VanEck Avalanche ETF (VAVX) risk factors, FY2025 10-K

Other

1. 01Risks Associated with AVAX And The Avalanche Network
2. 02The Value of the Shares Depends on the Development and Acceptance of the Avalanche Network. The Slowing or Stopping of the Development or Acceptance of the Avalanche Network May Adversely Affect an Investment in the Trust
3. 03private key will not be capable of being restored by the digital asset network resulting in the total loss of the value of the digital asset linked to the private key
4. 04Components of the Avalanche Protocol Were Only Conceived in 2018 and the Avalanche Protocol or Its Avalanche Layer 1 Mechanisms May Not Function as Intended, Which Could Have an Adverse Impact on the Value of AVAX and an Investment in the Shares
5. 05speed and capacity advantage over other blockchain networks like Bitcoin and Ethereum, which rely on sequential production of blocks and can lead to delays caused by validator confirmations
6. 06Digital Assets Represent a New and Rapidly Evolving Industry, and the Value of the Shares Depends on the Acceptance of AVAX
7. 07Due to the Nature of Private Keys, AVAX Transactions Are Irrevocable and Stolen or Incorrectly Transferred AVAX May Be Irretrievable. As a Result, Any Incorrectly Executed AVAX Transactions Could Adversely Affect an Investment in the Trust
8. 08If a Malicious Actor Were To Compromise One or More of The Subnets Running on the Avalanche Network, Such Activity Might Undermine Trust in Avalanche, Which Could Adversely Affect the Value of the Shares
9. 09A Disruption of the Internet May Affect Avalanche Operations, Which May Adversely Affect the AVAX Industry and an Investment in the Trust
10. 10The Avalanche Network’s Decentralized Governance Structure May Negatively Affect Its Ability to Grow And Respond to Challenges
11. 11Digital Asset Networks Are Developed By a Diverse Set of Contributors aAnd The Perception That Certain High-Profile Contributors Will No Longer Contribute to the Network Could Have an Adverse Effect on the Market Price of the Related Digital Asset
12. 12Digital Assets May Have Concentrated Ownership and Large Sales or Distributions by Holders of Such Digital Assets, or Any Ability To Participate In or Otherwise Influence a Digital Asset’s Underlying Network, Could Have an Adverse Effect on the Market Price of Such Digital Asset
13. 13The Avalanche Blockchain Could Be Vulnerable to Centralization Concerns Which Could Adversely Affect the Security and Stability of the Avalanche Network As Well As the Value of the Shares
14. 14A Temporary or Permanent “Fork” or a “Clone” of the Avalanche Blockchain Could Adversely Affect the Value of the Shares
15. 15Shareholders May Not Receive the Benefits of Any Forks or “Airdrops.”
16. 16In the Event of a Hard Fork of the Avalanche Network, the Sponsor Will, If Permitted By the Terms of The Trust Agreement, Use Its Discretion To Determine Which Network Should Be Considered the Appropriate Network for the Trust’s Purposes, and in Doing So May Adversely Affect the Value of the Shares
17. 17In the Event of a Hard Fork of the Avalanche Blockchain, the AVAX Custodians’ Operations May Be Interrupted or Subject to Additional Security Risks That Could Disrupt the Trust’s Ability to Process Creations and Redemptions of Shares or Otherwise Threaten the Security of the Trust’s AVAX Holdings
18. 18Any Name Change and Any Associated Rebranding Initiative by the Core Developers of AVAX May Not Be Favorably Received by the Digital Asset Community, Which Could Negatively Impact the Value of AVAX and the Value of the Shares
19. 19The Avalanche Blockchain Could Be Vulnerable to Attacks on Transaction Finality and Consensus Processes, Which Could Adversely Affect an Investment in the Trust or the Ability of the Trust To Operate
20. 20If Validators Exit the Avalanche Network, It Could Increase the Likelihood of a Malicious Actor Obtaining Control
21. 21Blockchain Technologies Are Based on Theoretical Conjectures As to the Impossibility of Solving Certain Cryptographical Puzzles Quickly. These Premises May Be Incorrect or May Become Incorrect Due to Technological Advances
22. 22The Price of AVAX on the AVAX Market Has Exhibited Periods of Extreme Volatility, Which Could Have a Negative Impact on the Performance of the Trust
23. 23MarketVector Has Analyzed AVAX Trading Platform Data and Developed Insights That Have Informed Marketvector’s Understanding of the AVAX Market and the Design of the Trust. If Such Data or Insights Are Inaccurate or Incorrect, the Value of an Investment in the Trust May Be Adversely Affected
