Grayscale Litecoin Trust (LTC)

Grayscale Litecoin Trust (LTC) operates in the digital asset industry, specifically holding Litecoin, a digital asset created and transmitted through the peer-to-peer Litecoin Network, a decentralized network of computers operating on cryptographic protocols. The Trust is a passive investment vehicle that does not seek to pursue any investment strategy beyond tracking the price of LTC, and it provides investors with exposure to LTC through Shares held in a traditional brokerage account without the barriers to entry or risks of holding LTC directly. The industry is characterized by extreme volatility, a limited history for digital assets, and a rapidly evolving regulatory landscape, with the Trust's value dependent on the acceptance of LTC and the capabilities of blockchain technologies.

The Trust faces competition from thousands of digital assets developed since Bitcoin's inception, with Bitcoin being the most developed due to its length of existence, infrastructure investment, and network of users. While LTC has enjoyed some success, its aggregate value is smaller than that of Bitcoin and Ether and may be eclipsed by more rapid development of other digital assets. The Trust's competitive positioning is based on providing a traditional brokerage account exposure to LTC, with the Sponsor believing the Index Provider's selection process and methodology provide a more accurate picture of LTC price movements than a simple average of Digital Asset Trading Platform spot prices.

The Trust generates revenue through the Sponsor's Fee, calculated as 2.5% of the aggregate value of the Trust's assets, less its liabilities, as calculated and published by the Sponsor. The Trust issues Shares in blocks of 100 Shares, called Baskets, to Authorized Participants in exchange for LTC deposits, and the Shares are quoted on OTC Markets under the ticker symbol LTCN. The Trust's assets consist solely of LTC, Incidental Rights, IR Virtual Currency, proceeds from the sale of LTC, and any rights pursuant to agreements, and the Trust does not operate a redemption program, so Shares are not redeemable by the Trust.

The Trust's primary product is the Shares, which represent units of fractional undivided beneficial interest in the Trust, with each Share representing approximately 0.0812 LTC as of June 30, 2026. The Trust holds LTC and provides investors with exposure to the price of LTC, with the investment objective for the value of the Shares to reflect the value of LTC held by the Trust, determined by reference to the Index Price, less expenses and liabilities. The Trust does not attempt to speculatively sell LTC at high prices or acquire LTC at low prices, nor does it attempt to avoid losses or hedge exposure to price changes.

The Trust's LTC are held by the Custodian, Coinbase Custody Trust Company, LLC, in a segregated Digital Asset Account using cold storage mechanisms to secure private keys. The Trust relies on third-party service providers, including the Sponsor, Grayscale Investments Sponsors, LLC, the Trustee, CSC Delaware Trust Company, the Transfer Agent, Continental Stock Transfer & Trust Company, and the Custodian, to perform essential functions. In September 2025, the Trust filed a registration statement on Form S-3 for a proposed public offering and listing on NYSE Arca, but as of the filing date, the Form S-3 has not been declared effective, and the Shares are offered only through private placements and traded on OTC Markets.

The Trust has not met its investment objective to date, as the Shares have traded at both premiums and discounts to the value of LTC held by the Trust, which at times have been substantial. The Trust's financial performance is tied to the price of LTC, and the Trust's expenses, including the Sponsor's Fee, reduce the amount of LTC represented by each Share over time. The Trust's NAV per Share is calculated using the Index Price based on the CoinDesk Litecoin Benchmark Rate as of October 1, 2025, and the Trust's market value of Shares held by non-affiliates was $141,495,018 as of December 31, 2025.

The Trust's growth vector includes the potential public offering and listing on NYSE Arca, with the Form S-3 filed in September 2025, which, if declared effective and approved, could provide an active trading market for the Shares. The Trust may also operate a redemption program in the future, subject to receipt of regulatory approval from the SEC and approval by the Sponsor, which would allow Authorized Participants to take advantage of arbitrage opportunities and potentially reduce premiums or discounts. The Trust's growth is also tied to the adoption of LTC, with the Litecoin Network upgraded with LitVM in June 2025, a zero knowledge Layer-2 network that enables smart contracts, supports cross-chain swaps, and enhances privacy and scalability.

