Bitcoin ETFs Brace for New Era of Legal Risk After Market Debuts

A new crop of legal challenges await issuers of the Bitcoin exchange-traded funds now available to broad swaths of investors, lawyers say.

The investment vehicle’s broad appeal means that issuers need to go above and beyond standard compliance with disclosure requirements, focusing on investor education to acquaint those less familiar with volatile digital assets, crypto-focused lawyers say. Security and custody issues that traditional asset classes don’t face are also seen as potential sources of litigation for the Bitcoin ETF sponsors.

“This is where litigation always comes into play; if it’s in the prospectus, that’s not always a ‘get out of ...