24. 24Smart Contracts, Including Those Relating to DeFi Applications, Are a New Technology and Their Ongoing Development and Operation May Result in Problems, Which Could Reduce the Demand for AVAX or Cause a Wider Loss Of Confidence in the Avalanche Network, Either of Which Could Have an Adverse Impact on the Value of AVAX
25. 25Popular Decentralized Applications Running on Avalanche May Cease To Operate or May Migrate to Competing Blockchains, Which May Negatively Impact the Price of AVAX and Make the Avalanche Network Less Attractive
26. 26Validation on the Avalanche Network Is Subject to Risks, including Staking Liquidity and Operational Uncertainty on the Avalanche Network
27. 27delay could adversely affect the Trust’s liquidity and its ability to fulfil investor redemptions in a timely manner, particularly during periods of heightened market volatility or significant redemption activity
28. 28Proof-Of-Stake Blockchains Are a Relatively Recent Innovation, and Have Not Been Subject to As Widespread Use or Adoption Over As Long Of A Period Of Time As Traditional Proof-Of-Work Blockchains
29. 29Operational Cost May Exceed the Award for Validating Transaction, and Increased Transaction Fees May Adversely Affect the Usage of the Avalanche Network
30. 30As a result of AVAX’s fee burning mechanism, the incentives for validators to validate transactions with higher gas fees are reduced, since those validators would not receive those gas fees
31. 31Recent Developments in the Digital Asset Economy Have Led to Extreme Volatility and Disruption in Digital Asset Markets, a Loss of Confidence in Participants of the Digital Asset Ecosystem, Significant Negative Publicity Surrounding Digital Assets Broadly and Market-Wide Declines in Liquidity
32. 32The Value of the Shares Relates Directly to the Value of AVAX, the Value of Which May Be Highly Volatile and Subject to Fluctuations Due to a Number of Factors
33. 33assurance that AVAX will maintain its value in the long, intermediate, short, or any other term. In the event that the price of AVAX declines, the Sponsor expects the value of the Shares to decline proportionately
34. 34Digital Asset Networks Face Significant Scaling Challenges and Efforts to Increase the Volume and Speed of Transactions May Not Be Successful
35. 35There is no guarantee that any of the mechanisms in place or being explored for increasing the scale of settlement of Avalanche Network transactions will be effective, or how long these mechanisms will take to become effective, which could adversely impact the value of the Shares
36. 36AVAX Trading Platforms May Be Exposed to Fraud and Manipulation
37. 37AVAX Trading Platforms May Be Exposed to Front-Running
38. 38AVAX Trading Platforms May Be Exposed to Wash Trading
39. 39Competition From Central Bank Digital Currencies And Emerging Payments Initiatives Involving Financial Institutions Could Adversely Affect The Value Of AVAX And Other Digital Assets
40. 40Prices Of AVAX May Be Affected Due To Stablecoins (Including Tether And US Dollar Coin (“USDC”)), The Activities Of Stablecoin Issuers And Their Regulatory Treatment
41. 41Competition From the Emergence or Growth of Other Digital Assets or Methods of Investing in AVAX Could Have a Negative Impact on the Price of AVAX and Adversely Affect the Value of the Shares
42. 42The Digital Asset Markets Follow Trends, Certain Trends May Favor Certain Blockchains Over Others, a Trend Change Could Affect the Popularity of the Avalanche Blockchain
43. 43Congestion or Delay on the Avalanche Network May Delay Purchases or Sales of AVAX by the Trust
44. 44The SEC may approve applications under Rule 19b-4 of the Exchange Act to list competing digital assets as exchange-traded products, which could reduce demand for, and the price of, AVAX and adversely impact the value of the Shares
45. 45Failure of Funds That Hold Digital Assets to Receive SEC Approval to List Their Shares on Exchanges Could Adversely Affect the Value of the Shares
46. 46Digital Asset Treasury Companies Risk
47. 47The MarketVector Avalanche Benchmark Rate Has a Limited History
48. 48The MarketVector Avalanche Benchmark Rate Could Fail To Track the Global AVAX Price, and a Failure of the MarketVector Avalanche Benchmark Rate Could Adversely Affect the Value of the Shares
