Subject to the Staking Condition being satisfied and subject to compliance with certain related requirements, the Sponsor has sole discretion over whether the Trust will engage in Staking, and there can be no assurance that the Sponsor will cause the Trust to engage in Staking. If the Sponsor causes the Trust to engage in Staking, the Sponsor will cause the Trust to engage in staking with respect to all of the Trust's SUI at all times, except (i) as necessary to pay the Sponsor's Fee and the Sponsor's Staking Fee, (ii) as necessary to pay any additional Trust expenses, (iii) as necessary to satisfy existing and reasonably foreseen potential redemption requests (assuming the Trust is then permitted to operate an ongoing redemption program) as determined by the Sponsor, (iv) as necessary to reduce the SUI obtained by the Trust as Native Staking Consideration to cash for distribution at regular intervals, (v) as necessary to reduce the SUI obtained by the Trust as Native Staking Consideration to cash in connection with the Trust's liquidation, (vi) as necessary to take protective actions in respect of vulnerabilities in the source code or cryptography underlying the Sui Network and/or its proof-of-stake protocol, its staking smart contracts or its validator client software, (vii) if the Custodian discontinues its arrangements with the Trust and such discontinuance affects the Trust's SUI, for so long as is reasonably necessary to re-establish those arrangements or to establish similar arrangements with other parties, (viii) if the Custodian discontinues its arrangements with the Staking Provider and such discontinuance affects the Trust's SUI, for so long as is reasonably necessary to re-establish those arrangements or to establish similar arrangements with other parties, (ix) in the event of a change in applicable law or regulation, (x) as necessary to maintain a Liquidity Sleeve (as defined herein), (xi) as necessary pursuant to a “contingent liquidity arrangement” within the meaning of Section 6.02(12) of IRS Revenue Procedure 2025-31 or (xii) in accordance with any other exception that is expressly contemplated by an opinion, ruling or tax guidance that satisfies the Staking Condition. All SUI received by the Trust in connection with the creation of new Shares, or as Native Staking Consideration, would also be staked upon receipt by the Trust, unless one or more of the exceptions described in clauses (i)-(xii) above applies. Moreover, any staked SUI which must be un-staked in order to fulfill a distribution in connection with a redemption (to the extent such distribution cannot be fulfilled utilizing the portion of the Trust's SUI that has not been staked, or through another mechanism to manage liquidity in connection with Redemption Orders contemplated by an opinion of a Tax Advisor, a Tax Ruling or Tax Guidance that satisfies the Staking Condition) 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 Custodian, and such transaction is processed by the Sui Network. During the portion of any Uplisted Period during which the Staking Condition has been satisfied with respect to a particular form of Staking, the Trust Agreement imposes further requirements relating to recently released IRS guidance. If the Sponsor, in its sole discretion, causes the Trust to engage in Staking, the Sponsor generally will stake as much of the Trust’s SUI as is practicable (i.e., up to 100%) at all times, with the remainder of the Trust’s SUI remaining unstaked in order to address the various exceptions and other considerations described herein, including the satisfaction of the Staking Condition. The approximate percentage of the Trust’s SUI that is staked each day will be reported the following day at 4:00 p.m., New York time, on etfs.grayscale.com/gsui. If the transaction fees for recording transactions on the Sui Network are not sufficiently high to incentivize validators, or if certain jurisdictions continue to limit or otherwise regulate validating activities, validators may cease expanding validating power or demand high transaction fees, which could negatively impact the value of SUI and the value of the Shares. If the digital asset awards for validating transactions or the transaction fees for recording transactions on the Sui Network are not sufficiently high to incentivize validators, or if certain jurisdictions continue to limit or otherwise regulate validating activities, validators may cease expending validating power to validate transactions on the Sui Network could be slowed. For example, the realization of one or more of the following risks could materially adversely affect the value of the Shares: • Over the past several years, digital asset validating operations have evolved from individual users validating with computer processors, graphics processing units and first-generation application specific integrated circuit machines to “professionalized” validating operations using proprietary hardware or sophisticated machines. If the profit margins of digital asset validating operations are not sufficiently high, digital asset validators are more likely to immediately sell digital assets earned by validating, resulting in an increase in liquid supply of that digital asset, which would generally tend to reduce that digital asset’s market price. • A reduction in digital assets staked by validators on the Sui Network could increase the likelihood of a malicious actor or botnet obtaining control. See “—If a malicious actor or botnet obtains control of more than 50% of the validating power on the Sui Network, or otherwise obtains control over the Sui Network through its influence over core developers or otherwise, such actor or botnet could manipulate the Blockchain to adversely affect the value of the Shares or the ability of the Trust to operate.” • 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 Blockchain or a software upgrade automatically charges fees for all transactions on the Sui Network, the cost of using SUI may increase and the marketplace may be reluctant to accept SUI as a means of payment. Alternatively, validators could collude in an anti-competitive manner to reject low transaction fees on the Sui Network and force users to pay higher fees, thus reducing the attractiveness of the Sui Network. Higher
25
Made with FlippingBook - professional solution for displaying marketing and sales documents online