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What changed in Bakkt Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Bakkt Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+754 added−736 removedSource: 10-K (2025-03-20) vs 10-K (2024-03-25)

Top changes in Bakkt Holdings, Inc.'s 2024 10-K

754 paragraphs added · 736 removed · 494 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

110 edited+68 added−87 removed85 unchanged
Biggest changeBakkt Marketplace / Bakkt Crypto -7- Table of Contents Supported For Crypto Asset Symbol Trading Transfers Rewards Bitcoin BTC Yes Yes* No, planned first half 2024 Bitcoin Cash BCH Yes Yes* No Dogecoin DOGE Yes* Yes* No Ethereum ETH Yes Yes* No Ethereum Classic ETC Yes* Yes* No Litecoin LTC Yes Yes* No Shiba Inu SHIB Yes* Yes* No USD Coin USDC Yes* Yes* No * Except for the State of New York Bakkt Trust Supported for Crypto Asset Symbol Custody Transfers Bitcoin BTC Yes Yes Bitcoin Cash BCH Yes Yes Dogecoin DOGE Yes Yes Ethereum ETH Yes Yes Ethereum Classic ETC Yes Yes Litecoin LTC Yes Yes Shiba Inu SHIB Yes Yes USD Coin USDC Yes Yes Our management regularly considers whether to make any potential additional crypto assets available on our platform, consistent with our policies and procedures.
Biggest changeBakkt Crypto facilitates transactions in, and provides services for, the crypto assets listed in the table below. -11- Supported For Crypto Asset Symbol Trading Transfers Aave AAVE Yes No Cardano ADA Yes Yes* Algorand ALGO Yes Yes* Arbitrum ARB Yes No Cosmos ATOM Yes Yes* Avalanche AVAX Yes Yes* Basic Attention Token BAT Yes No Bitcoin Cash BCH Yes Yes* BONK BONK Yes No Bitcoin BTC Yes Yes* Dogecoin DOGE Yes Yes* Polka dot DOT Yes Yes* EOS EOS Yes No Ethereum Classic ETC Yes Yes* Ethereum ETH Yes Yes* Fantom FTM** Yes No The Graph GRT Yes No Hedera HBAR Yes No Lido DAO LDO Yes No Chainlink LINK Yes Yes* Litecoin LTC Yes Yes* NEAR Protocol NEAR Yes No Optimism OP Yes No Pepe Coin PEPE Yes Yes* Shiba Inu SHIB Yes Yes* Solana SOL Yes Yes* Sui SUI Yes No TRUMP $TRUMP Yes Yes* Uniswap UNI Yes No USD Coin USDC Yes* Yes* WIF WIF Yes No Stellar XLM Yes No Ripple XRP Yes Yes* * Except for the State of New York ** Delisted January 19, 2025 Our management regularly considers whether to add or remove crypto assets available on our platform, consistent with our policies and procedures and developments in light of regulatory guidance.
This data is used to complete required processes ( e.g., Customer Identification Program and KYC verification) and to service customers. We have built an extensive vendor network across various industries including financial services, travel and entertainment, retail and platform companies. While we have made significant headway building partnerships in these industries, there remain significant untapped growth opportunities in each area.
This data is used to complete required processes ( e.g., Customer Identification Program and KYC verification) and to service customers. We have built an extensive vendor network across various industries including financial services, travel and entertainment, retail and platform companies. While we have made headway building partnerships in these industries, there remain significant untapped growth opportunities in each area.
Some clients may choose to enable our capabilities directly in their experience, while others may want a “ready-to-go” storefront and leverage capabilities such as our web-based technology. Our institutional-grade platform, born out of our former parent company, Intercontinental Exchange, Inc. (“ICE”), supports “know your customer” (“KYC”) and anti-money laundering (“AML”) capabilities, and other anti-fraud measures to combat financial crime.
Some clients choose to enable our capabilities directly in their experience, while others want a “ready-to-go” storefront and leverage capabilities such as our web-based technology. Our institutional-grade platform, born out of our former parent company, Intercontinental Exchange, Inc. (“ICE”), supports “know your customer” (“KYC”) and anti-money laundering (“AML”) capabilities, and other anti-fraud measures to combat financial crime.
We have robust policies and programs that govern crypto-related activity, such as a cyber security program, information security policy, global AML policy, and Bank Secrecy Act (“BSA”)/Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury program. These measures are all designed to protect our clients and stockholders. • Client-led strategy.
We have policies and programs that govern crypto-related activity, such as a cyber security program, information security policy, global AML policy, and U.S. Bank Secrecy Act (“BSA”)/Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury program. These measures are all designed to protect our clients and stockholders. • Client-led strategy.
The term customers is in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers .). • “Crypto” or “Crypto asset” means an asset that is built using blockchain technology, including virtual currencies (as used in the State of New York), coins, cryptocurrencies, stablecoins, and other tokens.
The term customers is in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers . • “Crypto” or “Crypto asset” means an asset that is built using blockchain technology, including virtual currencies (as used in the State of New York), coins, cryptocurrencies, stablecoins, and other tokens.
Our ability to stand up capabilities within client ecosystems makes our platform an attractive solution for such financial institutions seeking an intuitive, tightly integrated, low risk solution to offer crypto and loyalty services. We believe our growing network of clients provides potential for increased scale and substantiates the viability of our business plan.
We believe our ability to stand up capabilities within client ecosystems makes our platform an attractive solution for such financial institutions seeking an intuitive, tightly integrated, low risk solution to offer crypto and loyalty services. -21- We believe our growing network of clients provides potential for increased scale and substantiates the viability of our business plan.
Technology Our core platforms were built in-house and are maintained by our skilled technical staff who have deep industry expertise across crypto and loyalty solutions. We leverage a modern software and cloud infrastructure stack to offer off-the-shelf or bespoke solutions for our clients, depending on their needs.
Technology Our core platforms were built in-house and are maintained by our skilled technical staff who have industry expertise across crypto and loyalty solutions. We leverage a modern software and cloud infrastructure stack to offer off-the-shelf or bespoke solutions for our clients, depending on their needs.
For additional information regarding these laws and regulations and related risks, please see “ Risk Factors – Risks Related to Regulation, Taxation, and Laws – Complying with evolving laws and requirements relating to privacy, and other data related laws and requirements may be expensive and force us to make changes to our business, and failure to comply with such laws and requirements could result in substantial harm to our business. ” Consumer Protection Regulation.
For additional information regarding these laws and regulations and related risks, please see “ Risk Factors Risks Related to Regulation, Taxation, and Laws Complying with evolving privacy and other data related laws and requirements may be expensive and force us to make changes to our business, and failure to comply with such laws and requirements could result in substantial harm to our business. ” Consumer Protection Regulation.
We also believe that, as a relatively new brand, this approach will allow us to scale customers and revenue more quickly. • Institutional-grade platform. Our platform architecture is engineered to natively support crypto across a wide range of classes, with scalability and strong regulatory and compliance controls.
We also believe that, as a relatively new brand, this approach will allow us to scale customers and revenue more quickly. • Institutional-grade platform. Our platform architecture is engineered to natively support crypto across a wide range of classes, with scalability and regulatory and compliance controls.
Further, additional laws and regulations may apply to our businesses as we expand outside of the United States in the future. For more information, please see our risk factors described in “Item 1A. Risk Factors - Risks Related to Regulation, Taxation and Laws”. Regulation of Our Money Transmission Business.
Further, additional laws and regulations may apply to our businesses as we expand outside of the United States in the future. For more information, please see our risk factors described in “Item 1A. Risk Factors Risks Related to Crypto and Risks Related to Regulation, Taxation and Laws”. Regulation of Our Money Transmission Business.
After the liquidity provider accepts the order, it issues a transaction confirmation. The parties then are obligated to deliver fiat currency and crypto assets according to the terms of the transaction. The agreements contain customary representations and warranties and confidentiality, limitation of liability and indemnification provisions.
After the liquidity provider accepts the order, it issues a transaction confirmation. The parties then are obligated to deliver fiat currency and crypto assets according to the terms of the transaction. The agreements contain customary representations and warranties and confidentiality, limitation of liability and indemnification -17- provisions.
In October 2023, the governor of California signed into law the Digital Financial Assets Law (“DFAL”), which establishes a required licensing framework administered by the California Department of Financial Protection and Innovation (“DFPI”) for entities engaged in digital financial asset business activity in the state of California.
In October 2023, the governor of California signed into law the -27- Digital Financial Assets Law (“DFAL”), which establishes a required licensing framework administered by the California Department of Financial Protection and Innovation (“DFPI”) for entities engaged in digital financial asset business activity in the state of California.
We believe we are well-positioned to provide innovative, multi-faceted product solutions and grow with this evolving market. Our platform is well positioned to power commerce by enabling businesses, institutions, and consumers, to better manage, transact with and monetize crypto.
We believe we are well-positioned to provide innovative, multi-faceted product solutions and grow with this evolving market. Our platform is well positioned to power commerce by enabling businesses, institutions, and consumers to better manage, transact with and monetize crypto assets.
Using Bakkt Crypto’s platform, customers can purchase approved crypto assets, store crypto assets in custodial wallets, liquidate their holdings, and transfer supported crypto assets between a custodial wallet maintained by Bakkt Crypto and external wallets in certain jurisdictions, if enabled by the client.
Using Bakkt Crypto’s platform, customers can purchase approved crypto assets, store crypto assets in custodial wallets, liquidate their holdings, -5- and transfer supported crypto assets between a custodial wallet maintained by Bakkt Crypto and external wallets in certain jurisdictions, if enabled by the client.
Our administrative, technical, and physical controls include the use of separation of duties, physical and logical access controls, biometrics, hardware security modules, advanced cryptographic algorithms, dedicated security monitoring, and other controls to protect our environment and restrict unauthorized access.
Our administrative, technical, and physical controls include the use of separation of duties, physical and logical access controls, biometrics, hardware security modules, advanced cryptographic algorithms, dedicated -26- security monitoring, and other controls to protect our environment and restrict unauthorized access.
Business Overview In this section and elsewhere in this Annual Report on Form 10-K, we use the following terms, which are defined as follows: • “Client” means businesses with whom we contract to provide services to customers on our platform, and includes financial institutions, hedge funds, merchants, retailers, third party partners, and other businesses (except in the accompanying notes to the consolidated financial statements, where we refer to revenue earned from customers, instead of clients.
Business Overview In this section and elsewhere in this Form 10-K, we use the following terms, which are defined as follows: • “Client” means businesses with whom we contract to provide services to customers on our platform, and includes financial institutions, hedge funds, merchants, retailers, third party partners, and other businesses (except in the accompanying notes to the consolidated financial statements, where we refer to revenue earned from customers, instead of clients).
The agreements are for a term of either one or two years and can be terminated by either party for breach or in case of a change of control.
The agreements are generally for a term of either one or two years and can be terminated by either party for breach or in case of a change of control.
In most cases, the agreements also contain provisions giving Bakkt Crypto discretion in the choice of crypto assets offered to each client through its platform and, in some cases, exclusivity covenants pursuant to which clients have agreed not to refer their customers to other crypto asset trading platforms.
Generally, the agreements also contain provisions giving Bakkt Crypto discretion in the choice of crypto assets offered to each client through its platform and, in some cases, exclusivity covenants pursuant to which clients have agreed not to refer their customers to other crypto asset trading platforms.
Additionally, our platform implements advanced strategies and controls to enable KYC, AML, and other anti-fraud measures to combat financial crime.
Additionally, our platform implements strategies and controls to enable KYC, AML, and other anti-fraud measures to combat financial crime.
Upon receipt of the order, Bakkt Crypto accepts and processes the sale order and records the order fill transaction on Bakkt Crypto’s internal ledger by recording a debit to the customer’s crypto asset account. If the customer’s funding source is a fiat wallet, Bakkt Marketplace will credit the customer’s fiat wallet on its internal ledger.
Upon receipt of the order, Bakkt Crypto accepts and processes the sale order and records the order fill transaction on Bakkt Crypto’s internal ledger by recording a debit to the customer’s crypto asset account. -15- If the customer’s funding source is a fiat wallet, Bakkt Crypto will credit the customer’s fiat wallet on its internal ledger.
Our insurance policies cover employee-related accidents and injuries, property damage, business interruption, storm damage, facilities, cyber, crime and liability deriving from our activities. Our insurance policies also cover directors and officers’, employee and fiduciary liability. The insurance policies include exclusions aimed at delineating and clarifying the scope of coverage.
Our insurance policies cover employee-related accidents and injuries, property damage, business interruption, storm damage, facilities, cyber, crime and liability deriving from our activities. Our insurance policies also cover the employee and fiduciary liability of our directors and officers. The insurance policies include exclusions aimed at delineating and clarifying the scope of coverage.
The agreements do not have a set term and generally may be cancelled by either party for convenience on prior written notice of 30 to 60 days, with some agreements providing for no such notice obligations or a notice obligation of seven days. -13- Table of Contents Settlement is conducted on a net basis on the blockchain supporting the crypto asset.
The agreements do not have a set term and generally may be cancelled by either party for convenience on prior written notice of 30 to 60 days, with some agreements providing for no such notice obligations or a notice obligation of seven days. Settlement is conducted on a net basis on the blockchain supporting the crypto asset.
At Bakkt, we -26- Table of Contents strive to challenge the status quo with new ideas, have open and honest communications, appreciate our diversity of thought, take ownership and accountability for delivering valuable results and act with integrity, respect and reliability. In a complex industry, it is critical for employees to act ethically.
At Bakkt, we strive to challenge the status quo with new ideas, have open and honest communications, appreciate our diversity of thought, take ownership and accountability for delivering valuable results and act with integrity, respect and reliability. In a complex industry, it is critical for employees to act ethically.
Fig. 6 Crypto Assets Sale with Proceeds to the Customer’s BaaS Account If the customer’s funding source is a brokerage account, Bakkt Crypto sends a message to ledger the funds from the Bakkt Crypto brokerage account at the brokerage’s clearing firm to the customer’s brokerage account at the brokerage’s clearing firm.
Fig. 5 Crypto Assets Sale with Proceeds to the Customer’s BaaS Account If the customer’s funding source is a brokerage account, Bakkt Crypto sends a message to ledger the funds from the Bakkt Crypto brokerage account at the brokerage’s clearing firm to the customer’s brokerage account at the brokerage’s clearing firm.
It is possible that the information we post on social media could be deemed to be material information. Accordingly, investors should monitor our investor relations website as well as the social media channels listed on our investor relations website. The information on our website or any other website is not incorporated by reference into this Annual Report on Form 10-K.
It is possible that the information we post on social media could be deemed to be material information. Accordingly, investors should monitor our investor relations website as well as the social media channels listed on our investor relations website. The information on our website or any other website is not incorporated by reference into this Form 10-K. -31-
We expect that our business will require licensure under the DFAL and will therefore take steps to obtain necessary licenses prior to the enactment’s effective date of July 1, 2025.
We expect that our business will require licensure under the DFAL and will therefore take steps to obtain necessary licenses prior to the enactment’s effective date of July 1, 2026.
Bakkt Marketplace holds a New York State virtual currency license (commonly referred to as a “BitLicense”), and money transmitter licenses from all states throughout the United States (“U.S.”) where such licenses are required for the operation of its business, and is registered as a money services business with the Financial Crimes Enforcement Network of the U.S. Department of the Treasury.
Bakkt Crypto holds a New York State virtual currency license (commonly referred to as a “BitLicense”) and money transmitter licenses from all states throughout the United States (“U.S.”) where such licenses are required for the operation of its business, and is registered as a money services business with the Financial Crimes Enforcement Network of the U.S.
Our program is also designed to prevent our network and other services from being used to facilitate business in countries, or with persons or entities, included on designated lists promulgated by OFAC and equivalent authorities in other countries.
Our program is also designed to prevent our platform from being used to facilitate business in countries, or with persons or entities, included on designated lists promulgated by OFAC and equivalent authorities in other countries.
External Transfers of Crypto Assets (through Bakkt Crypto) Other than in the State of New York, we make available to customers the ability to transfer crypto assets to external wallets. Because we have structured our platforms to be client-configurable in several aspects, each client has the discretion to enable this transfer feature for its customers.
External Transfers of Crypto Assets Other than in the State of New York, we make available to customers the ability to transfer crypto assets to and from external wallets. Because we have structured our platforms to be client-configurable in several aspects, each client has the discretion to enable this transfer feature for its customers.
Operationally, there are segregations of duties and information tied to trading, listing and money movements, including protections for whistleblowers, compliance reviews, and blackout periods. Orders are entered into our systems where transactions are executed at best available prices with market makers and liquidity sources, designed to further insulate customer activities and prevent front-running and other illegal activities.
Operationally, we implement segregation of duties and information tied to trading, listing and money movements, including protections for whistleblowers, compliance reviews, and blackout periods. Orders are entered into our systems where transactions are executed at best available prices with market makers and liquidity sources, designed to further insulate customer activities and prevent front-running and other illegal activities.