49. 49ability to track the market price of AVAX. To the extent such prices differ materially from the MarketVector Avalanche Benchmark Rate, investors may lose confidence in the Shares’ ability to track the market price of AVAX, which could adversely affect the value of the Shares
50. 50The MarketVector Avalanche Benchmark Rate Used to Calculate the Value of the Trust’s AVAX May Be Volatile, Adversely Affecting the Value of the Shares
51. 51The MarketVector Avalanche Benchmark Rate May Be Affected by Manipulative or Fraudulent Practices in the Global AVAX Market or at Constituent Trading Platforms
52. 52problems, which may adversely affect the value of AVAX and, consequently, the value of the Shares,” and the MarketVector Avalanche Benchmark Rate may be affected to the extent they cause global prices of AVAX to be subject to factors other than bona fide market forces
53. 53The Index Administrator Could Experience System Failures or Errors
54. 54The Sponsor Can Remove the MarketVector Avalanche Benchmark Rate and Use a Different Pricing or Valuation Methodology Instead
55. 55Intellectual Property Rights Claims May Adversely Affect the Trust and the Value oOf the Shares
56. 56The Value Of the Shares May Be Influenced by a Variety of Factors Unrelated to the Value Of AVAX
57. 57The Trust Is Subject to Market Risk
58. 58An Investment in Shares of the Trust Is Different From Directly Owning AVAX
59. 59Redemption Liquidity Risk
60. 60The NAV May Not Always Correspond to the Market Price of AVAX and, As a Result, Baskets May Be Created or Redeemed at a Value That Is Different From the Market Price of the Shares
61. 61Authorized Participants’ Buying and Selling Activity Associated with the Creation and Redemption of Baskets May Adversely Affect an Investment in the Shares of the Trust
62. 62The Inability of Liquidity Providers, and Authorized Participants or Their Designees To Hedge Their AVAX Exposure May Adversely Affect the Liquidity of Shares and the Value of an Investment in the Shares
63. 63The Lack of Ability To Facilitate In-Kind Creations and Redemptions of Shares Could Have Adverse Consequences for the Trust
64. 64The Liquidity of the Shares May Also Be Affected by the Withdrawal from Participation of Authorized Participants or Liquidity Providers
65. 65The Trust Is Subject To Risks Due To Its Concentration of Investments in a Single Asset Class
66. 66The Lack of Active Trading Markets for the Shares of the Trust May Result in Losses on Shareholders’ Investments at the Time of Disposition of Shares
67. 67Possible Illiquid Markets May Exacerbate Losses, Increase the Variability Between the Trust’s NAV and Its Market Price Or Affect the Trust’s Ability to Meet Cash Creation Orders and Redemption Orders
68. 68specific price when there is a relatively small volume of buy and sell orders in the AVAX market. A market disruption can also make it more difficult to liquidate a position or find a suitable counterparty at a reasonable cost
69. 69The Shares May Trade at A Price That Is at, above or below the Trust’s NAV Per Share As a Result of the Non-Current Trading Hours Between the Exchange and the Digital Asset Market
70. 70The Trust Is an “Emerging Growth Company” and It Cannot Be Certain If the Reduced Disclosure Requirements Applicable to Emerging Growth Companies Will Make the Shares Less Attractive to Investors
71. 71Several Factors May Affect the Trust’s Ability to Achieve Its Investment Objective on a Consistent Basis
72. 72The Amount of AVAX Represented by Each Share Will Decline Over Time As the Trust Pays the Sponsor Fee and Extraordinary Trust Expenses, and As a Result, the Value of the Shares May Decrease Over Time
73. 73The Trust Is a Passive Investment Vehicle. The Trust Is Not Actively Managed and Will Be Affected by a General Decline in the Price of AVAX
74. 74The Development and Commercialization of the Trust Is Subject to Competitive Pressures
75. 75Threats to the Trust’s Accounts with the AVAX Custodians Could Result in the Halting of Trust Operations and a Loss of Trust Assets or Damage to the Reputation of the Trust, Each of Which Could Result in a Reduction in the Price of the Shares
76. 76Staking May Subject the Trust to Risks, Which in the Future May Include Loss of Rewards and Operational Uncertainties
77. 77Loss of a Critical Banking Relationship for, or the Failure of a Bank Used by, the Trust Could Adversely Impact the Trust’s Ability To Create or Redeem Baskets, or Could Cause Losses to the Trust
