Bitwise Bitcoin ETF

Item 1A. Risk Factors

There have been no material changes to the risk factors described in the Trust's Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 18, 2025, as amended by Amendment No. 1 to Annual Report on Form 10-K/A filed with the SEC on March 28, 2025., other than the updates to the risk factors set forth below.

Regulatory Risk

As bitcoin and the digital asset ecosystem have expanded, they have attracted increasing regulatory attention from U.S. regulators, and evolving regulatory frameworks may impact bitcoins classification and treatment. These developments could significantly influence the Trusts compliance requirements, valuation strategies, result in extraordinary expenses, and substantially impact the value of the Shares.

The regulatory landscape for digital assets in the United States is complex and evolving, with multiple federal and state agencies actively overseeing various aspects of their use, trading, and compliance obligations. These agencies include, but are not limited to, the SEC, the U.S. Commodity Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC), the Office of the Comptroller of the Currency, the Federal Reserve Board, the U.S. Department of the Treasury, the Consumer Financial Protection Bureau, the Federal Trade Commission, the Internal Revenue Service, the U.S. Department of Justice (DOJ) and various state financial regulators and state Attorneys General.

The jurisdiction of federal and state regulators over bitcoin depends on its classification. Bitcoin may be deemed securities, commodities, virtual currencies, or another asset type. Each classification can trigger different regulatory frameworks and oversight responsibilities. Bitcoin could be classified by the SEC as a security under U.S. federal securities laws, depending on its use and the circumstances surrounding specific transactions. Bitcoin may also be classified by the CFTC as a commodity interest under the Commodity Exchange Act, or by state regulators as a form of virtual currency subject to state money transmission laws. Although U.S. courts have ruled in some circumstances that Bitcoin is a commodity, no comprehensive federal court ruling conclusively establishes that bitcoin or any other digital asset is a security, commodity, or other form of asset under all circumstances. 

In recent years, the SEC has increased enforcement actions and investigations in the crypto sector, targeting entities it deems in violation of securities laws. This includes actions against platforms such as Kraken for offering unregistered securities and staking services, as well as investigations into Coinbase, Ripple, Binance and ConsenSys for activities involving various digital assets and services. The SEC also proposed or adopted several rules last year that could significantly impact the digital asset industry. These included amendments to the 1934 Acts definition of dealer, which could negatively affect numerous digital asset trading platforms, and certain DeFi platforms in particular, and proposed amendments to the SEC Custody Rule under the Advisers Act, which would make it more difficult for asset managers to custody digital assets. The SEC also raised concerns about compliance and market oversight of digital assets, and emphasized retail investor protection and market integrity as key priorities, with its Division of Examinations identifying digital assets as a focus for 2025. These regulatory actions and heightened scrutiny extend to emerging areas such as DeFi protocols and NFTs creating additional legal challenges and market uncertainty. 

However, recent SEC developments indicate possible shifts in its regulatory approach, although the SECs long-term direction remains uncertain. The SEC approved multiple spot Bitcoin ETFs for the first time in January 2024 followed by the approval of multiple spot Ethereum ETFs in July 2024, including the Bitwise trusts holding bitcoin and ether. These approvals suggest that both bitcoin and ether may be commodities. More recently, the SEC and its staff: (i) withdrew Staff Accounting Bulletin 121, eliminating the requirement for companies to recognize a liability and corresponding asset for safeguarding digital assets; (ii) formed a new Crypto Task Force led by Commissioner Hester Peirce aimed at providing greater regulatory clarity to the digital asset industry; (iii) held a series of public roundtables between April and June 2025 through the Crypto Task Force, specifically addressing crypto trading, custody, tokenization, and decentralized finance, reflecting intensified efforts to engage stakeholders and clarify regulatory expectations across these critical market segments; (iv) indicated a strategic shift away from regulation-by-enforcement toward explicit rulemaking tailored specifically for digital assets; (v) released additional targeted written guidance addressing various digital asset topics, including a staff statement 

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clarifying that certain stablecoins may not constitute securities, guidance related to meme coins, a statement on proof-of-work mining activities, interpretations on protocol staking arrangements, and FAQs related to broker-dealer custody of digital assets; and (vi) released guidance on crypto-related disclosures for securities and exchange-traded product registrations. That said, any permanent regulatory shift remains uncertain at this time, and there is no assurance a more favorable U.S. regulatory environment will emerge at the federal or state levels. Any adverse regulatory developments or enforcement actions could negatively impact the value of these assets and related products, including the Trust.