Available Information Our website is http://www.bakkt.com, and our investor relations website is located at https://investors.bakkt.com, where we make available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Available Information Our website is http://www.bakkt.com, and our investor relations website is located at https://investors.bakkt.com, where we make available, free of charge, our Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of -30- 1934, as amended (the “Exchange Act”), as well as proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Under the Coinbase Custody Agreement, Coinbase Custody securely stores crypto asset private keys in offline storage. Under the Coinbase Custody Agreement, Coinbase Custody has implemented and agrees to maintain a reasonable information security program with policies and procedures reasonably designed to safeguard its electronic systems and Bakkt Crypto’s confidential information.
Pursuant to the Coinbase Custody Agreement, Coinbase Custody securely stores crypto asset private keys in offline storage and has implemented and agreed to maintain a reasonable information security program with policies and procedures reasonably designed to safeguard its electronic systems and Bakkt Crypto’s confidential information.
Under the BitGo Custody Agreement, BitGo, at Bakkt Crypto’s direction, establishes and maintains wallets for the storage of crypto assets, including cold wallets where BitGo holds all of the keys, and all of those keys are stored offline (“Vault”). BitGo serves as custodian of crypto assets stored in these wallets.
Under the BitGo Custody Agreement, BitGo, at Bakkt Crypto’s direction, establishes and maintains wallets for the storage of crypto assets, including cold wallets where BitGo holds all of the keys, and all of those keys are held in an offline storage platform (a “Vault”). BitGo serves as custodian of crypto assets stored in these wallets.
This business enables clients (including financial institutions, airlines and other loyalty sponsors) to enable their customers - who hold their loyalty points - to redeem those points for items including travel and merchandise. To that end, our Loyalty Solutions business enables point redemption and fulfillment (including travel reservations).
Bakkt Loyalty Solutions: Bakkt’s Loyalty Solutions business enables clients (including financial institutions, airlines and other loyalty sponsors) to enable their customers—who hold their loyalty points—to redeem those points for items including travel and merchandise. To that end, Bakkt’s Loyalty Solutions business enables point redemption and fulfillment (including travel reservations).
Fig. 4 Crypto Assets Purchase Through A Customer’s Points/Rewards Account For sales, customers submit an order request via the client with which they have a relationship to Bakkt Crypto to sell crypto assets by specifying the dollar value or quantity that they wish to sell.
Fig. 3 Crypto Assets Purchase Through A Customer’s Brokerage Account For sales, customers submit an order request via the client with which they have a relationship to Bakkt Crypto to sell crypto assets by specifying the dollar value or quantity that they wish to sell.
The BitGo Custody Agreement has an initial one-year term and renews automatically for successive one-year periods unless either party provides notice to the other party of its intent not to renew at least 60 days prior to the expiration of the then-current term.
The BitGo Custody Agreement had an initial one-year term and is renewing automatically for successive one-year periods unless either party provides notice to the other party of its intent not to renew at least 60 days prior to the expiration of the then-current term.
During the daily batch settlement period, fiat funds are transmitted from the Bakkt Crypto transaction account to the FBO account. -11- Table of Contents Fig. 5 Crypto Assets Sale with proceeds to the Customer’s Fiat Wallet Hosted by Bakkt Crypto If the customer’s funding source is a BaaS account, Bakkt Crypto sends a message to the client that a trade has been executed.
During the daily batch settlement period, fiat funds are transmitted from the Bakkt Crypto transaction account to the FBO account. Fig. 4 Crypto Assets Sale with proceeds to the Customer’s Fiat Wallet Hosted by Bakkt Crypto If the customer’s funding source is a BaaS account, Bakkt Crypto sends a message to the client that a trade has been executed.
Bakkt Crypto recognizes the revenue from markup and/or trade fees at this time in the flow using explicit journal types in the transaction ledgering. -9- Table of Contents If the customer’s funding source is a fiat wallet, Bakkt Marketplace will debit the customer’s fiat wallet on its internal ledger.
Bakkt Crypto recognizes the revenue from markup and/or trade fees at this time in the flow using explicit journal types in the transaction ledgering. -13- If the customer’s funding source is a fiat wallet, Bakkt Crypto will debit the customer’s fiat wallet on its internal ledger.
Human Capital Our employees are essential in propelling our success. We hold our employees to high standards, both in work product and ethics, and aim to create a culture of accountability and results. Our performance expectations and attributes empower our company. They reflect how we expect employees to operate, collaborate and make decisions.
We hold our employees to high standards, both in work product and ethics, and aim to create a culture of accountability and results. Our performance expectations and attributes empower our company. They reflect how we expect employees to operate, collaborate and make decisions.
Our platform is built to operate across various crypto assets and offers clients the flexibility to choose some or all of our capabilities, and the manner in which these capabilities are enabled for consumers, based on their needs and objectives.
Our platform is built to accommodate various crypto assets and offers clients the flexibility to choose some or all of our capabilities, and the manner in which these capabilities are enabled for consumers, based on each client’s needs and objectives.
Customers of our crypto clients access our platform through a client environment. Similarly, customers of our loyalty clients may only access our redemption storefronts through clients’ loyalty program user experiences. -22- Table of Contents Our marketing efforts are focused on business-to-business (“B2B”) activities to acquire new clients.
Customers of our crypto clients access our platform -25- through a client environment. Similarly, customers of our loyalty clients may only access our redemption storefronts through clients’ loyalty program user experience. Our marketing efforts are focused on business-to-business (“B2B”) activities to acquire new clients.
Founded in 2018, Bakkt builds technology that enables our clients to deliver new opportunities to their customers through Software as a Service (“SaaS”) and A pplication Programming interface (“ API”) solutions that unlock crypto and drive loyalty, powering engagement and performance. The global market for crypto, while nascent, is rapidly evolving and expanding.
Founded in 2018, Bakkt builds technology that enables our clients to deliver new opportunities to their customers through Software as a Service (“SaaS”) and A pplication Programming Interface (“ API”) solutions that provide crypto trading capabilities and loyalty solutions for our clients and customers. The global market for crypto, while nascent, is rapidly evolving and expanding.
We may also be covered for certain liabilities by insurance policies issued to third parties, including, but not limited to, our dealers and vendors. We maintain $230 million of insurance coverage, which includes $200 million of cold storage coverage and $30 million of hot storage coverage.
We may also be covered for certain liabilities by insurance policies issued to third parties, including, but not limited to, our dealers and vendors. To protect against loss to or theft of cryptocurrency assets, we maintain $230 million of insurance coverage, which includes $200 million of cold storage coverage and $30 million of hot storage coverage.
We have implemented a comprehensive AML compliance program designed to prevent our payments network and custody services from being used to facilitate money laundering, terrorist financing, and other illicit activity.
We have implemented a comprehensive AML compliance program designed to prevent our platform from being used to facilitate money laundering, terrorist financing, and other illicit activity.
In order to ensure we comply with applicable laws and regulations, we retain the right to review customer-facing marketing materials proposed to be used by clients. In specific instances, we require clients to disclose the services we provide and the related risks in such materials.
Clients may choose to market our crypto asset services to customers. In order to ensure we comply with applicable laws and regulations, we retain the right to review customer-facing marketing materials proposed to be used by clients. In specific instances, we require clients to disclose the services we provide and the related risks in such materials.
Crypto assets made available to customers residing in the State of New York will not be transferable to external wallets until that capability is approved by NYDFS, which we plan to seek in 2024.
Crypto assets made available to customers residing in the State of New York will not be transferable to external wallets until that capability is approved by the NYDFS, which we are presently seeking.
The Coinbase Custody Agreement remains effective until terminated by either party by providing at least 30 days’ prior written notice to the other party. Under the Fireblocks License Agreement, Fireblocks has granted Bakkt Crypto a non-exclusive, non-sublicensable, non-transferable license to generate wallets through the Fireblocks Vault service.
The Coinbase Custody Agreement remains effective until terminated by either party by providing at least 30 days’ prior written notice to the other party. -18- Pursuant to the License Agreement between Fireblocks and Bakkt Crypto, Fireblocks has granted Bakkt Crypto a non-exclusive, non-sub-licensable, non-transferable license to generate wallets through the Fireblocks Vault service.
The Listing Policies require the covered entity to undertake and document a risk assessment for each new crypto asset, which considers a number of risks, including legal and regulatory risk, and entails a review of the regulatory status of the crypto asset.
Material revisions to the Listing Policies require prior written approval from the NYDFS. The Listing Policies require the covered entity to undertake and document a risk assessment for each new crypto asset, which considers a number of risks, including legal and regulatory risk, and entails a review of the regulatory status of the crypto asset.
Bakkt Trust is also subject to FinCEN requirements as a financial institution. We are subject in certain jurisdictions to licensing and regulatory requirements as a result of offering our clients the ability to aggregate, buy, sell, convert, and send virtual currency through our platform.
We are subject in certain jurisdictions to licensing and regulatory requirements as a result of offering our clients the ability to aggregate, buy, sell, convert, and send virtual currency through our platform.
We believe Bakkt Crypto accelerated our product road map by providing new capabilities to our platform including the addition of 6 coins to our platform and deposit and withdrawal functionality in jurisdictions where permitted.
For example, Bakkt Crypto accelerated our product road map by providing new capabilities to our platform including the addition of 17 coins to our platform in 2024 and deposit and withdrawal functionality in jurisdictions where permitted.
Bakkt Crypto utilizes a proprietary, internal system to aggregate quotes from its liquidity providers by asset, side, price and size, which Bakkt Crypto uses to determine what quotes to provide, as principal, to its clients for display to customers.
Bakkt Crypto aggregates quotes from its liquidity providers by asset, side, price and size, which Bakkt Crypto uses to determine what quotes to provide, as principal, to its clients for display to customers.
During the daily batch settlement period, fiat funds are transmitted from the Bakkt Crypto transaction account to the Bakkt Crypto brokerage account. -12- Table of Contents Fig. 7 Crypto Assets Sale with Proceeds to the Customer’s Brokerage Account Liquidity Providers Bakkt Crypto currently has relationships with seven liquidity providers, with at least three providers servicing each supported crypto asset in order to provide consistent liquidity.
During the daily batch settlement period, fiat funds are transmitted from the Bakkt Crypto transaction account to the Bakkt Crypto brokerage account. -16- Fig. 6 Crypto Assets Sale with Proceeds to the Customer’s Brokerage Account Liquidity Providers Bakkt Crypto currently has relationships with several liquidity providers, with at least two providers servicing each supported crypto asset in order to provide consistent liquidity.
The integration with Bakkt Marketplace enabled direct fiat funding capabilities, user management and onboarding and compliance functionality, each of which continue to be enhanced with additions such as wire -20- Table of Contents funding support and, subject to applicable regulatory approvals, support for entity accounts, which materially expands the market for our trading capabilities from individual consumers to include businesses and trust entities.
The integration of Bakkt Crypto into our existing crypto trading business enabled direct fiat funding capabilities, user management and onboarding and compliance functionality, each of which continues to be enhanced with additions such as wire funding support and, subject to applicable regulatory approvals, support for entity accounts, which have materially expanded the market for our trading capabilities from individual consumers to include businesses and trust entities.
Instead, Bakkt Crypto settles with liquidity providers on a daily basis; however, in instances where a liquidity provider’s settlement balance is less than $30,000 for a given token, or $50,000 across all tokens, Bakkt Crypto will settle with those liquidity providers on the last business day of the applicable month, or when the settlement balance exceeds those levels, if sooner.
Instead, Bakkt Crypto settles with liquidity providers on a daily basis; however, in instances where a liquidity provider’s settlement balance is less than an agreed upon notional dollar amount for a given token, Bakkt Crypto will settle with those liquidity providers on the last business day of the applicable month, or when the settlement balance exceeds those levels, if sooner.
We also maintain controls aligned to the Payment Card Industry Data Security Standard ("PCI-DSS") for in-scope systems where cardholder -23- Table of Contents data is stored or processed. We comply with NYDFS cybersecurity requirements which impose strict rules related to establishing a detailed cybersecurity plan, enacting a comprehensive cybersecurity policy, and maintaining an ongoing reporting system for cybersecurity events.
We also maintain compliance with the Payment Card Industry Data Security Standard (“PCI-DSS”) for in-scope systems where cardholder data is stored or processed. We comply with NYDFS cybersecurity requirements which impose requirements related to establishing a detailed cybersecurity plan, enacting a comprehensive cybersecurity policy, and maintaining an ongoing reporting system for cybersecurity events.
For more information, please see our risk factors described in “Item 1A. Risk Factors - Related to Our Business, Finances and Operations”. Revenue Model We primarily generate revenue when clients or their customers use our services to buy, sell and/or store crypto or transact in loyalty points across our platform in the following key areas: • Subscription and service revenue.
Risk Factors - Risks Related to Our Business, Finances and Operations”. Revenue Model We primarily generate revenue when clients or their customers use our services to buy, sell and/or store crypto or transact in loyalty points on our platform in the following key areas: • Subscription and service revenue.
In addition, under the Electronic Fund Transfer Act, we are required to disclose the terms of, and any fees applicable to, our electronic fund -25- Table of Contents transfer services to consumers prior to their use of the service, among other requirements.
In addition, under the Electronic Fund Transfer Act, we are required to disclose the terms of, and any fees applicable to, our electronic fund transfer services to consumers prior to their use of the service, among other requirements. -28- Anti-Money Laundering and Counter-Terrorism Regulation.
Our core locations are Alpharetta, GA, Scottsdale, AZ and New York City, NY. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We have not experienced any work stoppages, and we consider our relations with our employees to be good.
None of our employees are represented by a labor union or covered by a collective bargaining agreement. We have not experienced any work stoppages, and we consider our relations with our employees to be good.
These services are provided through our clients which have a direct relationship with such customers and utilize our trading platform and custody services. • crypto asset trading; • custody services for the crypto assets supported for trading; • external transfers of crypto assets (through Bakkt Crypto); and • crypto rewards (expected to become available in the first half of 2024).
These services are provided through our clients which have a direct relationship with such customers and utilize our trading platform and custody services. • crypto asset trading; • custody services for the crypto assets supported for trading; and • external transfers of crypto assets in jurisdictions where transfers are allowed.
Our loyalty-related capabilities deepen our clients’ relationships with their customers by strengthening the value proposition of their loyalty programs. Our thousands of redemption options enable our clients to meet their customers where they are, deliver the products and services they desire, and meet the expectations of next generation audiences by offering crypto redemption options.
Our thousands of redemption options enable our clients to meet their customers where they are, deliver the products and services they desire, and meet the expectations of next generation audiences by offering crypto redemption options.
Bakkt Marketplace and Bakkt Crypto maintain a money transmitter license in each jurisdiction in which they operate that requires such a license for our activities. In all other jurisdictions where Bakkt Marketplace and Bakkt Crypto operate, we have established with the applicable licensing body that a money transmitter license is not required at this time.
Bakkt Crypto maintains a money transmitter license in each jurisdiction in which it operates that requires such a license for its activities. In all other jurisdictions where Bakkt Crypto operates, we have established with the applicable licensing body that a money transmitter license is not required at this time. We will comply with new license requirements as they arise.
Specifically, Bakkt Crypto offers customers the ability to purchase, sell, store and, in approved jurisdictions, deposit and withdraw approved crypto assets, all from within the applications of our clients with whom customers already have a relationship.
Our Corporate Structure We operate primarily through the following entities: Bakkt Crypto: Bakkt Crypto Solutions, LLC (“Bakkt Crypto”), through business partnerships with clients, offers customers of those clients the ability to purchase, sell, store and, in approved jurisdictions, deposit and withdraw approved crypto assets, all from within the applications of our clients with whom customers already have a relationship.
During the daily batch settlement, funds are transferred from the rewards client account to the Bakkt Crypto transaction account.
During the daily batch settlement period, fiat funds are transmitted from the Bakkt Crypto brokerage account to the Bakkt Crypto transaction account.
In connection with our acquisition of Bakkt Crypto, we acquired third-party custodial relationships with Coinbase Custody Trust Company (“Coinbase Custody”) and BitGo Trust Company (“BitGo”), which are currently used by Bakkt Crypto for custody and crypto asset transfers, where applicable.
Custody Services for the Crypto Assets Supported for Trading Bakkt Crypto has third-party custodial relationships with Coinbase Custody Trust Company (“Coinbase Custody”) and BitGo Trust Company (“BitGo”), which are currently used for custody and crypto asset transfers, where applicable.
The platform is built upon highly scalable proprietary technology and is directly integrated with dozens of suppliers for real-time redemption of merchandise, gift cards and travel services.
The platform is built upon highly scalable proprietary technology and is directly integrated with dozens of suppliers for real-time redemption of merchandise, gift cards and travel services. Additionally, our multi-location call center teams leverage our platform to provide agent assisted transactions and redemption servicing.
We operate in a regulatory environment that is evolving rapidly and increasing in scope. As such, it is possible that current or future laws or regulations could be enacted, interpreted or applied in a manner that would prohibit, alter, or impair our existing or planned products and services, or that could require costly, time-consuming, or otherwise burdensome compliance measures.
As such, it is possible that current or future laws or regulations could be enacted, interpreted or applied in a manner that would support, prohibit, alter, or impair our existing or planned products and services, or that could require costly, time-consuming, or otherwise burdensome compliance measures, or could force us to change our business quickly to successfully compete with new or existing entrants in the industry.