78. 78The Lack of Full Insurance and Shareholders’ Limited Rights of Legal Recourse Against the Trust, Trustee, Sponsor, Administrator, Cash Custodian, and AVAX Custodians Expose the Trust and Its Shareholders to the Risk of Loss of the Trust’s AVAX for Wwhich No Person or Entity Is Liable
79. 79The First AVAX Custodian may terminate, in whole or in part, the First AVAX Custody Agreement, and/or suspend, restrict or terminate services to the Trust, in the event of a material breach not cured in thirty (30) days or if the Trust suffers a bankruptcy event
80. 80The Trust May Be Required, or the Sponsor May Deem It Appropriate, To Terminate and Liquidate at a Time That Is Disadvantageous to Shareholders
81. 81The Sponsor Is Solely Responsible for Determining the Value of the AVAX Holdings and AVAX Holdings Per Share, and Any Errors, Discontinuance or Changes in Such Valuation Calculations May Have an Adverse Effect on the Value of the Shares
82. 82Extraordinary Expenses Resulting from Unanticipated Events May Become Payable by the Trust, Adversely Affecting the Value of the Shares
83. 83The Value of the Shares Will Be Adversely Affected If the Trust Is Required To Indemnify the Sponsor, the Trustee, the Transfer Agent, the AVAX Custodians or the Cash Custodian under the Trust Documents
84. 84Validator downtime would cause the Trust to be prevented from obtaining rewards in respect of periods during which the validator is inactive on the Avalanche Network
85. 85Ramp-Up Staking Period Risk

Regulatory Risk

1. 86In May 2025 the SEC issued a “Statement on Protocol Staking Activities,” which clarified that certain staking activities, including certain liquid staking activities, do not involve the offer and sale of securities within the meaning of the Securities Act and the Exchange Act
2. 87business models that are concentrated in crypto- asset related activities or have concentrated exposures to the crypto-asset sector
3. 88AVAX’s Initial Manner of Sale May Resemble That of Certain Digital Assets Found to Be Securities, and a Determination That AVAX Is a “Security” May Adversely Affect the Value of AVAX and an Investment in the Shares, and Result in Potentially Eextraordinary, Nonrecurring Expenses to, or Termination of, the Trust
4. 89Depending on its characteristics, a digital asset may be considered a “security” under the federal securities laws. The test for determining whether a particular digital asset is a “security” is complex and difficult to apply, and the outcome is difficult to predict
5. 90Competing Industries May Have More Influence With Policymakers Than the Digital Asset Industry, Which Could Lead to the Adoption of Laws and Regulations That Are Harmful to the Digital Asset Industry
6. 91Shareholders Do Not Have the Protections Associated With Ownership of Shares in an Investment Company Registered Under The 1940 Act or The Protections Afforded by the CEA
7. 92The Trust is not registered as an investment company under the 1940 Act, and the Sponsor believes that the Trust is not required to register under such act. Consequently, Shareholders do not have the regulatory protections provided to investors in investment companies
8. 93Future Legal or Regulatory Developments May Negatively Affect the Value of AVAX or Require the Trust or the Sponsor To Become Registered with the SEC or CFTC, Which May Cause the Trust To Liquidate
9. 94Anonymity, Sanctions, and Illicit Financing Risk
10. 95creators, or programmers sometimes remain anonymous, it is not inconceivable that bad actors, such as those subject to sanctions, could seek to do so
11. 96Regulatory Changes or Actions in Foreign Jurisdictions May Affect the Value of the Shares or Restrict the Use of AVAX, Mining Activity or the Operation of Their Networks or the Global AVAX Markets in a Manner That Adversely Affects the Value of the Shares

Tax Risk

1. 97The Treatment Of The Trust For U.S. Federal Income Tax Purposes Is Uncertain
2. 98The Trust may take certain positions with respect to the tax consequences of Staking Activities, Incidental Rights and IR Virtual Currency. If the IRS were to disagree with, and successfully challenge, any of these positions, the Trust might not qualify as a grantor trust
3. 99The Treatment Of Digital Currency And Staking Activities For U.S. Federal Income Tax Purposes Is Uncertain
4. 100In 2014, the IRS released a notice (the “Notice”) discussing certain aspects of “convertible virtual currency” (that is, digital currency that has an equivalent value in fiat currency or that acts as a substitute for fiat currency) for U.S