The SEC has also regularly stated that certain digital assets may be considered securities under federal securities laws, and this classification can have significant implications for digital assets, including bitcoin. The legal test for determining whether any given crypto asset, product, or service is an investment contract security was set forth in the 1946 Supreme Court case SEC v. W.J. Howey Co. and whether any given crypto asset, product, or service is a note in the 1990 Supreme Court case Reves v. Ernst  Young. The legal tests for determining whether any given crypto asset, product, or service is a security requires a highly complex, fact-driven analysis. Accordingly, whether any given crypto asset, product or service would be ultimately deemed by a federal court to be a security is uncertain and difficult to predict notwithstanding the conclusions of the SEC or any conclusions the Trust may draw regarding the likelihood that a particular crypto asset, product or service could be deemed a security or securities offering under applicable laws. Certain statements by SEC officials have suggested that bitcoin does not meet the criteria of an investment contract under the federal securities laws. None of these statements are comprehensive or binding, and the SEC continues to scrutinize aspects of the digital asset space, including bitcoin. 

If bitcoin were determined to be a security under federal or state securities laws by the SEC or any U.S. authority, or in a proceeding in a court of law or otherwise, it may have material adverse consequences for bitcoin and the broader digital asset market. For example, it may become more difficult for bitcoin to be traded, cleared and custodied as compared to other digital assets that are not considered to be securities, which could in turn negatively affect the liquidity and general acceptance of bitcoin and cause users to migrate to other digital assets. Further, if any other digital asset with widespread markets is determined to be a security, it could also have material adverse consequences for bitcoin as a digital asset due to negative publicity or a decline in the general acceptance of digital assets. In addition, trading platforms that feature digital assets that are determined to be securities may face penalties or be required to shut down if they do not have the licenses required to facilitate electronic securities markets, which could result in a reduction of the liquidity of bitcoin markets. For example, the SECs increased enforcement activity over the last few years has highlighted the potential for stricter regulation across the broader digital asset industry, which could exacerbate negative market reactions. As such, any determination that bitcoin or any other digital asset with widespread market presence is a security under federal or state securities laws may adversely affect the value of bitcoin and, as a result, the value of the Shares. 

To the extent that bitcoin is deemed to fall within the definition of a security under U.S. federal securities laws, the Trust and the Sponsor may be subject to additional requirements under the Investment Company Act and the Advisers Act, and may also 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 for the Trust, thereby materially and adversely impacting the Shares. Compliance could also necessitate fundamental changes to the Trusts structure or operations, potentially making its current investment strategy unfeasible. If the Sponsor and/or the Trust determines to comply with such additional regulatory and registration requirements, the Sponsor may decide to terminate the Trust. Any such termination could result in the liquidation of the Trusts bitcoin holdings, which could occur at a time that is disadvantageous to Shareholders, leading to potential financial losses. 

In addition, the CFTC has asserted regulatory jurisdiction over the bitcoin futures markets. As the CFTC has determined that bitcoin is a commodity under the Commodity Exchange Act (CEA), it also has authority to prosecute fraud and manipulation in the cash, or spot, market for bitcoin. However, its oversight of cash or spot market exchanges is generally limited unless those transactions involve collateral, leverage, or financing. The National Futures Association (NFA) serves as the self-regulatory organization for the U.S. futures industry, including bitcoin futures, but does not have authority over bitcoins cash or spot market. Recent enforcement actions by the CFTC underscore its heightened scrutiny of the digital asset markets. In 2023 and 2024, the CFTC launched 47 actions against crypto firms, targeting high-profile entities and executives, including FTX, Binance, and Coinbase, for violations such as illegal off-exchange commodity trading and inadequate AML programs. Notably, in April 2024, the CFTC fined Coinbase $6.5 million for reckless false reporting and wash trading.

To the extent that bitcoin is deemed to fall within the definition of a commodity interest under the CEA, the Trust and the Sponsor may be subject to additional regulation under the CEA and CFTC regulations. These requirements may result in extraordinary, recurring and/or non-recurring compliance expenses of the Trust, which could materially and adversely impact the Shares. If the Sponsor and/or the Trust determines not to comply with such regulatory requirements, the Sponsor may terminate the Trust, the Trust may face termination, resulting in the forced liquidation of its bitcoin holdings, which could occur at a time that is disadvantageous to 

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Shareholders, leading to potential financial losses. Moreover, the growing scope of the CFTCs regulatory authority over digital assets, combined with potential regulatory overlap with the SEC, may create additional uncertainty and compliance costs. These developments could reduce the liquidity of bitcoin markets and create negative publicity, leading to decreased demand and ultimately a decline in the value of the Shares.

