SEC has typically analyzed\nwhether a particular digital asset is a security by reference to whether it meets the tests developed by the federal courts interpreting\nthese terms, known as the Howey and Reves tests, respectively. For many digital assets, whether or not the Howey or Reves tests\nare met is difficult to resolve definitively, and substantial legal arguments can often be made both in favor of and against a\nparticular digital asset qualifying as a security under one or both of the Howey and Reves tests. Adding to the complexity, the\nSEC staff has indicated that the security status of a particular digital asset can change over time as the relevant facts evolve.\n\n \n\nIn the Interpretive Release, the SEC stated that, based on its\ncurrent understanding of the digital asset markets, ether is a “digital commodity” and not itself a security. Although\nthe Interpretive Release represents the official position of the SEC, it is not itself a statute or binding rule, does not supersede\nor replace the Howey test, is based on the SEC’s current understanding of the digital asset markets, and may be refined,\nrevised or expanded. In addition, a court, regulator, or future administration could take a different view, and future legislation,\nrulemaking, enforcement positions, judicial decisions or other developments could result in ether, the Trust, the Shares or transactions\ninvolving ether being treated differently than contemplated by the Interpretive Release. Any such developments could adversely\naffect the Trust and the value of the Shares.\n\n \n\nAs part of determining whether ETH is a security for purposes\nof the federal securities laws, the Sponsor takes into account a number of factors, including the various definitions of “security”\nunder the federal securities laws and federal court decisions interpreting elements of these definitions, such as the U.S. Supreme\nCourt’s decisions in the Howey and Reves cases, as well as reports, orders, press releases, public statements and speeches\nby the SEC and its staff providing guidance on when a digital asset may be a security for purposes of the federal securities laws,\nand other materials relevant to the status of ETH as a security (or not). Finally, the Sponsor discusses the security status of\nETH with its securities lawyers. Through this process the Sponsor believes that it is applying the proper legal standards in making\na good faith determination that it believes ETH is not presently a security under federal law in light of the uncertainties inherent\nin the Howey and Reves tests. In light of these uncertainties and the fact-based nature of the analysis, the Sponsor acknowledges\nthat ETH may currently be a security, based on the facts as they exist today, or may in the future be found by the SEC or a federal\ncourt to be a security under the federal securities laws notwithstanding the Sponsor’s prior conclusion; and the Sponsor’s\nprior conclusion, even if reasonable under the circumstances and made in good faith, would not preclude legal or regulatory action\nbased on the presence of a security.\n\n \n\nThe Sponsor may dissolve the Trust if the Sponsor determines\nETH is a security under the federal securities laws, whether that determination is initially made by the Sponsor itself, or because\nthe SEC or a federal court subsequently makes that determination. Because the legal tests for determining whether a digital asset\nis or is not a security often leave room for interpretation, for so long as the Sponsor believes there to be good faith grounds\nto conclude that the Trust’s ETH is not a security, the Sponsor does not intend to dissolve the Trust on the basis that ETH\ncould at some future point be determined to be a security.\n\n15\n\nAny enforcement action by the SEC or a state securities regulator\nasserting that ETH is a security, or a court decision to that effect would be expected to have an immediate material adverse impact\non the trading value of ETH, as well as the Shares. This is because the business models behind most digital assets are incompatible\nwith regulations applying to transactions in securities. The New York Attorney General alleged in a lawsuit filed in March 2023\nthat ETH was a security under New York and federal securities law and that a cryptocurrency exchange that deals in ETH, unlawfully\nfailed to register as a securities dealer under New York state law. However, the New York Attorney General alleged in the alternative\nin the same case that ETH was a commodity under both New York state and federal law. The defendant settled the New York Attorney\nGeneral’s lawsuit without a court adjudicating whether ETH was a security, a commodity, or neither for purposes of New York\nstate or federal law.\n\n \n\nIf a digital asset is determined or asserted to be a security,\nit is likely to become difficult or impossible for the digital asset to be traded, cleared or custodied in the United States through\nthe same channels used by non-security digital assets, which in addition to materially and adversely affecting the trading value\nof the digital asset is likely to significantly impact its liquidity and market participants’ ability to convert the digital\nasset into U.S. dollars. For example, in 2020 the SEC filed a complaint against the issuer of XRP, Ripple Labs, Inc., and two of\nits executives, alleging that they raised more than $1.3 billion through XRP sales that should have been registered under the federal\nsecurities laws, but were not. In the years prior to the SEC’s action, XRP’s market capitalization at times reached\nover $140 billion. However, in the weeks following the SEC’s complaint, XRP’s market capitalization fell to less than\n$10 billion, which was less than half of its market capitalization in the days prior to the complaint. The SEC’s action against\nXRP’s issuer underscores the continuing uncertainty around which digital assets are securities, and demonstrates that such\nfactors as how long a digital asset has been in existence, how widely held it is, how large its market capitalization is and that\nit has actual usefulness in commercial transactions, ultimately may have no bearing on whether the SEC or a court will find it\nto be a security. There is currently legislation that is being proposed and considered that addresses this regulatory uncertainly,\nbut it is unclear if the proposed legislation will be passed.\n\n \n\nIn addition, if ETH is determined to be a security, the Trust\ncould be considered an unregistered “investment company” under SEC rules, which could necessitate the Trust’s\nliquidation. In this case, the Trust and the Sponsor may be deemed to have participated in an illegal offering of securities and\nthere is no guarantee that the Sponsor will be able to register the Trust under the Investment Company Act at such time\nor take such other actions as may be necessary to ensure the Trust’s activities comply with applicable law, which could force\nthe Sponsor to liquidate the Trust.\n\n \n\nMoreover, whether or not the Sponsor or the Trust were subject\nto additional regulatory requirements as a result of any SEC or federal court determination that its assets include securities,\nthe Sponsor may nevertheless decide to terminate the Trust, in order, if possible, to liquidate the Trust’s assets while\na liquid market still exists. For example, in response to the SEC’s action against the issuer of XRP, certain significant\nmarket participants announced they would no longer support XRP and announced measures, including the delisting of XRP from major\ndigital asset trading platforms. The sponsor of the Grayscale XRP Trust subsequently dissolved this trust and liquidated its assets.\nIf the SEC or a federal court were to determine that ETH is a security, it is likely that the value of the Shares of the Trust\nwould decline significantly, and that the Trust itself may be terminated and, if practical, its assets liquidated.\n\n \n\n*Future Legal Or Regulatory Developments\nMay Negatively Affect The Value Of eth Or Require The Trust Or The Sponsor To Become Registered With The SEC Or CFTC, Which May\nCause The Trust To Liquidate.*\n\n \n\nCurrent and future legislation, SEC and\nCFTC rulemaking, and other regulatory developments may impact the manner in which ETH are treated for classification and clearing\npurposes. In particular, although the Interpretive Release classified ETH as a digital commodity and not a security under the federal\nsecurities laws, ETH may nonetheless in the future be classified by the CFTC as a “commodity interest” under the CEA.\nAlternatively, in the future a court or a future SEC administration could conclude that ETH is a “security” under U.S.\nfederal securities laws. The Sponsor and the Trust cannot be certain as to how future regulatory developments will impact the treatment\nof ETH under the law. In the face of such developments, the required registrations and compliance steps may result in extraordinary,\nnonrecurring expenses to the Trust. If the Sponsor decides to terminate the Trust in response to the changed regulatory circumstances,\nthe Trust may be dissolved or liquidated at a time that is disadvantageous to Shareholders.\n\n \n\nThe SEC has stated that certain digital\nassets may be considered “securities” under the federal securities laws. The test for determining whether a particular\ndigital asset is a “security” is complex and the outcome is difficult to predict. If ETH is in the future determined\nto be a “security” under federal or state securities laws by the SEC or any other agency, or in a proceeding in a court\nof law or otherwise, it would likely have material adverse consequences for the value of ETH. For example, it may become more difficult\nor impossible for ETH to be traded, cleared and custodied in the United States as compared to other digital assets that are not\nconsidered to be securities, which could in turn negatively affect the liquidity and general acceptance of ETH and cause users\nto migrate to other digital assets.\n\n \n\nTo the extent that ETH is determined to\nbe a security, the Trust and the Sponsor may also be subject to additional regulatory requirements, including under the 1940 Act,\nand the Sponsor may be required to register as an investment adviser under the Investment Advisers Act of 1940, as amended (the\n“Advisers Act”). If the Sponsor determines not to comply with such additional regulatory and\n\n16\n\nregistration requirements,\nthe Sponsor will terminate the Trust. Any such termination could result in the liquidation of the Trust’s ETH at a time that\nis disadvantageous to Shareholders.\n\n \n\nTo the extent that ETH is deemed to fall\nwithin the definition of a “commodity interest” under the CEA, the Trust and the Sponsor may be subject to additional\nregulation under the CEA and CFTC regulations. These additional requirements may result in extraordinary, recurring and/or nonrecurring\nexpenses of the Trust, thereby materially and adversely impacting the Shares. If the Sponsor and/or the Trust determines not to\ncomply with such additional regulatory and registration requirements, the Sponsor may terminate the Trust. Any such termination\ncould result in the liquidation of the Trust’s ETH at a time that is disadvantageous to Shareholders."}