5. 101Future Developments Regarding The Treatment Of Digital Currency And Staking Activities For U.S. Federal Income Tax Purposes Could Adversely Affect The Value Of The Shares
6. 102Future Developments In The Treatment Of Digital Currency For Tax Purposes Other Than U.S. Federal Income Tax Purposes Could Adversely Affect The Value Of The Shares
7. 103A U.S. Tax-Exempt Shareholder May Recognize “Unrelated Business Taxable Income” As A Consequence Of An Investment In Shares
8. 104Shareholders Could Incur A Tax Liability Without An Associated Distribution Of The Trust
9. 105A Hard “Fork” Of The Avalanche Blockchain Could Result In Shareholders Incurring A Tax Liability

Other Risks

1. 106Shareholders Cannot Be Assured of the Sponsor’s Continued Services, the Discontinuance of Which May Be Detrimental to the Trust
2. 107Shareholders cannot be assured that the Sponsor will be willing or able to continue to serve as sponsor to the Trust for any length of time. If the Sponsor discontinues its activities on behalf of the Trust and a substitute sponsor is not appointed, the Trust will terminate and liquidate its AVAX
3. 108Although the AVAX Custodians Are Fiduciaries With Respect to the Trust’s Assets, They Could Resign or Be Removed by The Sponsor, Which May Trigger Early Dissolution of the Trust
4. 109Shareholders May Be Adversely Affected by the Lack of Independent Advisers Representing Investors in the Trust
5. 110Shareholders and Authorized Participants Lack the Right Under the Custody Agreements and Staking Services Provider Agreement To Assert Claims Directly Against the AVAX Custodians or the Staking Services Provider, Which Significantly Limits Their Options for Recourse
6. 111The Exchange on Which the Shares Are Listed May Halt Trading in the Trust’s Shares, Which Would Adversely Impact a Shareholder’s Ability To Sell Shares
7. 112The Liquidity of the Shares May Also Be Affected by the Withdrawal from Participation of Authorized Participants, Which Could Adversely Affect the Market Price of the Shares
8. 113The Market Infrastructure of the AVAX Spot Market Could Result in the Absence of Active Authorized Participants Able To Support the Trading Activity of the Trust
9. 114AVAX Spot Exchanges Are Not Subject To Same Regulatory Oversight As Traditional Equity Exchanges, Which Could Negatively Impact the Ability of Authorized Participants To Implement Arbitrage Mechanisms
10. 115Shareholders That Are Not Authorized Participants May Only Purchase or Sell Their Shares in Secondary Trading Markets, and the Conditions Associated With Trading in Secondary Markets May Adversely Affect Shareholders’ Investment in the Shares
11. 116As the Sponsor and Its Management Have Limited History of Operating Investment Vehicles Like the Trust, Their Experience May Be Inadequate Or Unsuitable To Manage the Trust
12. 117Security Threats to the Trust’s Accounts With the AVAX Custodians Could Result in the Halting of Trust Operations and a Loss of Trust Assets or Damage to the Reputation of the Trust, Each of Which Could Result in a Reduction in the Price of the Shares
13. 118The Sponsor Is Leanly Staffed and Relies Heavily on Key Personnel
14. 119The Trust Is New, and If It Is Not Profitable, the Trust May Terminate and Liquidate at a Time That Is Disadvantageous to Shareholders
15. 120Shareholders Do Not Have the Rights Enjoyed by Investors in Certain Other Vehicles and May Be Adversely Affected by a Lack of Statutory Rights and by Limited Voting and Distribution Rights
16. 121The Trust Agreement Includes Provisions That Limit Shareholders’ Voting Rights and Restrict Shareholders’ Right To Bring a Derivative Action
17. 122An Investment in the Trust May Be Adversely Affected by Competition from Other Investment Vehicles Focused on AVAX or Other Cryptocurrencies
18. 123Shareholders May Be Adversely Affected by Creation or Redemption Orders That Are Subject to Postponement, Suspension or Rejection Under Certain Circumstances
19. 124Shareholders May Be Adversely Affected by an Overstatement or Understatement of the NAV Calculation of the Trust Due to the Valuation Method Employed on the Date of the NAV Calculation
20. 125The Liability of The Sponsor and the Trustee Is Limited, and the Value of the Shares Will Be Adversely Affected If the Trust Is Required To Indemnify the Trustee or the Sponsor
21. 126Due to the Increased Use of Technologies, Intentional and Unintentional Cyber-Attacks Pose Operational and Information Security Risks
22. 127The Trust and Its Service Providers Are Subject to Certain Operational Risks