Regulatory changes or actions by federal or state executives or legislators may affect the value of the Shares or restrict the use of bitcoin, its mining activity or the operation of its networks or the digital asset markets in a manner that adversely affects the value of the Shares. 

Uncertainty about the jurisdiction over digital assets by federal and state authorities has resulted in calls for comprehensive digital asset legislation, and the expansion of the digital asset market, along with significant industry developments in recent  years, has led to increased scrutiny by consecutive U.S. Presidents and the U.S. Congress. On January 23, 2025, President Trump issued Executive Order 14178, titled Strengthening American Leadership in Digital Financial Technology, which revoked President Bidens March 2022 Executive Order 14067, Ensuring Responsible Development of Digital Assets. Among other things, Trumps order establishes the Presidents Working Group on Digital Asset Markets, tasked with proposing a federal regulatory framework for digital assets within 180 days. This working group is directed to focus on fostering innovation, reducing regulatory burdens, and ensuring U.S. competitiveness in global digital financial markets.

Trumps executive order follows ongoing legislative efforts to establish a comprehensive regulatory framework for digital assets. On May 22, 2024, the U.S. House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (Fit21), advancing efforts to establish a federal framework for digital assets. Fit21 seeks to clarify the SECs and CFTCs jurisdiction, granting the CFTC primary oversight of digital commodities while preserving the SECs authority over securities. Alongside Fit21, other proposals aim to refine digital asset classifications, disclosure requirements, and tax treatment. In June and July 2025, significant new legislation emerged, including the passage of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), signed into law by President Trump on July 18, 2025, which requires stablecoins to be fully backed by U.S. dollars or approved low-risk assets, subjecting them to federal and state regulation. Additionally, the House passed the Digital Asset Market Structure and Investor Protection Act (CLARITY Act) on June 23, 2025, further clarifying regulatory responsibilities between the SEC and CFTC and introducing a provisional registration system for digital asset exchanges, though this bill remains pending in the Senate. The House also advanced the Anti-CBDC Surveillance State Act, aimed at prohibiting the Federal Reserve from issuing a central bank digital currency, currently awaiting Senate action. However, the future of pending regulatory efforts, and how regulatory authority may be divided among regulators, remains uncertain.

Traditional financial services competitors also have long-established relationships with policymakers and have cultivated lobbying efforts to advance their interests. While members of the cryptocurrency industry have begun engaging with policymakers and external advisors to advocate for balanced regulation, the relative infancy of these efforts compared to other industries leaves the cryptocurrency industry vulnerable to unfavorable regulatory outcomes. New laws, regulations, or interpretations of existing regulations may emerge in the United States and internationally that are detrimental to digital asset platforms, potentially disrupting the Trust's business operations, financial performance, or growth opportunities. Furthermore, political and advocacy activities from the Trust and the Sponsor aimed at influencing the regulatory environment may attract negative perceptions from investors and the public. Such perceptions could harm the Trusts reputation and its overall market position, compounding the challenges posed by an increasingly complex and uncertain regulatory landscape.

It is difficult to predict whether, or when, any of these developments will lead to Congress granting additional authorities to the SEC or other regulators, what the nature of such additional authorities might be, how additional legislation and/or regulatory oversight might impact the ability of digital asset markets to function or how any new regulations or changes to existing regulations might impact the value of digital assets generally and those held by the Trust specifically. Any change in the classification of bitcoin may require substantial compliance steps resulting in extraordinary expenses to the Trust. If these developments significantly alter the regulatory landscape, the Sponsor may choose to terminate the Trust, potentially leading to liquidation at a time that could be disadvantageous for Shareholders and adversely impact the value of the Shares.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

a)None.

b)Not applicable.

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c)The Trust does not purchase Shares directly from its Shareholders. In connection with its redemption of Baskets held by Authorized Participants, the Trust redeemed 866 Baskets (comprising 8,660,000 Shares) during the three-month period ended June 30, 2025. The following table summarizes the redemptions by Authorized Participants during the period: