for state and local tax purposes may be issued in the future. A state or local government authority’s treatment of SUI may have negative consequences, including the imposition of a greater tax burden on investors in SUI or the imposition of a greater cost on the acquisition and disposition of SUI generally. Any such treatment may have a negative effect on prices of SUI and may adversely affect the value of the Shares. A U.S. tax-exempt shareholder may recognize “unrelated business taxable income” as a consequence of an investment in Shares. Under the guidance provided in the Ruling & FAQs, hard forks, airdrops and similar occurrences with respect to digital assets will under certain circumstances be treated as taxable events giving rise to ordinary income. Moreover, as separately provided by the IRS in the 2023 Staking Guidance, staking rewards will, under certain circumstances, be treated as giving rise to taxable income. In the absence of guidance to the contrary, it is possible that any such income recognized by a U.S. tax-exempt shareholder would constitute UBTI. A tax-exempt shareholder should consult its tax adviser regarding whether such shareholder may recognize UBTI as a consequence of an investment in Shares. See “Material U.S. Federal Income Tax Consequences.” Shareholders may be subject to withholding tax on income derived from forks, airdrops and similar occurrences and, if the Staking Condition is satisfied, Staking Consideration received as staking rewards. The Ruling & FAQs do not address whether income recognized by a non-U.S. person as a result of a fork, airdrop or similar occurrence or staking could be subject to the 30% withholding tax imposed on U.S.-source “fixed or determinable annual or periodical” income. Non-U.S. Holders (as defined under “Material U.S. Federal Income Tax Consequences—Tax Consequences to Non-U.S. Holders”) should be aware that, in the absence of guidance, a withholding agent (including a broker through which a Non- U.S. Holder holds Shares) may withhold 30% of any such income recognized by a non-U.S. Holder in respect of its Shares, including by deducting such withheld amounts from proceeds that such non-U.S. Holder would otherwise be entitled to receive in connection with a distribution of Incidental Rights, IR Virtual Currency or, if the Staking Condition is satisfied, Staking Consideration received as staking rewards. See “Material U.S. Federal Income Tax Consequences.” In addition, the Trust may enter into Staking Arrangements with Staking Providers organized in, or that have operations in, a non- U.S. jurisdiction. Non-U.S. jurisdictions may seek to impose withholding tax on Staking Consideration received by the Trust as staking rewards, which may negatively affect a shareholder’s investment in the Trust. Risk Factors Related to Staking The Trust will not be permitted to engage in Staking unless (and, then, only to the extent that) the Staking Condition is satisfied in addition to the Trust satisfying any additional requirements that may arise in connection with the satisfaction of the Staking Condition, which could negatively affect the value of the Shares . The Trust currently is prohibited from engaging in Staking, and there can be no assurance that the Trust will be permitted to engage in Staking in the future. The Trust Agreement provides that the Trust may engage in Staking, but only if (and, then, only to the extent that) the Staking Condition has been satisfied. As of the date of this prospectus, the Staking Condition has not been met for the Trust, and there can be no assurance as to whether or when the Staking Condition will be met for the Trust in the future. The Sponsor may decide in its sole discretion not to pursue satisfaction of the Staking Condition, and there can be no assurance that the Sponsor will cause the Trust to engage in Staking. Subject to the Staking Condition being satisfied and subject to compliance with certain related requirements, in the future the Trust may stake a portion of its SUI holdings to receive Native Staking Consideration. However, as long as the Staking Condition and any related requirements have not been satisfied, the Trust will not stake any portion of its SUI holdings to receive Native Staking Consideration. The current inability of the Trust to engage in Staking and receive such Native Staking Consideration could place the Shares at a comparative disadvantage relative to an investment in SUI directly or through a vehicle that is not subject to such a prohibition, which could negatively affect the value of the Shares . Staking introduces a risk of loss of SUI, which could adversely affect the value of the Shares. Staking introduces a risk of loss of SUI. 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 Sui Network may impose penalties (i.e., “slashing”) if a validator commits malicious acts related to the validation of transactions. Currently on the Sui Network, slashing generally operates theoretically possible by social consensus, rather than being automatically applied by the protocol’s code. If two-thirds of validators determine that a validator should be slashed for low operational performance, malicious behavior, or poor community membership, that validator's rewards will be slashed. Slashing on the Sui Network does not slash a validator's staked SUI.
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