SEC Filing Document

Company: Grayscale BNB ETF
Ticker: GBNB
CIK: 2106762
Filing Type: S-1/A
Document Type: S-1/A
Date Filed: 2026-04-07
Accession Number: 0001193125-26-145494
Exchange: 
SIC Code: 6221
SIC Description: Commodity Contracts Brokers & Dealers
URL: https://www.sec.gov/Archives/edgar/data/2106762/000119312526145494/bnb_s-1_amendment_1.htm

Chunk 35 of 83
Word Count: 1355
Character Count: 8693

Document Content:

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 “Business—Material U.S. Federal Income Tax Consequences.” The tax treatment of BNB and transactions involving BNB for state and local tax purposes is not settled.

Because BNB is a new technological innovation, the tax treatment of BNB for state and local tax purposes, including, without limitation state and local income and sales and use taxes, is not settled. It is uncertain what guidance, if any, on the treatment of BNB for state and local tax purposes may be issued in the future. A state or local government authority’s treatment of BNB may have negative consequences, including the imposition of a greater tax burden on

investors in BNB or the imposition of a greater cost on the acquisition and disposition of BNB generally. Any such treatment may have a negative effect on prices of BNB and may adversely affect the value of the Shares.

Non-U.S. Holders may be subject to U.S. federal withholding tax on income derived from forks, airdrops and similar occurrences and, if the Trust were permitted to engage in Staking, 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 Trust were permitted to engage in Staking, Staking Consideration received as staking rewards. See “Material U.S. Federal Income Tax Consequences.”

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. If the Staking Condition is satisfied in the future and the Sponsor intends to cause the Trust to engage in Staking, the Trust will make additional disclosures with the SEC regarding the Trust's staking arrangements.

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 BNB 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 BNB 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 BNB 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 BNB, which could adversely affect the value of the Shares.

Staking introduces a risk of loss of BNB. 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 BNB Smart Chain utilizes a proof-of-staked-authority consensus mechanism under which a limited set of validators are selected to produce blocks based on staking and other eligibility criteria. Validators are required to meet certain performance and conduct standards in order to remain in the active validator set. If a validator engages in prohibited conduct or fails to meet performance requirements, the BNB Smart Chain protocol may impose penalties, commonly referred to as “slashing.”

Slashing on the BNB Smart Chain may occur in connection with validator misbehavior, including double-signing blocks, prolonged downtime, failure to properly validate transactions, or other violations of protocol rules.

Penalties may include temporary removal (or “jailing”) from the validator set, forfeiture of a portion of the validator’s self-bonded stake, or loss of staking rewards. In certain cases, slashing penalties are enforced automatically pursuant to protocol rules, while in other cases validator removal or related penalties may occur through network governance or validator coordination mechanisms.

Because the BNB Smart Chain maintains a relatively limited number of active validators compared to some other proof-of-stake networks, slashing events affecting one or more validators could have a greater proportional impact on validator participation and network security. Although publicly available data indicates that slashing events on the BNB Smart Chain have historically involved validator “jailings” and limited stake penalties rather than large-scale or systemic losses of BNB, there can be no assurance that future slashing events would be similarly limited in scope or impact. Penalties affecting even a small number of validators could represent a meaningful percentage of the active validator set at any given time. In addition, BNB has a market capitalization in the tens of billions of U.S. dollars and average daily trading volume in the low single-digit billions of U.S. dollars, although such figures fluctuate materially over time. While this level of market activity reflects a substantial market for BNB, it also means that adverse events affecting validator participation or confidence in the BNB Smart Chain, including slashing events, could contribute to increased price volatility. Any material slashing event, or perception that the validator structure is vulnerable to penalties or coordinated misconduct, could negatively impact the market price of BNB and, consequently, the value of the Shares.

Further, there can be no guarantee that slashing penalties and resulting lost opportunity to receive staking rewards will not occur as a result of the activities of a Staking Provider. Furthermore, a Staking Provider’s liability to the Trust is expected to be limited, and a Staking Provider may lack the assets or insurance in order to support the restitution for of any lost opportunity to receive staking rewards. While the Staking Arrangements may provide for indemnification up to a specified cap, slashing insurance or other reimbursement programs, there can be no guarantee that the Trust would recover any lost opportunity to receive staking rewards, if it is subject to penalties imposed by the BNB Smart Chain.

If the Trust were permitted to engage in Staking in the future, beneficial owners of Shares could incur tax liabilities without receiving corresponding distributions from the Trust.