Bakkt Crypto also self-custodies customer crypto assets using the Fireblocks Vault service. All wallets hosted by Bakkt Crypto are omnibus wallets, which may contain both crypto assets held for the benefit of customers and the limited quantity of crypto assets held by Bakkt Crypto in its own account as inventory.
All wallets hosted by Bakkt Crypto are omnibus wallets, which may contain both crypto assets held for the benefit of customers and the limited quantity of crypto assets held by Bakkt Crypto in its own account as inventory. Bakkt Crypto does not, and historically did not, operate a proprietary trading business.
Under the Listing Policies, we utilize the risk assessment to consider various factors when making a decision to approve a new crypto asset for listing, including, among others, the appropriateness of the crypto asset to our business model and client base and whether the crypto asset is supported by other reputable markets or trading venues.
The Listing Policies also provide for an evaluation of actual or potential conflicts of interest with respect to the potential listing of a crypto asset, and updates to policies and procedures to ensure that monitoring and control measures are in place to manage money laundering and financial crime risk associated with the crypto asset. -20- Under the Listing Policies, we utilize the risk assessment to consider various factors when making a decision to approve a new crypto asset for listing, including, among others, the appropriateness of the crypto asset to our business model and client base and whether the crypto asset is supported by other reputable markets or trading venues.
Our modern embedded web experiences and API-driven platform allow us to partner and easily integrate with clients, including through the following: • Via standard SSO and API integrations, our multi-storefront loyalty redemption platform is provided as SaaS and powers rewards redemption for several of the top loyalty programs in the US.
Our modern embedded web experiences and API-driven platform allow us to partner and easily integrate with clients, including through the following: • Our crypto solutions operate in an institutional-grade crypto trading platform, anchored by our trade execution engine, which was built with speed and scale at its core to deliver equities-grade trading performance to provide liquidity for the purchase and sale of crypto to our clients. • Via standard SSO and API integrations, our multi-storefront loyalty redemption platform is provided as SaaS and powers rewards redemption for several of the top loyalty programs in the US.
Fig. 2 Crypto Assets Purchase Through A Customer’s BaaS Account If the customer’s funding source is a brokerage account, Bakkt Crypto sends a message to ledger the funds from the customer’s brokerage account at the brokerage’s clearing firm to Bakkt Crypto brokerage account at the brokerage’s -10- Table of Contents clearing firm.
Our client, not the Company, maintains the relationship with the BaaS provider and the Company is not itself regulated as a bank. -14- Fig. 2 Crypto Assets Purchase Through A Customer’s BaaS Account If the customer’s funding source is a brokerage account, Bakkt Crypto sends a message to ledger the funds from the customer’s brokerage account at the brokerage’s clearing firm to Bakkt Crypto brokerage account at the brokerage’s clearing firm.
We recognize that businesses want to offer consumers choice, innovation and a frictionless experience, and our platform and service offerings were constructed with this in mind. We have thoughtfully built a unique and powerful platform with end-to-end services, including easily consumable technology services, customer support and compliance infrastructure, for our clients.
We recognize that businesses want to offer consumers choice, innovation and a frictionless experience, and our platform and service offerings were constructed with this in mind.
We enable responsible and secure access to crypto for our clients. Our compliance measures, controls and rigorous risk management practices are at the core of how we operate. Our infrastructure provides multiple layers of protection and provides heightened security and compliance. This includes a separate and independent board for Bakkt Trust.
We believe that our business model provides us with significant competitive advantages, including: • Multi-faceted approach to security and compliance. We enable responsible and secure access to crypto for our clients. Our compliance measures, controls and risk management practices are at the core of how we operate. Our infrastructure provides multiple layers of protection and provides heightened security and compliance.
Customers may sell crypto assets through Bakkt Crypto. The sale proceeds from a sale can be directed to one of three potential customer accounts: • the customer’s fiat wallet (see Fig. 5 below); • the customer’s BaaS account (see Fig. 6 below); or • the customer’s brokerage account (see Fig. 7 below).
The sale proceeds from a sale can be directed to: • the customer’s fiat wallet (see Fig. 4 below); • the customer’s BaaS account (see Fig. 5 below); or • the customer’s brokerage account (see Fig. 6 below).
Customers may purchase approved crypto assets directly through Bakkt Crypto utilizing one of four funding sources: • the customer’s fiat wallet (see Fig. 1 below); • the customer’s Banking as a Service (“BaaS”) provider account (see Fig. 2 below); • the customer’s brokerage account (see Fig. 3 below); or • the customer’s points/rewards account with a participating loyalty client (see Fig. 4 below; expected to become available in the first half of 2024).
Customers may purchase approved crypto assets directly through Bakkt Crypto utilizing: • the customer’s fiat wallet (see Fig. 1 below); • the customer’s Banking as a Service (“BaaS”) provider account (see Fig. 2 below); or • the customer’s brokerage account (see Fig. 3 below). Customers may sell crypto assets through Bakkt Crypto.
These clients include Webull, Public.com, Blockchain.com, Swan Bitcoin, and Caesars. We believe this strategy will enable us to add transacting accounts and volume more quickly and more efficiently than a direct-to-consumer model, given our limited operating history and the novelty of the crypto space for some customers.
We believe this strategy will enable us to add transacting accounts and volume more quickly and more efficiently than a direct-to-consumer model, given our limited operating history and the novelty of the crypto space for some customers. -23- As part of this approach, we have developed our platform to be flexible and scalable to accommodate how different clients may want to implement our solutions.
New members of the custody operations team, like all our employees, also are subject to background checks and drug testing. The daily reconciliations prepared by the custody team are reviewed and analyzed by management monthly and provided to external auditors at least annually, or as otherwise requested.
New members of the custody operations team, like all our employees, also are subject to background checks and drug testing. The daily reconciliations prepared by the custody team are reviewed and analyzed by management monthly. Designated individuals within the custody operations team are responsible for the initiation and approval of outbound wallet transactions, as per our policies and procedures.
The SEC has recently proposed changes to its investment adviser custody rule, which could affect the terms upon which we can offer custody services to those clients. Escheatment and Unclaimed Property Regulations. There is regulatory uncertainty regarding how states and jurisdictions treat virtual currencies and other crypto assets under unclaimed property laws and regulations.
We also have clients that are investments advisors. The SEC has recently proposed changes to its investment adviser custody rule, which could affect the terms upon which we can offer custody services to those clients. Escheatment and Unclaimed Property Regulations.
Our loyalty revenue has seasonality and is typically higher in the fourth quarter, driven by holiday spending and the travel bookings. -19- Table of Contents Revenue generated from our crypto services had been immaterial prior to our acquisition of Bakkt Crypto; however, revenue from crypto services is now a significant driver of our business, and we expect crypto services revenue to increase as we grow our client base and our customers.
Revenue generated from our crypto services was immaterial prior to our acquisition of Bakkt Crypto in April 2023; however, revenue from crypto services is now a significant driver of our business, and we expect Crypto services revenue to continue to increase as we grow our client base and our customers.
The service allows Bakkt Crypto to access and use crypto asset wallets that store private and public keys, interact with various blockchains and monitor its balances of crypto assets. -14- Table of Contents Our intention is to consolidate our self-custodial services while still offering diversification across custodians for clients that request it.
The service allows Bakkt Crypto to access and use crypto asset wallets that store private and public keys, interact with various blockchains and monitor its balances of crypto assets.
The agreements with these third-party fintech partners (referred to as clients) provide for licensing of their front-end trading platforms by Bakkt Crypto and cooperation between the parties in facilitating customers’ transactions in crypto assets.
Bakkt Crypto’s proprietary trading platform and relationships with liquidity providers provide access to a wide range of crypto assets and competitive pricing to our customers. Our agreements with clients provide for licensing of their front-end trading platforms by Bakkt Crypto and cooperation between the parties in facilitating customers’ transactions in crypto assets.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThis has been reflected in certain CFTC enforcement actions, including those against Coinflip, Inc. and certain informal CFTC guidance, such as the LabCFTC’s Primer on Virtual Currencies. • In June 2023, the CFTC won a default judgment against Ooki DAO, a decentralized autonomous organization that the CFTC charged with operating an illegal trading platform and unlawfully offering leveraged and margined retail commodity transactions in crypto assets outside of a registered exchange, unlawfully acting as a Futures Commission Merchant (FCM), and unlawfully failing to comply with Bank Secrecy Act obligations applicable to FCMs. • In July 2023, a court in the Southern District of New York held that Ripple’s sales of XRP to sophisticated investors pursuant to written contracts did constitute the unregistered offer and sale of investment contracts while sales of XRP to purchasers through blind bid/ask transactions on crypto asset exchanges did not constitute the sale of unregistered securities. • On July 31, 2023, a different court in the Southern District of New York held that the SEC had asserted a plausible claim that certain inter-related crypto assets offered by Terraform Labs qualified as investment contracts. • In September 2023, the CFTC issued orders and simultaneously filed and settled charges against Opyn, Inc., ZeroEx, Inc., and Deridex, Inc., alleging that each had offered users the ability to trade crypto asset derivatives without registering with the CFTC as one or more regulated entities. • The U.S.
Biggest changeThis has been reflected in certain CFTC enforcement actions, including those against Coinflip, Inc. and certain informal CFTC guidance, such as the LabCFTC’s Primer on Virtual Currencies. • In June 2023, the CFTC won a default judgment against Ooki DAO, a decentralized autonomous organization that the CFTC charged with operating an illegal trading platform and unlawfully offering leveraged and margined retail commodity transactions in crypto assets outside of a registered exchange, unlawfully acting as a Futures Commission Merchant (FCM), and unlawfully failing to comply with BSA obligations applicable to FCMs. • In July 2023, a court in the Southern District of New York held that Ripple Labs, Inc.’s (“Ripple”) sales of XRP to sophisticated investors pursuant to written contracts did constitute the unregistered offer and sale of investment contracts while sales of XRP to purchasers through blind bid/ask transactions on crypto asset exchanges did not constitute the sale of unregistered securities.
If we are not able to continue to grow our base of clients, we will not be able to continue to grow our customer base, our revenues or our business, which could negatively impact our business, financial condition and results of operations and may cause us to be unable to continue as a going concern.
If we are not able to continue to grow our base of clients, we will not be able to continue to grow our customer base, our revenues or our business, which could negatively impact our financial condition and results of operations and may cause us to be unable to continue as a going concern.
For example, under the purchase agreement for the acquisition of Bakkt Crypto, we agreed to issue cash consideration of $55.0 million, up to $45 million in shares of our Class A Common Stock depending on Bakkt Crypto's achievement of certain profitability targets for the fourth quarter of 2022, and up to an additional $100.0 million in shares of our Class A Common Stock depending on Bakkt Crypto's achievement of certain financial targets through 2025.
For example, under the purchase agreement for the acquisition of Bakkt Crypto, we agreed to issue cash consideration of $55.0 million, up to $45.0 million in shares of our Class A Common Stock depending on Bakkt Crypto’s achievement of certain profitability targets for the fourth quarter of 2022, and up to an additional $100.0 million in shares of our Class A Common Stock depending on Bakkt Crypto’s achievement of certain financial targets through 2025.
In August 2023, crypto asset exchange Bittrex Inc. and its co-founder and former CEO agreed to settle charges that they operated an unregistered national securities exchange, broker, and clearing agency, and agreed to make a total monetary payment of $24 million. In November 2023, three federal U.S. agencies—the U.S. Department of the Treasury, through the FinCEN and OFAC, the U.S.
In August 2023, crypto asset exchange Bittrex Inc. and its co-founder and former CEO agreed to settle charges that they operated an unregistered national securities exchange, broker, and clearing agency, and agreed to make a total monetary payment of $24 million. In November 2023, three federal U.S. agencies-the U.S. Department of the Treasury, through FinCEN and OFAC, the U.S.
Once a transaction has been verified and recorded in a block that is added to the distributed ledger, an incorrect transfer of a crypto generally will not be reversible, and we may not be able to obtain compensation for any such transfer or theft.
Once a transaction has been verified and recorded in a block that is added to the distributed ledger, an incorrect transfer of crypto generally will not be reversible, and we may not be able to obtain compensation for any such transfer or theft.
In addition, any actual or perceived non-compliance with applicable laws, regulations, policies, industry data protections, security standards, certifications, and other actual or alleged obligations or undertakings relating to privacy or cybersecurity could result in proceedings, investigations, or claims against us by regulatory authorities, consumers, clients, or others, leading to reputational harm, significant fines, litigation costs, damages and other liabilities.
In addition, any actual or perceived non-compliance with applicable laws, regulations, policies, industry data protections, security standards, certifications, and other actual or alleged privacy and security obligations or other undertakings relating to privacy or cybersecurity could result in proceedings, investigations, or claims against us by regulatory authorities, consumers, clients, or others, leading to reputational harm, significant fines, litigation costs, damages and other liabilities.
Risks Related to Information Technology and Data Actual or perceived cyberattacks, security incidents or breaches could result in serious harm to our reputation, business and financial condition. Our business involves the collection, storage, processing and transmission of confidential information and customers’ personal data, including financial information and information about how customers interact with our platform.
Risks Related to Information Technology and Data Actual or perceived cyberattacks, security incidents or breaches could result in serious harm to our reputation, business and financial condition. Our business involves the collection, storage, processing and transmission of confidential information and customers’ personal information, including financial information and information about how customers interact with our platform.
Our information technology and infrastructure and those of our vendors (including data center and cloud computing providers) may be vulnerable to cyberattacks, security incidents and breaches and third parties may be able to access our customers’ personal data and/or proprietary information, banking, crypto and payment card information, or other confidential, proprietary, or otherwise sensitive information, stored on or accessible through those systems.
Our information technology and infrastructure and those of our vendors (including data center and cloud computing providers) may be vulnerable to cyberattacks, security breaches and incidents and third parties may be able to access our customers’ personal information and/or proprietary information, banking, crypto and payment card information, or other confidential, proprietary, or otherwise sensitive information, stored on or accessible through those systems.
We have experienced from time to time, and may experience in the future, security incidents or breaches due to human error, malfeasance, insider threats, system errors, bugs, vulnerabilities, or other causes.
We have experienced from time to time, and may experience in the future, security breaches or incidents due to human error, malfeasance, insider threats, system errors, bugs, vulnerabilities, or other causes.
Our insurance policies may not be adequate to reimburse us for losses caused by security incidents or breaches.
Our insurance policies may not be adequate to reimburse us for losses caused by security breaches or incidents.
These risks include the following, among others: • difficulty in assimilating the operations, systems, and personnel of the acquired business; • difficulty in effectively integrating the acquired technologies or products with our current products and technologies; • difficulty in maintaining controls, procedures and policies during the transition and integration; • disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges due to integration issues; • difficulty integrating the acquired business’s accounting, management information and other administrative systems; • inability to retain key technical and managerial personnel of the acquired business; • inability to retain key customers, vendors and other business clients of the acquired business; • inability to achieve the financial and strategic goals for the acquired and combined businesses; • incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our results of operations; • regulatory changes that affect the value of the businesses we acquire or our plans for integration of those businesses, or that expose us to additional regulation or litigation in connection with the acquired businesses; • significant post-acquisition investments which may lower the actual benefits realized through the acquisition; • potential failure of the due diligence process to identify significant issues with product quality, legal, and financial liabilities among other things; and • potential inability to assert that internal controls over financial reporting are effective.
These risks include the following, among others: • difficulty in assimilating the operations, systems, and personnel of the acquired business; • difficulty in effectively integrating the acquired technologies or products with our current products and technologies; • difficulty in maintaining controls, procedures and policies during the transition and integration; • disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges due to integration issues; • difficulty integrating the acquired business’s accounting, management information and other administrative systems; • inability to retain key technical and managerial personnel of the acquired business; • inability to retain key customers, vendors and other business clients of the acquired business; • inability to achieve the financial and strategic goals for the acquired and combined businesses; • incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our results of operations; • regulatory changes that affect the value of the businesses we acquire or our plans for integration of those businesses, or that expose us to additional regulation or litigation in connection with the acquired businesses; • significant post-acquisition investments which may lower the actual benefits realized through the acquisition; • potential failure of the due diligence process to identify significant issues with product quality, legal, and financial liabilities among other things; and -42- • potential inability to assert that internal controls over financial reporting are effective.
The Certificate of Incorporation provides that ICE and its affiliates (including any non-employee directors of ours appointed by ICE) have no duty to refrain from (1) engaging in and possessing interests in other business ventures of every type and description, including those engaged in the same or similar business activities or lines of business in which we now engage or propose to engage or (2) otherwise competing with us, on their own account, in partnership with, or as an employee, officer, director or shareholder of any other individual, corporation, general or limited partnership, limited liability company, joint venture, trust, association or any other entity.
Our Certificate of Incorporation provides that ICE and its affiliates (including any non-employee directors of ours appointed by ICE) have no duty to refrain from (1) engaging in and possessing interests in other business ventures of every type and description, including those engaged in the same or similar business activities or lines of business in which we now engage or propose to engage or (2) otherwise competing with us, on their own account, in partnership with, or as an employee, officer, director or shareholder of any other individual, corporation, general or limited partnership, limited liability company, joint venture, trust, association or any other entity.
Further, our business model entails numerous risks, including risks relating to our ability to: • manage the complexity of our business model to stay current with the industry and new technologies; • successfully enter new categories, markets and jurisdictions in which we may have limited or no prior experience; • integrate into multiple distributed ledger technologies as they currently exist and as they evolve; • successfully develop and integrate products, systems and personnel into our business operations; • obtain and maintain required licenses and regulatory approvals for our business; and • respond to, and comply with the evolving regulatory landscape for crypto and crypto platforms.
Further, our business model entails numerous risks, including risks relating to our ability to: • manage the complexity of our business model to stay current with the industry and new technologies; • successfully enter new categories, markets and jurisdictions in which we may have limited or no prior experience; -34- • integrate into multiple distributed ledger technologies as they currently exist and as they evolve; • successfully develop and integrate products, systems and personnel into our business operations; • obtain and maintain required licenses and regulatory approvals for our business; and • respond to, and comply with, the evolving regulatory landscape for crypto and crypto platforms.
Among other things, the Certificate of Incorporation and By-Laws include provisions regarding: -69- Table of Contents • a classified Board with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board; • the ability of the Board to issue shares of Preferred Stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the limitation of the liability of, and the indemnification of, our directors and officers; • the right of the Board to elect a director to fill a vacancy created by the expansion of the Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the Board; • the requirement that directors may only be removed from the Board for cause and upon the affirmative vote of the holders of at least 66 2/3% of the total voting power of then outstanding Class A Common Stock; • a prohibition on stockholder action by written consent (except for actions by the holders of Class V Common Stock or as required for holders of future series of Preferred Stock), which forces stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors; • the requirement that a special meeting of stockholders may be called only by the Board, the Chairman of the Board or our Chief Executive Officer, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • controlling the procedures for the conduct and scheduling of the Board and stockholder meetings; • the requirement for the affirmative vote of holders of at least 66 2/3% of the total voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions in the Certificate of Incorporation which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Board and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt; • the ability of the Board to amend the By-Laws, which may allow the Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the By-Laws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which our stockholders must comply to nominate candidates to the Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control.
Among other things, the Certificate of Incorporation and By-Laws include provisions regarding: • a classified Board with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board; • the ability of the Board to issue shares of Preferred Stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the limitation of the liability of, and the indemnification of, our directors and officers; • the right of the Board to elect a director to fill a vacancy created by the expansion of the Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the Board; • the requirement that directors may only be removed from the Board for cause and upon the affirmative vote of the holders of at least 66 2/3% of the total voting power of then outstanding Class A Common Stock; • a prohibition on stockholder action by written consent (except for actions by the holders of Class V Common Stock or as required for holders of future series of Preferred Stock), which forces stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors; • the requirement that a special meeting of stockholders may be called only by the Board, the Chairman of the Board or our Chief Executive Officer, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • controlling the procedures for the conduct and scheduling of the Board and stockholder meetings; • the requirement for the affirmative vote of holders of at least 66 2/3% of the total voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions in the Certificate of Incorporation which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Board and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt; • the ability of the Board to amend the By-Laws, which may allow the Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the By-Laws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which our stockholders must comply to nominate candidates to the Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control.
Risks Related to Crypto • Disruptions in the crypto market subject us to additional risks, including the risk that banks may not provide banking services to us. • There may be a general perception among regulators and others that crypto is used to facilitate illegal activity such as fraud, money laundering, tax evasion and ransomware scams. • Crypto custodial solutions and related technology, including our systems and custodial arrangements, are subject to risks related to a loss of funds due to theft, employee or vendor sabotage, security and cybersecurity risks, system failures and other operational issues the loss, destruction or other compromise of our private keys and a lack of sufficient insurance. • Our failure to safeguard and manage our customers’ crypto could adversely impact our business, operating results, and financial condition. • Crypto does not have extensive historical precedent and distributed ledger technology continues to rapidly evolve. • We may encounter technical issues in connection with the integration of supported crypto assets and changes and upgrades to their underlying networks, which could adversely affect our business.
Risks Related to Crypto • Disruptions in the crypto market subject us to additional risks, including the risk that banks may not provide banking services to us. -32- • There may be a perception among regulators and others that crypto is used to facilitate illegal activity such as fraud, money laundering, tax evasion and ransomware scams. • Crypto custodial solutions and related technology, including our systems and custodial arrangements, are subject to risks related to a loss of funds due to theft, employee or vendor sabotage, security and cybersecurity risks, system failures and other operational issues the loss, destruction or other compromise of our private keys and a lack of sufficient insurance. • Our failure to safeguard and manage our customers’ crypto could adversely impact our business, operating results, and financial condition. • Crypto does not have extensive historical precedent and distributed ledger technology continues to rapidly evolve. • We may encounter technical issues in connection with the integration of supported crypto assets and changes and upgrades to their underlying networks, which could adversely affect our business.
Any allegations or violation of the FCPA or other applicable anti-bribery and anti-corruption laws could result in whistleblower complaints, sanctions, settlements, prosecution, enforcement actions, fines, damages, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, or suspension or debarment from government contracts, all of which may have an adverse effect on our reputation, business, results of operations, and prospects.
Any allegations or violation of the FCPA or other applicable anti-bribery and anti-corruption laws could result in whistleblower complaints, sanctions, settlements, prosecution, enforcement actions, fines, damages, adverse -63- media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, or suspension or debarment from government contracts, all of which may have an adverse effect on our reputation, business, results of operations, and prospects.
The issuance of additional Class A Common Stock or other equity securities could have, among other things, one or more of the following effects: • our existing stockholders’ proportionate ownership interest will decrease; • the amount of cash available per share, including for payment of dividends in the future, may decrease; • the relative voting strength of each previously outstanding share of our common stock may be diminished; and • the market price of our Class A Common Stock and/or Warrants may decline.
The issuance of additional Class A Common Stock or other equity securities could have, among other things, one or more of the following effects: • our existing stockholders’ proportionate ownership interest will decrease; • the amount of cash available per share, including for payment of dividends in the future, may decrease; -74- • the relative voting strength of each previously outstanding share of our common stock may be diminished; and • the market price of our Class A Common Stock and/or Warrants may decline.
For example, under the Telephone Consumer Protection Act (“TCPA”), in the U.S., plaintiffs may seek actual monetary loss or statutory damages of $500 per violation, whichever is greater, and courts may triple the damage award for willful or knowing violations. We could be subject to lawsuits (including class-action lawsuits) containing allegations that our business violated the TCPA.
For example, under the Telephone Consumer Protection Act (“TCPA”), in the U.S., plaintiffs may seek actual monetary loss or statutory damages of $500 per violation, whichever is greater, and courts may triple the damage -65- award for willful or knowing violations. We could be subject to lawsuits (including class-action lawsuits) containing allegations that our business violated the TCPA.
Laws outside of the United States often impose different, more specific, or even conflicting obligations on companies, as well as broader liability. For example, certain transactions that may be permissible in a local jurisdiction may be prohibited by regulations of U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) or U.S. anti-money laundering or counter-terrorist financing regulations.
Laws outside of the United States often impose different, more specific, or even conflicting obligations on companies, as well as broader -53- liability. For example, certain transactions that may be permissible in a local jurisdiction may be prohibited by regulations of U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) or U.S. anti-money laundering or counter-terrorist financing regulations.
Additionally, if these third parties experience operational interference or disruptions, breach their agreements with us, fail to perform their obligations and meet our expectations, or experience a cyberattack, security incident or breach, our operations could be disrupted or otherwise negatively affected, which could result in consumer dissatisfaction, regulatory scrutiny and damage to our reputation and brands and materially and adversely affect our business.
Additionally, if these third parties experience operational interference or disruptions, breach their agreements with us, fail to perform their obligations and meet our expectations, or experience a cyberattack, security incident or breach, our operations could be disrupted or otherwise negatively affected, which could result in consumer -71- dissatisfaction, regulatory scrutiny and damage to our reputation and brands and materially and adversely affect our business.
Any such interruption could result in loss of crypto and/or its value. In addition, over the past several years, crypto mining operations have evolved from individual users mining with computer processors, graphics processing units and first-generation application specific integrated circuit (“ASIC”) machines to “professionalized” mining operations using proprietary hardware or sophisticated machines.
Any such interruption could result in loss of crypto and/or its value. -52- In addition, over the past several years, crypto mining operations have evolved from individual users mining with computer processors, graphics processing units and first-generation application specific integrated circuit (“ASIC”) machines to “professionalized” mining operations using proprietary hardware or sophisticated machines.
The techniques used to obtain unauthorized, improper, or illegal access to systems and information (including customers’ personal data), disable or degrade service, or sabotage systems are constantly evolving and have become very complex and sophisticated, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target.
The techniques used to obtain unauthorized, improper, or illegal access to systems and information (including customers’ personal information), disable or degrade service, or sabotage systems are constantly evolving and have become very complex and sophisticated, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target.
Any of these events could reduce customer demand for our products and services and have an adverse impact on our business. There may be a general perception among regulators and others that crypto is used to facilitate illegal activity such as fraud, money laundering, tax evasion and scams.
Any of these events could reduce customer demand for our products and services and have an adverse impact on our business. There may be a perception among regulators and others that crypto is used to facilitate illegal activity such as fraud, money laundering, tax evasion and scams.
For certain crypto assets, a significant amount of development work is required and there is no guarantee that we will be able to integrate successfully with any existing or future crypto asset. In addition, such integration may introduce software errors or weaknesses into our platform, including our existing infrastructure.
For certain crypto assets, a significant amount of development work is required, and there is no guarantee that we will be able to integrate successfully with any existing or future crypto asset. In addition, integration may introduce software errors or weaknesses into our platform, including our existing infrastructure.
Such rules are under discussion today by the member and observer states of the “Organization for Economic Cooperation and Development” and may give rise to potential liabilities or disclosure requirements for prior customer arrangements and new rules that affect how we onboard our customers and report their transactions to taxing authorities.
Such rules are under discussion today by the member and observer states of the “Organization for Economic Cooperation and Development” (the “OECD”) and may give rise to potential liabilities or disclosure requirements for prior customer arrangements and new rules that affect how we onboard our customers and report their transactions to taxing authorities.
Any problems that we encounter with the development or operation of our platform, including technical, legal and regulatory problems, could have a material adverse effect on our business, financial condition and results of operations. We have a limited operating history and a history of operating losses, which make it difficult to forecast our future results of operations.
Any problems or delays that we encounter with the development or operation of our platform, including technical, legal and regulatory problems, could have a material adverse effect on our business, financial condition and results of operations. We have a limited operating history and a history of operating losses, which make it difficult to forecast our future results of operations.
Even if such integration is initially successful, any number of technical changes, software upgrades, soft or hard forks, cybersecurity incidents, bugs, errors, defects or other changes to the underlying blockchain network may occur from time to time, causing incompatibility, technical issues, disruptions, or security weaknesses to our platform.
Even if integration is initially successful, any number of technical changes, software upgrades, soft or hard forks, cybersecurity incidents, bugs, errors, defects or other changes to the underlying blockchain network may occur from time to time, causing incompatibility, technical issues, disruptions, or security weaknesses to our platform.
If we are unable to achieve the revenue growth that we expect from these investments, reduce our operating expenses, or achieve profitability, it would have an adverse effect on our business, financial condition and results of operations, and the value of our business and our securities may significantly decrease.
If we are unable to achieve the revenue growth that we expect from these investments, further reduce our operating expenses, or achieve profitability, it would have an adverse effect on our financial condition and results of operations, and the value of our business and our securities may significantly decrease.
These and other similar legal and regulatory developments could contribute to legal and economic uncertainty, affect how we design, market, sell and operate our platform, how our clients, customers and vendors process and share data, how we process and use data, and how we transfer personal data from one jurisdiction to another, which could negatively impact demand for our platform.
These and other similar legal and regulatory developments could contribute to legal and economic uncertainty, affect how we design, market, sell and operate our platform, how our clients, customers and vendors process and share data, how we process and use data, and how we transfer personal information from one jurisdiction to another, which could negatively impact demand for our platform.
If any of this were to occur, it could damage our reputation, limit our growth and materially and adversely affect our business, financial condition and results of operations. Our tax information reporting obligations with respect to transactions involving loyalty points or other incentives are subject to change.
If any of this were to occur, it could damage our reputation, limit our growth and materially and adversely affect our business, financial condition and results of operations. -66- Our tax information reporting obligations with respect to transactions involving loyalty points or other incentives are subject to change.
However, the IRS Notice, the 2019 Revenue Ruling & FAQs and the 2023 Revenue Ruling do not address other significant aspects of the U.S. federal income tax treatment of crypto and related transactions. Furthermore, the accounting treatment for revenues from crypto transactions is currently under review and subject to change.
However, the IRS Notice, the 2019 Revenue Ruling & FAQs and the 2023 Revenue Ruling do not -67- address other significant aspects of the U.S. federal income tax treatment of crypto and related transactions. Furthermore, the accounting treatment for revenues from crypto transactions is currently under review and subject to change.
The concentration of a significant portion of our business and transaction volume with a limited number of clients exposes us disproportionately to the risk of any of those clients choosing to no longer partner with us, to the economic performance of such clients or their respective industries or to any events, circumstances, or risks affecting such clients or their respective industries.
The concentration of a significant portion of our business and transaction volume with a limited number of clients exposes us disproportionately to the risk of any of those clients choosing to no longer partner with us, to the -40- economic performance of such clients or their respective industries or to any events, circumstances, or risks affecting such clients or their respective industries.
Economic factors such as interest rates, inflation, changes in monetary and related policies, market volatility (including as a result of geopolitical issues, such as the wars in Ukraine and the Middle East), consumer confidence, and unemployment rates are among the most significant factors that impact consumer spending behavior.
Economic factors such as interest rates, tariffs, inflation, changes in monetary and related policies, market volatility (including as a result of geopolitical issues, such as the wars in Ukraine and the Middle East), consumer confidence, and unemployment rates are among the most significant factors that impact consumer spending behavior.
Unlike bank accounts or accounts at some other financial institutions, in the event of loss or loss of utility value, there is no public insurer to offer recourse to us or to any consumer and the misappropriated crypto may not be easily traced to the bad actor.
Unlike bank accounts or accounts at some other financial institutions, in the event of loss or loss of utility value, there is no -50- public insurer to offer recourse to us or to any consumer and the misappropriated crypto may not be easily traced to the bad actor.
Customers that traded such supported assets on our platform and suffered trading losses could also seek to rescind a transaction that we facilitated on the basis that it was conducted in violation of applicable law, which could subject us to significant liability.
Customers that traded such supported assets on our platform and suffered -58- trading losses could also seek to rescind a transaction that we facilitated on the basis that it was conducted in violation of applicable law, which could subject us to significant liability.
Furthermore, our future obligation to make payments under the Tax Receivable Agreement could make it a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that may be deemed realized under the Tax Receivable Agreement.
Furthermore, our future obligation to make payments under the Tax Receivable Agreement could -61- make it a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that may be deemed realized under the Tax Receivable Agreement.
See “ Risks Related to Risk Management and Financial Reporting – Future changes in financial accounting standards may significantly change our reported results of operations. ” Crypto does not have extensive historical precedent and distributed ledger technology continues to rapidly evolve.
See “— Risks Related to Risk Management and Financial Reporting—Future changes in financial accounting standards may significantly change our reported results of operations. ” -51- Crypto does not have extensive historical precedent, and distributed ledger technology continues to rapidly evolve.
We may at times fail to comply with our privacy policies or other notices or statements we may make regarding the collection, use, disclosure and other processing of personal data, including credit card information, and certain other information or may be perceived to have failed to do so.
We may at times fail to comply with our privacy policies or other notices or statements we may make regarding the collection, use, disclosure and other processing of personal information, including credit card information, and certain other information or may be perceived to have failed to do so.
Any further deterioration in the crypto markets may have an adverse effect on our reputation, and any negative perception by our clients of crypto may lead to a loss of client demand for our products and services, any of which could have an adverse impact on our business and financial condition.
Any deterioration in the crypto markets may have an adverse effect on our reputation, and any negative perception by our clients of crypto may lead to a loss of client demand for our products and services, any of which could have an adverse impact on our business and financial condition.
As we expand our international activities, we become increasingly obligated to comply with the laws, rules, regulations, policies and legal interpretations of both the jurisdictions in which we operate and those into which we offer services on a cross-border basis.
As we expand our activities, we become increasingly obligated to comply with the laws, rules, regulations, policies and legal interpretations of both the jurisdictions in which we operate and those into which we offer services on a cross-border basis.
These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of the Board or taking other corporate actions, including effecting changes in management.
These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by -75- the current members of the Board or taking other corporate actions, including effecting changes in management.
In connection with the filing of subsequent amendments thereto, we disclosed that without additional equity financing we could not conclude that we could maintain our operations for a period of at least 12 months from the dates of such amendment filings.
In connection with the filing of subsequent amendments thereto, we disclosed that, without additional equity financing, we could not conclude that we could maintain our operations for a period of at least 12 months from the dates of such filings.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Board or management. We cannot predict the impact our dual class structure may have on the stock price of our Class A Common Stock.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Board or management. -76- We cannot predict the impact our dual class structure may have on the stock price of our Class A Common Stock.
Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware, or if such court does not have subject matter jurisdiction, any other court located in the State of Delaware with subject matter jurisdiction, will be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of us, (b) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of ours to us or our stockholders, (c) any action asserting a claim against us or our officers or directors arising pursuant to any provision of the DGCL or the Certificate of Incorporation or By-Laws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, (d) any action to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the By-Laws or any provision thereof, (e) any action asserting a claim against us or any current or former director, officer, employee, stockholder or agent of ours governed by the internal affairs doctrine of the law of the State of Delaware or (f) any action asserting an “internal corporate claim” as defined in Section 115 of the DGCL.
Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware, or if such court does not have subject matter jurisdiction, any other court located in the State of Delaware with subject matter jurisdiction, will be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of us, (b) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of ours to us or our stockholders, (c) any action asserting a claim against us or our officers or directors arising pursuant to any provision of the Delaware General Corporation Law (the “DGCL”) or the Certificate of Incorporation or By-Laws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, (d) any action to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the By-Laws or any provision thereof, (e) any action asserting a claim against us or any current or former director, officer, employee, stockholder or agent of ours governed by the internal affairs doctrine of the law of the State of Delaware or (f) any action asserting an “internal corporate claim” as defined in Section 115 of the DGCL.
Our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, thus we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity securities.
Our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, thus we cannot predict or -43- estimate the amount, timing, or nature of any future issuances of debt or equity securities.
If we are deemed to be an investment company under the Investment Company Act, we would be required to institute burdensome compliance requirements and our activities would be restricted, which would adversely affect our business, financial condition and results of operations.
If we are deemed to be an investment company under the Investment Company Act, we would be required to institute burdensome compliance requirements and our activities -62- would be restricted, which would adversely affect our business, financial condition and results of operations.
Should we or one of our third-party custodians fail to implement or maintain the policies, procedures and controls necessary to secure the custody of the crypto assets entrusted to us by our customers in full compliance with applicable law and regulation, the Company could suffer reputational harm and/or significant financial losses; face litigation or regulatory enforcement action potentially leading to significant fines, penalties, and additional restrictions; and see its customers discontinue or reduce their use of our and our partners’ products.
Should we or one of our third-party custodians fail to implement or maintain the policies, procedures and controls necessary to secure the custody of the crypto assets entrusted to us by our customers in full compliance with applicable law and regulation, the Company could suffer reputational harm and/or significant financial losses; face litigation or regulatory enforcement action potentially leading to significant fines, penalties, and additional restrictions; and see its customers discontinue or reduce their use of our and our clients’ products.
For example, an asset that is a security in the United States may generally only be offered or sold in the United States pursuant to a registration statement filed with the SEC or in an offering that qualifies for an exemption from registration.
For example, an asset that is a security in the United States may generally only be offered or sold in the United States pursuant to a registration -57- statement filed with the SEC or in an offering that qualifies for an exemption from registration.
Furthermore, laws relating to privacy, data protection and cybersecurity, including with respect to the use of data in artificial intelligence and machine learning, are rapidly evolving, extensive, complex and include inconsistencies and uncertainties.
Furthermore, laws relating to privacy, data protection and cybersecurity, including with respect to the use of data in connection with artificial intelligence and machine learning, are rapidly evolving, extensive, complex and include inconsistencies and uncertainties.
Our ability to realize the intended benefits of these partnerships will depend on our ability to finalize such agreements, for such products and services, and to do so on terms sufficiently favorable to us.
Our ability to realize the intended benefits of these partnerships will depend on our ability to finalize such -37- agreements, for such products and services, and to do so on terms sufficiently favorable to us.
If we experience rapid growth, we could face significant challenges in: • maintaining and developing relationships with existing and new clients • securing funding to maintain our operations and future growth; • maintaining adequate financial, business and risk controls; • implementing new or updated information and financial risk controls and procedures; • navigating complex and evolving regulatory and competitive environments; • attracting, integrating and retaining an appropriate number of qualified, skilled employees; • training, managing and appropriately sizing our workforce and other components of our business on a timely and cost-effective basis; • expanding within existing markets; • entering new markets and introducing new solutions; • continuing to develop, maintain, protect and scale our platform; • effectively using limited personnel and technology resources; and -40- Table of Contents • maintaining the security of our platform and the confidentiality of the information, including personally identifiable information, provided and utilized across our platform.
If we experience rapid growth, we could face significant challenges in: • maintaining and developing relationships with existing and new clients; • securing funding to maintain our operations and future growth; • maintaining adequate financial, business and risk controls; • implementing new or updated information and financial risk controls and procedures; -46- • navigating complex and evolving regulatory and competitive environments; • attracting, integrating and retaining an appropriate number of qualified, skilled employees; • training, managing and appropriately sizing our workforce and other components of our business on a timely and cost-effective basis; • expanding within existing markets; • entering new markets and introducing new solutions; • continuing to develop, maintain, protect and scale our platform; • effectively using limited personnel and technology resources; and • maintaining the security of our platform and the confidentiality of the information, including personally identifiable information, provided and utilized across our platform.
Moreover, if any system failure or similar event results in damages to our customers, these clients could seek significant compensation or contractual penalties from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address, and could have other consequences described in this “ Risk Factors ” section under the caption “ Actual or perceived cyberattacks, security incidents, or breaches could result in serious harm to our reputation, business and financial condition .” Further, frequent or persistent site interruptions could lead to regulatory scrutiny, significant fines and penalties and mandatory and costly changes to our business practices, and ultimately could cause us to lose existing licenses that we need to operate or prevent or delay us from obtaining additional licenses that may be required for our business.
Moreover, if any system failure or similar event results in damages to our customers, these clients could seek significant compensation or contractual penalties from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address, and could have other consequences described under the caption “— Actual or perceived cyberattacks, security incidents, or breaches could result in serious harm to our reputation, business and financial condition .” Further, frequent or persistent site interruptions could lead to regulatory scrutiny, significant fines and penalties and mandatory and costly changes to our business practices, and ultimately could cause us to lose existing licenses that we need to operate or prevent or delay us from obtaining additional licenses that may be required for our business.
Accordingly, ICE is able to exert significant influence over the election and removal of our directors and thereby significantly influence corporate and management policies, including potential mergers or acquisitions, payment of dividends, asset sales, amendment of our Certificate of Incorporation and By-Laws and other significant corporate transactions for so long as it retains significant ownership.
Accordingly, ICE is able to exert significant influence over the election and removal of our directors and thereby significantly influence corporate and management policies, including potential mergers or acquisitions, payment of dividends, asset sales, amendments of our Certificate of Incorporation and By-Laws and other significant corporate transactions for so long as it retains significant ownership.
We cannot predict whether our dual class structure will result in a lower or more volatile market price of our Class A Common Stock or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indexes.
We cannot predict whether our dual class structure will result in a lower or more volatile market price of our Class A Common Stock or in adverse publicity or other adverse consequences. For example, certain index providers have considered restrictions on including companies with multiple-class share structures in certain of their indexes.
For instance, in the United States, each of Bakkt Marketplace and Bakkt Crypto has obtained licenses to operate as a money transmitter (or its equivalent) in the states where it operates and where such licenses are required, as well as in the District of Columbia and Puerto Rico, and as a virtual currency business with the State of New York.
For instance, in the United States, Bakkt Crypto has obtained licenses to operate as a money transmitter (or its equivalent) in the states where it operates and where such licenses are required, as well as in the District of Columbia and Puerto Rico, and as a virtual currency business with the State of New York.
Actual results could materially differ from those estimates and the amounts reported in our consolidated financial statements and accompanying notes appearing elsewhere in this Annual Report on Form 10-K. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.
Actual results could materially differ from those estimates and the amounts reported in our consolidated financial statements and accompanying notes appearing elsewhere in this Form 10-K. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.
Certain of our executive officers and directors, including our incoming Chief Executive Officer, have limited experience in the management of a publicly traded company.
Certain of our executive officers and directors, including our Chief Executive Officer, have limited experience in the management of a publicly traded company.
In particular, the high levels of, and increases in, inflation currently experienced in the United States could negatively impact our business by increasing our costs and reducing consumer activities necessarily to our revenue generation. Our ability to generate subscription and service revenue and transaction revenue depends, in part, on customers continuing to access and utilize our platform.
In particular, the high levels of inflation experienced in the United States could negatively impact our business by increasing our costs and reducing consumer activities necessarily to our revenue generation. Our ability to generate subscription and service revenue and transaction revenue depends, in part, on customers continuing to access and utilize our platform.
Unauthorized parties have attempted, and we expect that they will continue to attempt, to gain access to our systems or facilities through various means, including, but not limited to, hacking into our systems or facilities or those of our customers or vendors, and attempting to fraudulently induce users of our systems (including employees and customers) -62- Table of Contents into disclosing customer names, passwords, payment card information, or other sensitive information, which may in turn be used to access our information technology systems, or to steal crypto stored by our customers.
Unauthorized parties have attempted, and we expect that they will continue to attempt, to gain access to our systems or facilities through various means, including, but not limited to, hacking into our systems or facilities or those of our customers or vendors, and attempting to fraudulently induce users of our systems (including employees and customers) into disclosing customer names, passwords, payment card information, or other sensitive information, which may in turn be used to access our information technology systems, or to steal crypto stored by our customers.
While the metrics presented in this Annual Report on Form 10-K are based on what we believe to be reasonable assumptions and estimates, our internal systems and tools have a number of limitations, and our methodologies for tracking these metrics may change over time.
While the metrics presented in this Form 10-K are based on what we believe to be reasonable assumptions and estimates, our internal systems and tools have a number of limitations, and our methodologies for tracking these metrics may change over time.
Non-compliance with those requirements may lead to injunctions, penalties and sanctions against us as well as the person seeking to hold, acquire or increase a controlling interest, may subject the relevant transactions to cancellation or forced sale, and may result in increased regulatory compliance requirements or other potential regulatory restrictions on our business (including in respect of matters such as corporate governance, restructurings, mergers and acquisitions, financings -59- Table of Contents and distributions).
Non-compliance with those requirements may lead to injunctions, penalties and sanctions against us as well as the person seeking to hold, acquire or increase a controlling interest, may subject the relevant transactions to cancellation or forced sale, and may result in increased regulatory compliance requirements or other potential regulatory restrictions on our business (including in respect of matters such as corporate governance, restructurings, mergers and acquisitions, financings and distributions).
We face operational risk because we rely on third party vendors to provide us with financial, technology and other services and to facilitate certain of our business activities, including, for example, marketing services, fulfillment services, cloud-based computer and data storage and other IT solutions and payment processing. -34- Table of Contents These third parties may be subject to financial, legal, regulatory and labor issues, cyberattacks, security incidents, privacy breaches, service terminations, disruptions or interruptions, or other problems, which may impose additional costs or requirements on us or prevent these third parties from providing services to us or our customers on our behalf, which could harm our business.
We face operational risk because we rely on third party vendors to provide us with financial, technology and other services and to facilitate certain of our business activities, including, for example, marketing services, fulfillment services, cloud-based computer and data storage and other IT solutions and payment processing. -39- These third parties may be subject to financial, legal, regulatory and labor issues, cyberattacks, security incidents, privacy breaches, service terminations, disruptions or interruptions, or other problems, which may impose additional costs or requirements on us or prevent these third parties from providing services to us or our customers on our behalf, which could harm our business.
In addition, upon the occurrence of certain events, the Class 2 Warrants (as defined below) may be exercised by way of an alternative cashless exercise, allowing the holder to receive the product of (x) the aggregate number of shares subject to the alternative cashless exercise (up to the full number of shares that would be issuable upon exercise of the Class 2 Warrant in accordance with the terms of the Class 2 Warrant if such exercise were by means of a cash exercise rather than a cashless exercise) and (y) 0.5.
In addition, upon the occurrence of certain events, the Class 2 Warrants may be exercised by way of an alternative cashless exercise, allowing the holder to receive the product of (x) the aggregate number of shares subject to the alternative cashless exercise (up to the full number of shares that would be issuable upon exercise of the Class 2 Warrant in accordance with the terms of the Class 2 Warrant if such exercise were by means of a cash exercise rather than a cashless exercise) and (y) 0.5.
Our clients may delegate their obligations relating to these or other laws or regulations to us via contract, and may impose additional obligations upon us via contract. More generally, we may be required to expend resources to assist our clients with such compliance obligations and to comply with our contractual obligations to our clients.
Our clients may delegate their privacy and security obligations relating to these or other laws or regulations to us via contract, and may impose additional obligations upon us via contract. More generally, we may be required to expend resources to assist our clients with such compliance obligations and to comply with our contractual obligations to our clients.
We have implemented remote and hybrid working protocols and offer work-issued devices to certain employees, but the actions of employees while working remotely may have a greater effect on the security of our infrastructure, networks, and the information, including personal data, we process, including for example by increasing the risk of compromise to systems or information arising from employees’ combined personal and private use of devices, accessing our networks or information -63- Table of Contents using wireless networks that we do not control, or the ability to transmit or store information outside of our secured network.
We have implemented remote and hybrid working protocols and offer work-issued devices to certain employees, but the actions of employees while working remotely may have a greater effect on the security of our infrastructure and networks and the information, including personal information, we process, including for example by increasing the risk of compromise to systems or information arising from employees’ combined personal and private use of devices, accessing our networks or information using wireless networks that we do not control, or the ability to transmit or store information outside of our secured network.
Because of our limited operating history and the fact that our current and historical revenue prior to the Bakkt Crypto Acquisition was largely not derived from our currently planned business model, our future revenue growth is difficult to predict.
Because of our limited operating history and the fact that our current and historical revenue prior to the acquisition of Bakkt Crypto was largely not derived from our current business model, our future revenue growth is difficult to predict.
In recent months, the SEC has alleged a number of additional crypto assets to be securities in the course of enforcement actions and lawsuits brought against crypto market participants, including lawsuits brought against the crypto exchanges Bittrex, Coinbase, Binance, and Kraken.
The SEC has alleged a number of additional crypto assets to be securities in the course of enforcement actions and lawsuits brought against crypto market participants, including lawsuits brought against the crypto exchanges Bittrex, Coinbase, Binance, and Kraken.
The attractiveness of our platform depends upon, among other things: • the number and variety of assets and other capabilities in which customers can transact through our platform; • our reputation, as well as clients’ and customers’ experience and satisfaction with, and trust and perception of, our platform; -29- Table of Contents • technological innovation; • regulatory compliance and data security; and • services and products offered by competitors.
The attractiveness of our platform depends upon, among other things: • the number and variety of assets and other capabilities in which customers can transact through our platform; • our reputation, as well as clients’ and customers’ experience and satisfaction with, and trust and perception of, our platform; • technological innovation; • regulatory compliance and data security; and • services and products offered by competitors.
Moreover, although we expect our risk assessment policies and procedures to regularly evolve to take into account developments in case law, facts and developments in technology, regulatory clarity and changes in market acceptance and adoption of these crypto assets, these developments and changes may occur more rapidly than we -50- Table of Contents are able to change our related policies and procedures.
Moreover, although we expect our risk assessment policies and procedures to regularly evolve to take into account developments in case law, facts and developments in technology, regulatory clarity and changes in market acceptance and adoption of these crypto assets, these developments and changes may occur more rapidly than we are able to change our related policies and procedures.
We cannot assure you that all of our employees, agents, representatives, clients or third-party -56- Table of Contents intermediaries will not take actions in violation of applicable law for which we may be ultimately held responsible. As we increase our international sales and business, our risks under these laws may increase.
We cannot assure you that all of our employees, agents, representatives, clients or third-party intermediaries will not take actions in violation of applicable law for which we may be ultimately held responsible. As we increase our international sales and business, our risks under these laws may increase.
Crypto is perceived by regulators and the general public as being susceptible to, and in fact has been used on numerous occasions for, illegal or improper uses, including money laundering, tax evasion, terrorist financing, illegal online gambling, fraudulent sales of goods or services, illegal sales of prescription medications or controlled substances, piracy of software, movies, music and other copyrighted or trademarked goods (in particular, crypto goods), bank fraud, child pornography, human trafficking, prohibited sales of alcoholic beverages or tobacco products, securities fraud, pyramid or ponzi schemes, or to facilitate other illegal activity.
Crypto may be perceived by some regulators and the general public as being susceptible to, and in fact has been used on numerous occasions for, illegal or improper uses, including money laundering, tax evasion, terrorist financing, illegal online gambling, fraudulent sales of goods or services, illegal sales of prescription medications or controlled substances, piracy of software, movies, music and other copyrighted or trademarked goods (in particular, -49- crypto goods), bank fraud, child pornography, human trafficking, prohibited sales of alcoholic beverages or tobacco products, securities fraud, pyramid or ponzi schemes, or to facilitate other illegal activity.
In addition, we may not be successful in achieving the full efficiencies and cost reduction benefits we expect or such benefits might be realized later than expected, and the ongoing costs of implementing these measures might be greater than anticipated. If these measures are not successful or sustainable, we might undertake additional restructuring efforts, which could result in future charges.
In addition, we may not be successful in achieving the full efficiencies and cost reduction benefits we expect or such benefits might be realized later than expected, and the ongoing costs of implementing these measures might be greater than anticipated. In addition, we might undertake additional restructuring efforts, which could result in future charges.
Any future changes in U.S. generally accepted accounting principles (“GAAP”) that require us to change the manner in which we account for our crypto held for our customers could have a material adverse effect on our financial results and the market price of our securities.
Any future changes in U.S. generally accepted accounting principles (“GAAP”) that require us to change the manner in which we account for our crypto held for our customers could have a material adverse effect on our financial results, our regulatory capital requirements, and the market price of our securities.
Although we have developed systems and processes designed to protect information we manage, prevent data loss and other security breaches and effectively respond to known and potential risks, and we expect to continue to expend significant resources to bolster these protections, there can be no assurance that these security measures will provide absolute security or have prevented or will prevent breaches, security incidents or attacks, in particular, as the frequency and sophistication of cyberattacks increases.
Although we have developed systems and processes designed to protect information we manage, prevent data loss and other security breaches and to permit us to effectively respond to known and potential risks, and we expect to continue to expend significant resources to bolster these systems and processes, there can be no assurance that our security measures will provide absolute security or have prevented or will prevent breaches, security incidents or attacks, in particular, as the frequency and sophistication of cyberattacks increases.
Moreover, because crypto, including bitcoin, has been in existence for a short period of time and is continuing to develop and evolve, there may be additional risks in the future that are impossible to predict and which could have a material adverse effect on our crypto and custody business.
Moreover, because crypto has been in existence for a short period of time and is continuing to develop and evolve, there may be additional risks in the future that are impossible to predict and which could have a material adverse effect on our business.
The Company expects that its business will require licensure under the DFAL and will therefore take steps to obtain necessary licenses prior to the enactment’s effective date of July 1, 2025.
The Company expects that its business will require licensure under the DFAL and will therefore take steps to obtain necessary licenses prior to the enactment’s effective date of July 1, 2026.
Furthermore, many foreign countries and governmental bodies have laws and regulations concerning the collection, use, processing, storage, and deletion of personal data obtained from their residents or by businesses operating within their jurisdiction. These laws and regulations often are more restrictive than those in the United States.
Furthermore, many foreign countries and governmental bodies have laws and regulations concerning the collection, use, storage, deletion and other processing of personal information obtained from their residents or by businesses operating within their jurisdiction. These laws and regulations often are more restrictive than those in the United States.
For more information about the regulatory risks to which our business is subject, see “A crypto asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty, and if crypto assets on our platform are later determined to be securities, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, which may adversely affect our business, operating results, and financial condition,” “Regulatory regimes governing blockchain technologies and crypto are evolving and uncertain, and new legislation, regulations, guidance and enforcement actions have in the past required, and may in the future require, us to alter our business practices” and “Our business is subject to extensive government regulation, oversight, licensure and approvals.
For more information about the regulatory risks to which our business is subject, see “— A crypto asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty, and if crypto assets on our platform are later determined to be securities, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, which may adversely affect our business, operating results, and financial condition, ” “— Regulatory regimes governing blockchain technologies and crypto are evolving and uncertain, and new legislation, regulations, guidance and enforcement actions have in the past required, and may in the future require, us to alter our business -59- practices ” and “— Our business is subject to extensive government regulation, oversight, licensure and approvals.
In many cases, these laws apply not only to third-party transactions, but also to transfers of information between or among us, our subsidiaries and other parties with which we have commercial relationships. Regulatory scrutiny of privacy, data protection and the collection, storage, use and sharing of personal data is increasing across multiple jurisdictions.
In many cases, these privacy and security obligations apply not only to third-party transactions, but also to transfers of information between or among us, our subsidiaries and other parties with which we have commercial relationships. Regulatory scrutiny of privacy, data protection, cybersecurity and the collection, storage, use and sharing of personal information is increasing across multiple jurisdictions.
We are subject to federal and state consumer protection laws and regulations in the jurisdictions in which we operate. In the United States, Bakkt Marketplace is subject to federal and state consumer protection laws and regulations applicable to its activities, including the Electronic Fund Transfer Act (“EFTA”) and Regulation E as implemented by the CFPB.
We are subject to federal and state consumer protection laws and regulations in the jurisdictions in which we operate. In the United States, Bakkt Crypto is subject to federal and state consumer protection laws and regulations applicable to its activities, including potentially the Electronic Fund Transfer Act (“EFTA”) and Regulation E as implemented by the CFPB.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeFor additional information regarding whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of -74- Table of Contents operations, or financial condition in “Item 1A. Risk Factors” and “Item 7.
Biggest changeWe face risks from cybersecurity threats, including those associated with cyberattacks and security breaches and incidents, in the future. For additional information regarding whether and how risks from identified cybersecurity threats are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition refer to “ Item 1A. Risk Factors ” and “ Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K, which disclosures are incorporated by reference herein. Cybersecurity Governance Cybersecurity is an important part of our risk management processes and an area of focus for our Board and management.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of this Form 10-K, which disclosures are incorporated by reference herein. Cybersecurity Governance Cybersecurity is an important part of our risk management processes and an area of focus for the Board and management.
The Board discusses such matters with our Chief Risk Officer (CRO) and Chief Information Security Officer (CISO). Members of the Board are also encouraged to regularly engage in ad hoc conversations with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs.
Members of the Board are also encouraged to regularly engage in ad hoc conversations with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs.
Such individuals have collectively over 40 years of prior work experience in various roles involving managing enterprise risk and information security, developing cybersecurity strategy, and implementing effective information and cybersecurity programs, as well as several relevant degrees and certifications, including Certified Information Security Manager, Certified Information Systems Auditor, and Certified Information Systems Security Professional.
Our CISO, who joined us in 2022, has over 25 years of prior work experience in various roles managing enterprise risk and information security, developing cybersecurity strategy, and implementing effective information and cybersecurity programs, as well as several relevant degrees and certifications, including Certified Information Security Manager, Certified Information Systems Auditor, and Certified -80- Information Systems Security Professional.
At least quarterly, the entire Board receives an overview from management of our cybersecurity program and strategy processes covering topics such as data security posture, results from third-party assessments, progress towards pre-determined risk-mitigation-related goals, our incident response plan, and certain cybersecurity threat risks or incidents and developments, as well as the steps management has taken to respond to such risks.
At least quarterly, the entire Board receives an update from the CISO of our cybersecurity program covering topics such as results from third-party assessments, progress toward strategic goals, compliance with regulatory requirements, and certain cybersecurity threat risks or developments, as well as the steps management has taken to respond to such risks.
We have implemented cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage such material risks. -73- Table of Contents To identify and assess material risks from cybersecurity threats, our Enterprise Risk Management program considers cybersecurity risks alongside other company risks as part of our overall risk assessment process.
We also engage with external cybersecurity assessors and consultants in evaluating and testing the design and operating effectiveness of controls. To identify and assess material risks from cybersecurity threats, our Enterprise Risk Management program considers cybersecurity risks alongside other company risks as part of our overall risk assessment process.
Our Board’s Audit and Risk Committee is responsible for the oversight of risks from cybersecurity threats.
The Board administers its cybersecurity risk oversight function directly as a whole, as well as through its Audit and Risk Committee, which is responsible for oversight of risks from cybersecurity threats.
We also maintain processes to address cybersecurity threat risks associated with our use of third-party service providers, including those who have access to our systems or data or facilities that house such systems and data. Cybersecurity considerations affect the selection and oversight of these third-party service providers.
We are aware of risks associated with our use of third-party service providers, including those who have access to our systems, data, or facilities. We have implemented processes to help manage these risks. We conduct security assessments of third-party providers who may have access to sensitive information as part of our selection and onboarding process.
Like other technology companies, we have faced cybersecurity incidents in the past. As of the date of this Annual Report on Form 10-K, however, we have not assessed any risks from prior cybersecurity incidents as having materially affected or being reasonably likely to materially affect us.
We also conduct ongoing monitoring in the form of periodic reviews conducted by our security team based on the business criticality of the third-party service. As of the date of this Form 10-K we do not believe that these risks or any previous cybersecurity events or incidents have materially affected or are reasonably likely to materially affect us.
Removed
Item 1C. Cybersecurity Cybersecurity Risk Management and Strategy We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K.
Added
Item 1C. Cybersecurity Cybersecurity Risk Management and Strategy We regularly face cybersecurity threats from malicious third parties that could obtain unauthorized access to our internal systems, networks, and data.
Removed
These risks include, among other things, operational risks; intellectual property loss or theft; fraud; extortion; harm to employees or customers; potential litigation, regulatory investigations or other proceedings, and other legal risks; and reputational risks.
Added
It is virtually impossible for us to entirely mitigate the risk of these and other security threats we face, and the security, performance, and reliability of our products may be disrupted by third parties, including nation-states, fraudsters, criminal syndicates, competitors, hackers, disgruntled employees, former employees, or contractors.
Removed
To provide for the availability of critical data and systems, address regulatory compliance requirements, manage our material risks from cybersecurity threats, and to protect against, detect, and respond to cybersecurity incidents, we undertake these activities: • undertake an annual review of our policies and statements related to cybersecurity; • conduct cybersecurity awareness training for all employees annually; • conduct privileged access and incident training for employees involved in our systems and processes that handle sensitive data; • conduct regular phishing email simulations for all employees and all contractors with access to corporate email systems to enhance awareness and responsiveness to such possible threats; • through policy, practice and contract (as applicable), require employees, as well as applicable third parties who provide services on our behalf, to treat customer information and data with care; • conduct tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes and technologies; • leverage the National Institute of Standards and Technology incident handling framework as the foundation of our incident response plan to help us identify, protect, detect, respond, and recover when there is an actual or potential cybersecurity incident; and • carry information security risk insurance that provides protection against the certain potential losses arising from a cybersecurity incident.
Added
While we have implemented security measures internally and have integrated security measures into our systems, network, and products, these measures may not always function as expected and may not always detect or prevent all unauthorized activity, prevent all security breaches or incidents, mitigate all security breaches or incidents, or protect against all attacks or incidents.
Removed
Our incident response plan coordinates the activities we take in our efforts to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes designed to triage, assess severity, escalate, contain, investigate, and remediate the incident, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage.
Added
Particularly in light of the extensive cybersecurity risks facing our company and the fact that we provide crypto digital asset products to our clients, we recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to protect our internal systems and our clients’ data.
Removed
We regularly engage with independent third parties to review our cybersecurity program and assess the effectiveness of our controls. These third parties include our Internal Audit department as well as external reputable and well-known firms, all of which review various aspects of our cybersecurity program, processes, and controls throughout the year.
Added
We have established a multi-layered approach to manage our cybersecurity risks with preventative and detective capabilities enabled in our network and internal systems that are designed to protect against identified cyber threats.
Removed
We perform diligence on these third parties and monitor cybersecurity threat risks identified through such diligence. Additionally, we generally require those third parties that we believe could introduce significant cybersecurity risk to us to agree by contract to manage their cybersecurity risks in specified ways, and be subject to certain obligations related to their cybersecurity practices.
Added
This approach to cybersecurity includes, among other things, annual and periodic risk assessments; ongoing collaboration with our product and engineering teams for the purpose of securing our products, systems, and data; a vulnerability management program focused on proactively identifying, triaging and mitigating security vulnerabilities within our systems, penetration tests and other simulations; regularly required security training for all employees; and a comprehensive incident response process to identify, contain, and remediate cybersecurity incidents.
Removed
We face risks from cybersecurity threats, including those associated with cyberattacks and security breaches and incidents, in the future.
Added
The Board is responsible for monitoring and assessing strategic risk exposure, and our cybersecurity program and strategy are overseen by our Chief Information Security Officer (CISO).
Removed
Our enterprise risk management and strategy processes are led by our CRO. Cybersecurity program management and strategy processes are led by our CISO.
Added
The CISO provides regular updates to the executive management team and provides the quarterly Board updates, as discussed below. The executive management team allocates resources to support the cybersecurity program through allocation of budget.
Removed
The CRO and CISO provide regular updates to the executive management team. The executive management team monitors the prevention, mitigation, detection, and remediation of cybersecurity incidents through their participation in the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan.
Removed
As discussed above, the CRO and CISO report to the entire Board about cybersecurity threat risks, among other cybersecurity related matters, at least quarterly.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties Facilities We lease facilities under operating leases in Alpharetta, Georgia, one for our corporate headquarters with an expiration date in October 2032, and another for a call center with an expiration date in April 2026 , in Scottsdale, Arizona, our principa l customer service center with an expiration date in September 2030, and in New York, New York, our satellite corporate office with an expiration date in March 2030.
Biggest changeProperties Facilities We lease facilities in Alpharetta, Georgia, one for our corporate headquarters with an expiration date in October 2032, and another for a call center with an expiration date in April 2026 , in Scottsdale, Arizona, our principa l customer service center with an expiration date in September 2030, and in New York, New York, our satellite corporate office with an expiration date in January 2026.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor additional information on our ongoing legal proceedings, refer to Note 14 in our audited consolidated financial statements included in this Annual Report on Form 10-K. Item 4. Mine Safety Disclosure Not applicable. -76- Table of Contents PART II
Biggest changeFor additional information on our ongoing legal proceedings, refer to Note 14 in our audited consolidated financial statements included in this Form 10-K. Item 4. Mine Safety Disclosure Not applicable. -81- PART II
The results of any litigation cannot be predicted with certainty, and an unfavorable resolution in any legal proceedings could materially affect our future business, results of operations, or financial condition. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management -75- Table of Contents resources, and other factors.
The results of any litigation cannot be predicted with certainty, and an unfavorable resolution in any legal proceedings could materially affect our future business, results of operations, or financial condition. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Removed
The SEC has since made a number of follow-up requests for additional documents and information, and the Company has continued to respond to those requests on a timely basis. Based on the ongoing nature of this matter, the outcome remains uncertain and the Company cannot estimate the potential impact, if any, on its business or financial statements at this time.
Added
The SEC made a number of follow-up requests for additional documents and information, and the Company responded to those requests on a timely basis. On March 3, 2025, the SEC advised the Company that it had concluded its inquiry and did not intend to recommend an enforcement action against Bakkt Crypto.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of March 18, 2024, we had 141,798,069 shares of Class A Common Stock issued and outstanding held of record by 171 holders, 179,883,479 shares of Class V Common Stock issued and outstanding held of record by 3 holders, and 7,140,808 Public Warrants issued and outstanding, each exercisable for one share of Class A Common Stock, held of record by 1 holder.
Biggest changeAs of March 7, 2025, we had 6,532,626 shares of Class A Common Stock issued and outstanding held of record by 162 holders, 7,177,774 shares of Class V Common Stock issued and outstanding held of record by three holders, 7,140,383 Public Warrants issued and outstanding, held of record by one holder, and Class 1 Warrants exercisable for up to 1,153,200 shares of Class A Common Stock held of record by four holders and Class 2 Warrants exercisable for up to 864,650 shares of Class A Common Stock held of record by four holders.
Recent Sales of Unregistered Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Unregistered Sales of Equity Securities None.
Recent Sales of Unregistered Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters, And Issuer Purchases Of Equity Securities Market Information and Holders Our Class A Common Stock and Public Warrants trade on NYSE under the trading symbols “BKKT” and “BKKT WS,” respectively.
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters, And Issuer Purchases Of Equity Securities Market Information and Holders Our Class A Common Stock and Public Warrants trade on NYSE under the trading symbols “BKKT” and “BKKT WS,” respectively. Our Class 1 Warrants and Class 2 Warrants are privately held.
There is no public market for our Class V Common Stock. Dividend Policy We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends on our capital stock in the foreseeable future.
Dividend Policy We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to support operations and to finance the growth and development of our business.
Removed
We currently intend to retain all available funds and any future earnings to support operations and to finance the growth and development of our business.
Added
Holders of the Public Warrants can exercise 25 Public Warrants to purchase one share of Class A common stock at an exercise price of $287.50 per share. There is no public market for our Class V Common Stock. There is no public market for our Class V Common Stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAssets under custody were $701.6 million and $15.8 million as of December 31, 2023 and December 31, 2022, respectively. -82- Table of Contents Results of Operations The following table is our consolidated statements of operations for the years ended December 31, 2023 and December 31, 2022, respectively (in thousands): Year Ended December 31, 2023 Year Ended December 31, 2022 Revenues: Crypto services $ 726,988 $ 1,745 Loyalty services, net 53,148 54,479 Total revenues 780,136 56,224 Operating expenses: Crypto costs 718,511 1,657 Execution, clearing and brokerage fees 3,772 — Compensation and benefits 102,042 139,049 Professional services 10,382 11,483 Technology and communication 20,837 17,079 Selling, general and administrative 33,385 35,414 Acquisition-related expenses 4,299 5,675 Depreciation and amortization 13,932 25,350 Related party expenses 3,902 1,168 Goodwill and intangible assets impairments 60,499 1,822,089 Impairment of long-lived assets 30,265 11,494 Restructuring expenses 4,608 2,336 Other operating expenses 1,592 2,343 Total operating expenses 1,008,026 2,075,137 Operating loss (227,890) (2,018,913) Interest income, net 4,338 1,877 (Loss) gain from change in fair value of warrant liability (1,571) 16,638 Other expense, net (245) (856) Loss before income taxes (225,368) (2,001,254) Income tax (expense) benefit (444) 11,320 Net loss (225,812) (1,989,934) Less: Net loss attributable to noncontrolling interest (150,958) (1,411,829) Net loss attributable to Bakkt Holdings, Inc. $ (74,854) $ (578,105) Net loss per share attributable to Class A common stockholders: Basic $ (0.84) $ (8.12) Diluted $ (0.84) $ (8.12) Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Financial Summary The year ended December 31, 2023 included the following notable items relative to the year ended December 31, 2022 : • Revenue increased $723.9 million primarily driven by a significant increase in crypto services revenue due to our acquisition of Bakkt Crypto; and -83- Table of Contents • Operating expenses decreased $1,067.1 million primarily driven by goodwill and intangible asset impairments recorded in the prior year, partially offset by increased crypto trading costs in connection with our acquisition of Bakkt Crypto Revenue Revenues consist of crypto and loyalty revenue.
Biggest changeAssets under custody were $2,301.9 million and $701.6 million as of December 31, 2024 and December 31, 2023, respectively. -89- Results of Operations The following table is our consolidated statements of operations for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively (in thousands): Year Ended December 31, 2024 Year Ended December 31, 2023 Year Ended December 31, 2022 Revenues: Crypto services $ 3,441,056 $ 726,988 $ 1,745 Loyalty services, net 49,164 53,148 54,479 Total revenues 3,490,220 780,136 56,224 Operating expenses: Crypto costs 3,403,207 718,511 1,657 Execution, clearing and brokerage fees 24,024 3,772 — Compensation and benefits 83,164 102,042 139,049 Professional services 16,804 10,382 11,483 Technology and communication 17,714 20,837 17,079 Selling, general and administrative 26,553 33,385 35,414 Acquisition-related expenses 128 4,299 5,675 Depreciation and amortization 343 13,932 25,350 Related party expenses 600 3,902 1,168 Goodwill and intangible assets impairments — 60,499 1,822,089 Impairment of long-lived assets 889 30,265 11,494 Restructuring expenses 8,194 4,608 2,336 Other operating expenses 1,516 1,592 2,343 Total operating expenses 3,583,136 1,008,026 2,075,137 Operating loss (92,916) (227,890) (2,018,913) Interest income, net 4,318 4,338 1,877 (Loss) gain from change in fair value of warrant liability (17,186) (1,571) 16,638 Other income (expense), net 2,507 (245) (856) Loss before income taxes (103,277) (225,368) (2,001,254) Income tax (expense) benefit (170) (444) 11,320 Net loss (103,447) (225,812) (1,989,934) Less: Net loss attributable to noncontrolling interest (56,788) (150,958) (1,411,829) Net loss attributable to Bakkt Holdings, Inc. $ (46,659) $ (74,854) $ (578,105) Net loss per share attributable to Class A common stockholders: Basic $ (7.97) $ (21.01) $ (203.08) Diluted $ (7.97) $ (21.01) $ (203.08) Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Financial Summary The year ended December 31, 2024 included the following notable items relative to the year ended December 31, 2023 : • Revenue increased $2,710.1 million primarily driven by a significant increase in Crypto services revenue resulting from an increase in trading volume; and -90- • Operating expenses increased $2,575.1 million primarily driven by increased crypto trading costs as a result in increased crypto service revenue.
Investing Activities Net cash flows provided by investing activities of $66.0 million for the year ended December 31, 2023 primarily consisted of the receipt of $185.8 million of proceeds from the sale of available-for-sale securities, partially offset by the purchase of $61.8 million of available-for-sale debt securities, $47.9 million net cash used to acquire Bakkt Crypto, $0.6 million cash used to acquire Bakkt Brokerage and $9.4 million of capitalized costs of internally developed software for our technology platforms.
Net cash flows provided by investing activities of $66.0 million for the year ended December 31, 2023 primarily consisted of the receipt of $185.8 million of proceeds from the sale of available-for-sale securities, partially offset by the purchase of $61.8 million of available-for-sale debt securities, $47.9 million net cash used to acquire Bakkt Crypto, $0.6 million cash used to acquire Bakkt Brokerage and $9.4 million of capitalized costs of internally developed software for our technology platforms.
Net cash inflows from changes in our operating assets and liabilities for the year ended December 31, 2023 resulted primarily from a $32.3 million increase in customer funds, a non-recurring return of a $15.2 million deposit with ICE Clear US, Inc., a decrease in prepaid insurance of $9.8 million, and an increase in amounts due to related parties of $2.1 million, which were partially offset by an increase in accounts payable and accrued liabilities of $8.0 million, an increase in operating lease liabilities of $3.0 million, and an increase in accounts receivable of $10.0 million.
Net cash inflows from changes in our operating assets and liabilities for the year ended December 31, 2023 resulted -97- primarily from a $32.3 million increase in customer funds, a non-recurring return of a $15.2 million deposit with ICE Clear US, Inc., a decrease in prepaid insurance of $9.8 million, and an increase in amounts due to related parties of $2.1 million, which were partially offset by an increase in accounts payable and accrued liabilities of $8.0 million, an increase in operating lease liabilities of $3.0 million, and an increase in accounts receivable of $10.0 million.
The significant estimates and assumptions that affect the financial statements may include, but are not limited to, going concern, those that are related to income tax valuation allowances, useful lives of intangible assets and property, equipment and software, fair value of financial assets and liabilities, determining provision for credit losses, valuation of acquired tangible and intangible assets, the impairment of intangible assets and goodwill, and fair market value of Bakkt common units, incentive units and participation units.
The significant estimates and assumptions that affect the financial statements may include, but are not limited to, going concern, those that are related to income tax valuation allowances, useful lives of intangible assets and property, equipment and software, fair value of financial assets and liabilities, determining provision for credit losses, valuation of acquired tangible and intangible assets, the impairment of intangible assets and goodwill, and fair market value -104- of Bakkt common units, incentive units and participation units.
The purchasing card facility requires us to maintain a concentration account with the lender subject to a minimum liquidity maintenance requirement of $7.0 million as collateral along with the accounts receivable of our subsidiary, within the loyalty business. Bakkt Holdings, Inc. serves as the guarantor on behalf of our subsidiary under the commercial purchasing card facility.
The purchasing card facility requires us to maintain a concentration account with the lender subject to a minimum liquidity maintenance requirement of $7.0 million along with the accounts receivable of our subsidiary, within the loyalty business. Bakkt Holdings, Inc. serves as the guarantor on behalf of our subsidiary under the commercial purchasing card facility.
We have determined that we are the principal in transactions with customers as we control the crypto prior to its delivery to the customer and we are primarily responsible for the delivery of the crypto to the customer. Accordingly, revenue and costs associated with Bakkt Crypto's services are presented gross in our consolidated statement of operations.
We have determined that we are the principal in transactions with customers as we control the crypto prior to its -102- delivery to the customer and we are primarily responsible for the delivery of the crypto to the customer. Accordingly, revenue and costs associated with Bakkt Crypto’s services are presented gross in our consolidated statement of operations.
References in this section to “we,” “us,” “our,” “Bakkt” or the “Company” and like terms refer to Bakkt Holdings, Inc. and its subsidiaries for the years ended December 31, 2023 and December 31, 2022, unless the context otherwise requires.
References in this section to “we,” “us,” “our,” “Bakkt” or the “Company” and like terms refer to Bakkt Holdings, Inc. and its subsidiaries for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, unless the context otherwise requires.
The excess of the acquisition consideration transferred over the fair value of the net assets acquired, including other intangible assets, is recorded as goodwill. Goodwill is tested for impairment at the reporting unit level, and we are organized and operate as a single reporting unit.
The excess of the acquisition consideration transferred over the fair value of the net assets acquired, including other intangible assets, is recorded as goodwill. Goodwill is tested for -101- impairment at the reporting unit level, and we are organized and operate as a single reporting unit.
For purposes of the TRA, the cash tax savings in income tax will be computed by comparing our actual income tax liability (calculated with certain assumptions) to the amount of such taxes that we would have been required to pay had there been no increase to the tax basis of the assets of Bakkt as a result of Bakkt having an election in effect under Section 754 of the Code for each taxable year in which an exchange of Bakkt Common Units for Class A Common Stock occurs and had we not entered into the TRA.
For purposes of the TRA, the cash tax savings in income tax will be computed by comparing our actual income tax liability (calculated with certain assumptions) to the amount of such taxes that we would have been required to pay had there been no increase to the tax basis of the assets of Opco as a result of Opco having an election in effect under Section 754 of the Code for each taxable year in which an exchange of Opco Common Units for Class A Common Stock occurs and had we not entered into the TRA.
Deferred Revenue Deferred revenue includes amounts invoiced prior to us meeting the criteria for revenue recognition. We invoice clients for service fees at the time the service is performed, and such fees are recognized as revenue over time as we satisfy our performance obligation.
Deferred Revenue Deferred revenue includes amounts invoiced prior to us meeting the criteria for revenue recognition. We invoice clients for service fees at the time the service is performed, and such fees are recognized as revenue over time as we satisfy -103- our performance obligation.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management.
The TRA provides for the payment by us to exchanging holders of Bakkt Common Units of 85% of certain net income tax benefits, if any, that we realize (or in certain cases is deemed to realize) as a result of these increases in tax basis related to entering into the TRA, including tax benefits attributable to payments under the TRA.
The TRA provides for the payment by us to exchanging holders of Opco Common Units of 85% of certain net income tax benefits, if any, that we realize (or in certain cases is deemed to realize) as a result of these increases in tax basis related to entering into the TRA, including tax benefits attributable to payments under the TRA.
Bakkt will have in effect an election under Section 754 of the Internal Revenue Code for each taxable year in which an exchange of Bakkt Common Units for Class A Common Stock (or cash) occurs. The exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of Bakkt.
Opco will have in effect an election under Section 754 of the Internal Revenue Code for each taxable year in which an exchange of Opco Common Units for Class A Common Stock (or cash) occurs. The exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of Opco.
The consideration allocated to the custody and material right performance obligations is estimated on the basis of a cost plus a margin approach and was not material to the year ended December 31, 2023. Judgment is required in determining whether the Company is the principal or the agent in our contracts with customers.
The consideration allocated to the custody and material right performance obligations is estimated on the basis of a cost plus a margin approach and was not material to the year ended December 31, 2024. Judgment is required in determining whether the Company is the principal or the agent in our contracts with customers.
Our future cash requirements will depend on many factors, including our revenue growth rate, the timing and extent of overhead, sales and marketing expenditures to support projected growth, and our ability to limit our software development investments to features and functionality with a clear line of sight to revenue generation.
Our future cash requirements will depend on many factors, including our revenue growth rate, the timing and extent of overhead, sales and marketing expenditures to support projected growth, our ability to limit our software development investments to features and functionality with a clear line of sight to revenue generation, and our ability to retain our clients.
Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization , acquisition-related expenses, share-based and unit-based compensation expense, goodwill and intangible assets impairments, restructuring charges, changes in the fair value of our warrant liability and certain other non- -92- Table of Contents cash and/or non-recurring items that do not contribute directly to our evaluation of operating results and are not components of our core business operations.
Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization , acquisition-related expenses, share-based and unit-based compensation expense, goodwill and intangible assets impairments, restructuring charges, changes in the fair value of our warrant liability and certain other non-cash and/or non-recurring items that do not contribute directly to our evaluation of operating results and are not components of our core business operations.
Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our audited consolidated financial statements and accompanying notes. We base our estimates and assumptions on various judgments that we believe to be reasonable under the circumstances.
Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our audited consolidated financial statements and accompanying notes. We base our estimates and assumptions on various judgments that we believe to be reasonable under the circumstances.
Pursuant to the TRA, among other things, holders of Bakkt Common Units may, subject to certain conditions, from and after April 16, 2022, exchange such Common Units (along with a corresponding number of shares of our Common Stock), for Class A Common Stock on a one-for-one basis, subject to the terms of the Exchange Agreement, including our right to elect to deliver cash in lieu of Class A Common Stock and, in certain cases, adjustments as set forth therein.
Pursuant to the TRA, among other things, holders of Opco Common Units may, subject to certain conditions, from and after April 16, 2022, exchange such Opco Common Units (along with a corresponding number of shares of our Class V Common Stock), for Class A Common Stock on a one-for-one basis, subject to the terms of the Exchange Agreement, including our right to elect to deliver cash in lieu of Class A Common Stock and, in certain cases, adjustments as set forth therein.
Our platform is built to operate across various crypto assets and offers clients the flexibility to choose some or all of our capabilities, and the manner in which these capabilities are enabled for consumers, based on their needs and objectives.
Our platform is built to accommodate across various crypto assets and offers clients the flexibility to choose some or all of our capabilities, and the manner in which these capabilities are enabled for consumers, based on their needs and objectives.
In our notes to the audited consolidated financial statements, we describe the significant accounting policies used in preparing the consolidated financial statements. Our management has discussed the development, selection, and disclosure of our critical accounting policies and estimates with the Audit Committee of our Board of Directors.
In our notes to the audited consolidated financial statements, we describe the significant accounting policies used in preparing the consolidated financial statements. Our -100- management has discussed the development, selection, and disclosure of our critical accounting policies and estimates with the Audit Committee of the Board.
Actual results and outcomes may differ from management’s estimates and assumptions and such differences may be material to our audited consolidated financial statements. Recently Issued and Adopted Accounting Pronouncements Recently issued and adopted accounting pronouncements are described in Note 2 to our audited consolidated financial statements . Item 7A.
Actual results and outcomes may differ from management’s estimates and assumptions and such differences may be material to our audited consolidated financial statements. Recently Issued and Adopted Accounting Pronouncements Recently issued and adopted accounting pronouncements are described in Note 2 to our audited consolidated financial statements .
We classify as assets or liabilities any equity-linked contracts that (1) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside our control) or (2) give the counterparty a choice of net-cash settlement or settlement in -96- Table of Contents shares (physical settlement or net-share settlement).
We classify as assets or liabilities any equity-linked contracts that (1) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside our control) or (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).
The carrying value of our tradename intangible asset was equal to its fair value and our single reporting unit had no cushion on its goodwill impairment analysis immediately after the impairment was recorded.
The carrying value of our tradename intangible asset was equal to its fair value and our single reporting unit had no cushion on its goodwill impairment analysis immediately after the impairment was recorded in 2023.
Loyalty Redemption Platform Revenue Recognition We host, operate and maintain a loyalty redemption platform connecting loyalty programs to ecommerce merchants allowing loyalty point holders to redeem a spectrum of loyalty currencies for crypto, merchandise and services. Our customer in these arrangements is generally the loyalty program sponsor (our client).
Loyalty Redemption Platform Revenue Recognition We host, operate and maintain a loyalty redemption platform connecting loyalty programs to e-commerce merchants allowing loyalty point holders to redeem a spectrum of loyalty currencies for crypto, merchandise and services. Our customer in these arrangements is generally the loyalty program sponsor (our client).
Warrants We account for our ordinary share warrants in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging—Contracts in Entity’s Own Equity (“ASC Topic 815”), as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement.
Warrants We account for our ordinary share warrants in accordance with applicable accounting guidance provided in ASC 815, Derivatives and Hedging—Contracts in Entity’s Own Equity , as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement.
During the year ended December 31, 2023, we recorded impairment charges of $12.9 million related to certain fixed assets, $8.9 million related to our right of use assets, $7.5 million related to -87- Table of Contents certain internally developed software assets and $0.8 million related to other assets.
During the year ended December 31, 2023, we recorded impairment charges of $12.9 million related to certain fixed assets, $8.9 million related to our right of use assets, $7.5 million related to certain internally developed software assets and $0.8 million related to other assets.
Our contracts related to our loyalty redemption platform consist of two performance obligations: (1) access to our SaaS-based redemption platform and customer support services and (2) facilitation of order fulfillment services. We are the principal related to providing access -95- Table of Contents to our redemption platform.
Our contracts related to our loyalty redemption platform consist of two performance obligations: (1) access to our SaaS-based redemption platform and customer support services and (2) facilitation of order fulfillment services. We are the principal related to providing access to our redemption platform.
See “ Liquidity and Capital Resources” below for management’s assertions on the impact of the Concurrent Offerings on our going concern considerations.
See “ Liquidity and Capital Resources ” below for management’s assertions on the impact of the Concurrent Offerings on our going concern considerations.
Expenditures made using the purchasing card facility are payable monthly, are not subject to formula-based restrictions and do not bear interest if amounts outstanding are paid when due and in full.
Expenditures made using the purchasing card facility are payable at least bi-monthly, are not subject to formula-based restrictions and do not bear interest if amounts outstanding are paid when due and in full.
The following items require significant estimation or judgement: Going Concern At each reporting period, in accordance with Accounting Standards Codification ("ASC") 205-40, Going Concern, we evaluate whether there are conditions or events that raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued.