The Trust's growth is supported by the regulatory environment, with the SEC issuing an interpretation in March 2026 clarifying how federal securities laws apply to certain crypto assets, and the CFTC joining the interpretation. The SEC also issued a notice of proposed rulemaking in August 2026 titled 'Regulation Crypto Asset,' which would create a tailored offering regime for certain investment contracts involving crypto assets, including a startup exemption for offerings up to $5 million and a fundraising exemption for offerings up to $75 million. These regulatory developments could provide clearer pathways for digital asset offerings and potentially enhance the Trust's ability to operate and grow.

The Trust's margin and cost outlook is influenced by the Sponsor's Fee of 2.5% of the aggregate value of the Trust's assets, less liabilities, which is paid to the Sponsor as compensation for services. The Trust's expenses, including the Sponsor's Fee and Additional Trust Expenses, are paid in LTC, which reduces the amount of LTC represented by each Share over time. The Sponsor is obligated to pay Sponsor-paid Expenses, which include fees paid to the Trustee, Transfer Agent, and Custodian, and the Trust's cost structure is expected to remain stable with no active management or trading strategy.

The Trust's operational outlook involves reliance on third-party service providers, including the Custodian, which controls and secures the Trust's LTC in a Digital Asset Account using cold storage. The Custodian is required to maintain insurance in types and amounts that are commercially reasonable, and the Custodian has advised the Sponsor that it maintains insurance coverage through its ultimate parent, Coinbase Global, Inc. The Trust has no employees, officers, or directors, and all activities are conducted by the Sponsor and other service providers, with the Sponsor responsible for day-to-day administration.

The Trust's capital allocation is focused on holding LTC and paying expenses, with no share repurchase authorizations or dividend policy. The Trust does not expect to take any Incidental Rights or IR Virtual Currency into account for purposes of determining NAV, and the Trust's assets will not be loaned or pledged. The Trust's capital expenditures are limited to the costs of operating the Trust, including the Sponsor's Fee and Additional Trust Expenses, which are paid in LTC.

The Trust faces headwinds from the lack of an ongoing redemption program, which means there is no arbitrage mechanism to keep the value of the Shares closely linked to the Index Price, and the Shares have historically traded at substantial premiums or discounts to NAV per Share. The Trust may halt creations for extended periods, including in connection with forks, airdrops, and other similar events, which could exacerbate deviations. Additionally, the Trust's value is subject to extreme volatility in the trading prices of LTC, and the Shares could lose all or substantially all of their value.

The Trust faces constraints from regulatory uncertainty, including changes in securities-law treatment of LTC or transactions involving LTC under federal or state law, which could adversely affect the value of LTC and the Shares and require the Trust to change its operations or terminate. The Trust also faces risks from potential restrictions on mining activities, which could adversely affect the Litecoin Network and the value of the Shares. The Trust's reliance on third-party service providers, including the Custodian, poses challenges to the safekeeping of LTC and operations if such providers need to be replaced.

The Trust's Shares have historically traded at substantial premiums or discounts to NAV per Share due to the holding period under Rule 144, the lack of an ongoing redemption program, and the Trust's ability to halt creations, which means there is no arbitrage mechanism to keep the value of the Shares closely linked to the Index Price. The trading prices of LTC have experienced extreme volatility and may continue to do so, and the Shares could lose all or substantially all of their value. The Trust relies on third-party service providers, including the Custodian, and the replacement of such providers could pose challenges to the safekeeping of the Trust's LTC and operations. Changes in the securities-law treatment of LTC or transactions involving LTC under federal or state law could adversely affect the value of LTC and the Shares and require the Trust to change its operations or terminate. The Trust's value depends on the acceptance of LTC, and competition from the emergence or growth of other digital assets could have a negative impact on the price of LTC and adversely affect the value of the Shares.

Management's message emphasizes the Trust's passive investment strategy and its objective for the value of the Shares to reflect the value of LTC held by the Trust, less expenses and liabilities. The Sponsor believes the Index Provider's selection process and methodology provide a more accurate picture of LTC price movements than a simple average of Digital Asset Trading Platform spot prices. The Trust's strategic priorities include seeking regulatory approval for a public offering and listing on NYSE Arca, potentially operating a redemption program in the future, and maintaining the security of the Trust's LTC through the Custodian's cold storage mechanisms.