The following items require significant estimation or judgement: Going Concern At each reporting period, in accordance with ASC 205-40, Going Concern (“ASC 205-40”), we evaluate whether there are conditions or events that raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued.
We earn revenue when consumers use our services to buy, sell, and store crypto and redeem loyalty points. We generate revenue across our platform in the following key areas: • Subscription and service revenue.
Revenue Revenues consist of crypto and loyalty revenue. We earn revenue when consumers use our services to buy, sell, and store crypto and redeem loyalty points. We generate revenue across our platform in the following key areas: • Subscription and service revenue.
Where applicable, we make payments to introducing brokers based on the transaction volume from resulting customer volume. These payments are expensed in the period they are incurred and are included in "Clearing, Execution and Brokerage Fees" on the consolidated statement of operations.
Where applicable, we make payments to introducing brokers based on the transaction volume from resulting customer volume. These payments are expensed in the period they are incurred and are included in “Clearing, Execution and Brokerage Fees” on the consolidated statement of operations.
The decrease was primarily due to lower net book values of intangible assets after impairments were recognized in 2022 and 2023.
The decrease was primarily due to lower net book values of long-lived and intangible assets after impairments were recognized in 2023.
We recorded impairment of goodwill and other intangible assets of $60.5 million and $1,822.1 million during the years ended December 31, 2023 and December 31, 2022, respectively . See Note 5 to our audited consolidated financial statements for additional disclosures related to the impairment of goodwill and other intangible assets.
We recorded impairment of goodwill and other intangible assets of $0.0 million and $60.5 million during the years ended December 31, 2024 and December 31, 2023, respectively . See Note 5 to our audited consolidated financial statements for additional disclosures related to the impairment of goodwill and other intangible assets.
Some clients may choose to enable our capabilities directly in their experience, while others may want a “ready-to-go” storefront and leverage capabilities such as our web-based technology. Our institutional-grade platform, born out of our former parent company, Intercontinental Exchange, Inc. (“ICE”), supports "know your customer" ("KYC"), anti-money laundering ("AML"), and other anti-fraud measures to combat financial crime .
Some clients may choose to enable our capabilities directly in their experience, while others may want a “ready-to-go” storefront and leverage capabilities such as our web-based technology. Our institutional-grade platform, born out of our former parent company, Intercontinental Exchange, Inc. (“ICE”), supports “know your customer” (“KYC”) and anti-money laundering (“AML”) capabilities, and other anti-fraud measures to combat financial crime.
As of the date of this report, holders have exercised all of the Pre-Funded Warrants. The offering of such securities was conducted in a registered direct offering (the “Third-Party Offering”).
As of the date of this Form 10-K, holders have exercised all of the Pre-Funded Warrants. The offering of such securities was conducted in a registered direct offering (the “Third-Party Offering”).
Should we conclude that it is more -94- Table of Contents likely than not that the recorded goodwill and intangible assets amounts have been impaired, we would perform the impairment test.
Should we conclude that it is more likely than not that the recorded goodwill and intangible assets amounts have been impaired, we would perform the impairment test.
We believe that the presentation of the following non-GAAP financial measures, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures provided herein, provides investors with an additional understanding of the factors and trends affecting our business that could not be obtained absent these disclosures.
We believe that the presentation of the following non-GAAP financial measures, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures provided herein, provides investors with an additional understanding of the factors and trends affecting our business that could not be obtained absent these disclosures. -99- Adjusted EBITDA We present Adjusted EBITDA as a non-GAAP financial measure.
In accordance with ASC 250-40, our initial -93- Table of Contents evaluation can only include management’s plans that have been fully implemented as of the issuance date. Operating forecasts for new products/markets cannot be considered in the initial evaluation as those product/market launches have not been fully implemented.
In accordance with ASC 205-40, our initial evaluation can only include management’s plans that have been fully implemented as of the issuance date. Operating forecasts for new products or markets cannot be considered in the initial evaluation as those product and market launches have not been fully implemented.
Business Combinations We account for our business combinations using the acquisition accounting method, which requires us to determine the fair value of identifiable assets acquired and liabilities assumed, including any contingent consideration, to properly allocate the purchase price to the individual assets acquired and liabilities assumed and record any residual purchase price as goodwill in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations .
Business Combinations We account for our business combinations using the acquisition accounting method, which requires us to determine the fair value of identifiable assets acquired and liabilities assumed, including any contingent consideration, to properly allocate the purchase price to the individual assets acquired and liabilities assumed and record any residual purchase price as goodwill in accordance with ASC 805, Business Combinations .
Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations The following discussion and analysis of financial condition and results of operations should be read together with our audited consolidated financial statements and the related notes included under Item 8 of this Annual Report on Form 10-K (the “audited consolidated financial statements”).
Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations The following discussion and analysis of financial condition and results of operations should be read together with our audited consolidated financial statements and the related notes included under Item 8 of this Form 10-K (this “Report”).
We expect these costs will decrease as a percentage of our revenue in future years as we gain improved operating leverage from our projected revenue growth. Selling, general and administrative costs decreased by $2.0 million, or 5.7%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
We expect these costs will decrease as a percentage of our revenue in future years as we gain improved operating leverage from our projected revenue growth. Selling, general and administrative costs decreased by $6.8 million, or 20.5%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
This payment obligation is an obligation of the Company and not of Bakkt.
This payment obligation is an obligation of the Company and not of Opco.
Execution, Clearing and Brokerage Fees ($ in thousands) Year Ended December 31, 2023 Year Ended December 31, 2022 $ Change % Change Execution, clearing and brokerage fees $ 3,772 $ — $ 3,772 n/m Execution, clearing and brokerage fees primarily represent payments to clients in exchange for driving order flow to our platform.
Execution, Clearing and Brokerage Fees ($ in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 $ Change % Change Execution, clearing and brokerage fees $ 24,024 $ 3,772 $ 20,252 n/m Execution, clearing and brokerage fees primarily represent payments to clients in exchange for driving order flow to our platform.
We began using the purchasing card facility in August 2022. In February 2024, Bank of America reduced our credit line associated with the purchasing card facility from $35.0 million to $15.0 million, increased the payment frequency and required us to pledge as collateral the amounts which were previously required to be maintained in the concentration account.
We began using the purchasing card facility in August 2022. In March 2024, Bank of America required us to pledge as collateral the amounts which were previously required to be maintained in the concentration account. In April 2024, Bank of America reduced our credit line associated with the purchasing card facility from $35.0 million to $20.0 million.
We recorded impairment of goodwill and other intangible assets of $30.3 million and $11.5 million during the years ended December 31, 2023 and December 31, 2022, respectively . See Notes 5 and 6 to our audited consolidated financial statements for additional disclosures related to impairment of long-lived assets.
We recorded impairment of long-lived assets of $0.9 million and $30.3 million during the years ended December 31, 2024 and December 31, 2023, respectively . See Notes 5 and 6 to our audited consolidated financial statements for additional disclosures related to impairment of long-lived assets.
Revenue generated from our crypto services had been immaterial prior to our acquisition of Bakkt Crypto; however, revenue from crypto services is now a significant driver of our business, and we expect crypto revenue to increase as we grow our client base and our customers.
Revenue generated from our crypto services was immaterial prior to our acquisition of Bakkt Crypto in April 2023; however, revenue from crypto services is now a significant driver of our business, and we expect crypto revenue to continue to increase as we grow our client base and our customers.
Custody services are rendered over the initial contract term which we have concluded is one day. Customers have a material right to obtain additional custody services at no cost by not selling the purchased crypto, which is recognized over the period that the assets are held on our platform.
Customers have a material right to obtain additional custody services at no cost by not selling the purchased crypto, which is recognized over the period that the assets are held on our platform.
The decrease was primarily due to a $15.6 million decrease in compensation and benefits expense, a $4.3 million reduction of marketing expenses and a $1.3 million reduction in professional services fees. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with GAAP, which requires us to make estimates and apply judgments that affect the reported amounts.
The decrease was primarily due to a $15.8 million decrease in compensation and benefits expense and a $6.8 million reduction of selling, general and administrative expenses. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with GAAP, which requires us to make estimates and apply judgments that affect the reported amounts.
We have developed and frequently evaluate and update our compliance models to ensure that we are complying with applicable restrictions. We continue to work with regulators to address the emerging global landscape for crypto . As investment continues, the intersection of technology and finance will require ongoing engagement as new applications emerge.
We have developed and frequently evaluate and update our compliance models to ensure that we are complying with applicable restrictions. As investment continues, the intersection of technology and finance will require ongoing engagement as new applications emerge.
In the ICE Offering, we closed the sale and issuance to ICE of 2,762,009 shares of Class A Common Stock, Class 1 Warrants to purchase up to 1,381,004 shares of Class A Common Stock and Class 2 Warrants to purchase up to 1,381,004 shares of Class A Common Stock, concurrently with the Third-Party Closing (the “Initial ICE Closing”).
In the ICE Offering, we closed the sale and issuance to ICE of 110,480 shares of Class A Common Stock, Class 1 Warrants to purchase up to 55,240 shares of Class A Common Stock and Class 2 Warrants to purchase up to 55,240 shares of Class A Common Stock, concurrently with the Third-Party Closing (the “Initial ICE Closing”).
Intangible assets subject to amortization consist primarily of acquired technology and client relationships from completed acquisitions, including our acquisition of Bakkt Crypto. Depreciation and amortization decreased by $11.4 million, or 45.0%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Intangible assets subject to amortization consist primarily of acquired technology and client relationships from completed acquisitions, including our acquisition of Bakkt Crypto. Depreciation and amortization decreased by $13.6 million, or 97.5%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Adjusted EBITDA We present Adjusted EBITDA as a non-GAAP financial measure. We believe that Adjusted EBITDA provides relevant and useful information, which is used by management in assessing the performance of our business.
We believe that Adjusted EBITDA provides relevant and useful information, which is used by management in assessing the performance of our business.
There were 3.8 million and 3.0 million unique monthly transacting accounts during the years ended December 31, 2023 and December 31, 2022, respectively. • Notional traded volume. We define notional traded volume as the total notional volume of transactions across crypto and loyalty platforms. The figures we use represent gross values recorded as of the order date.
There were 3.1 million, 3.8 million, and 3.0 million unique monthly transacting accounts during the years ended December 31, 2024, December 31, 2023, and December 21, 2022, respectively. • Notional traded volume. We define notional traded volume as the total notional volume of transactions across crypto and loyalty platforms.
Our marketing activities primarily consist of web-based promotional campaigns, promotional activities with clients, conferences and user events, and brand-building activities. Selling, general and administrative expenses do not include any headcount cost, which is reflected in the “Compensation and benefits” financial statement line item.
Our marketing activities primarily consist of web-based promotional campaigns, promotional activities with clients, conferences and user events, and brand-building activities. Selling, general and administrative expenses do not include any headcount cost, which is reflected in Compensation and benefits in the Consolidated Statements of Operations.
Operating Expenses Operating expenses consist of crypto costs, execution, clearing and brokerage fees, compensation and benefits, professional services, technology and communication expenses, selling, general and administrative expenses, acquisition-related expenses, depreciation and amortization, related party expenses, goodwill and intangible assets impairments, impairment of long-lived assets, restructuring charges, and other operating expenses. -84- Table of Contents Crypto Costs ($ in thousands) Year Ended December 31, 2023 Year Ended December 31, 2022 $ Change % Change Crypto costs $ 718,511 $ 1,657 $ 716,854 n/m Crypto costs represent the gross value of crypto sold by our customers on our platform.
Operating Expenses Operating expenses consist of crypto costs, execution, clearing and brokerage fees, compensation and benefits, professional services, technology and communication expenses, selling, general and administrative expenses, acquisition-related expenses, depreciation and amortization, related party expenses, goodwill and intangible assets impairments, impairment of long-lived assets, restructuring charges, and other operating expenses. -91- Crypto Costs ($ in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 $ Change % Change Crypto costs $ 3,403,207 $ 718,511 $ 2,684,696 373.6 % Crypto costs represent the gross value of crypto sold by our customers on our platform.
Therefore if there are further delays in our ability to execute on our strategy, negative deviations from the budgets utilized in these analyses or further declines in our market capitalization further impairment of our assets is possible. Crypto Revenue Recognition Bakkt Crypto offers customers the ability to purchase or sell certain crypto on its platform.
Therefore if there are further delays in our ability to execute on our strategy, negative deviations from the budgets utilized in these analyses or further declines in our market capitalization further impairment of our assets is possible.
We define crypto-enabled accounts as the total crypto accounts open on our platform. There were 6.2 million and less than 0.1 million crypto-enabled accounts as of December 31, 2023 and December 31, 2022, respectively . • Transacting accounts. We define transacting accounts as unique accounts that perform transactions on our platform each month.
There were 6.7 million and 6.2 million crypto-enabled accounts as of December 31, 2024 and December 31, 2023, respectively . • Transacting accounts. We define transacting accounts as unique accounts that perform transactions on our platform each month.
The purchase price of each share of Class A Common Stock and accompanying Warrant in the ICE Offering is $0.8670.
The purchase price of each share of Class A Common Stock and accompanying Warrant in the ICE Offering was $21.675.
Selling, General and Administrative ($ in thousands) Year Ended December 31, 2023 Year Ended December 31, 2022 $ Change % Change Selling, general and administrative $ 33,385 $ 35,414 $ (2,029) (5.7 %) Selling, general and administrative expenses include marketing, advertising, business insurance, rent and occupancy, bank service charges, dues and subscriptions, travel and entertainment, rent and occupancy, and other general and administrative costs.
Selling, General and Administrative ($ in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 $ Change % Change Selling, general and administrative $ 26,553 $ 33,385 $ (6,832) (20.5 %) Selling, general and administrative expenses include marketing, advertising, business insurance, rent and occupancy, bank service charges, dues and subscriptions, travel and entertainment, and other general and administrative costs.
Goodwill and Intangible Assets Impairments ($ in thousands) Year Ended December 31, 2023 Year Ended December 31, 2022 $ Change % Change Goodwill and intangible assets impairments $ 60,499 $ 1,822,089 $ (1,761,590) n/m We recorded intangible asset impairments of $60.5 million during the year ended December 31, 2023.
Goodwill and Intangible Assets Impairments ($ in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 $ Change % Change Goodwill and intangible assets impairments $ — $ 60,499 $ (60,499) n/m We recorded impairments of goodwill and other intangible assets of $60.5 million during the year ended December 31, 2023 .
(Loss) Gain from Change in Fair Value of Warrant Liability ($ in thousands) Year Ended December 31, 2023 Year Ended December 31, 2022 $ Change % Change (Loss) gain from change in fair value of warrant liability $ (1,571) $ 16,638 $ (18,209) (109.4 %) We recorded a loss of $1.6 million during the year ended December 31, 2023 for the change in fair value on the revaluation of our warrant liability associated with our public warrants.
We recorded a loss of $1.6 million during the year ended December 31, 2023 for the change in fair value on the revaluation of our warrant liability associated with our Public Warrants.
We intend to use our unrestricted cash, inclusive of the net proceeds from the Concurrent Offerings, and proceeds from maturity of available-for-sale debt securities to (i) fund our day-to-day operations, including, but not limited to funding our regulatory capital requirements, compensating balance arrangements and other similar commitments, each of which is subject to change, (ii) activate new crypto clients, (iii) maintain our product development efforts, and (iv) optimize our technology infrastructure and operational support.
We intend to use our unrestricted cash, inclusive of any potential borrowings under the ICE Credit Facility, to fund our day-to-day operations, including, but not limited to funding our regulatory capital requirements, compensating balance arrangements and other similar commitments, each of which is subject to change, and as available (i) activate new crypto clients, (ii) maintain our product development efforts, and (iii) optimize our technology infrastructure and operational support.
Net cash used in operating activities of $117.6 million for the year ended December 31, 2022 was primarily related to our net loss of $1,989.9 million, offset by non-cash charges of $1,869.4 million and changes in our operating assets and liabilities of $2.9 million.
Net cash used in operating activities of $21.2 million for the year ended December 31, 2024 was primarily related to our net loss of $103.4 million, offset by non-cash charges of $35.9 million and changes in our operating assets and liabilities of $46.3 million.
Compensation and Benefits ($ in thousands) Year Ended December 31, 2023 Year Ended December 31, 2022 $ Change % Change Compensation and benefits $ 102,042 $ 139,049 $ (37,007) (26.6 %) Compensation and benefits expense include all salaries and benefits, compensation for contract labor, incentive programs for employees, payroll taxes, share-based and unit-based compensation and other employee related costs.
Compensation and Benefits ($ in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 $ Change % Change Compensation and benefits $ 83,164 $ 102,042 $ (18,878) (18.5 %) Compensation and benefits expense include all salaries and benefits, compensation for contract labor, incentive programs for employees, payroll taxes, share-based and unit-based compensation and other employee related costs.
Professional services decreased by $1.1 million, or 9.6%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Professional services increased by $6.4 million, or 61.9%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Net cash inflows from changes in our operating assets and liabilities for the year ended December 31, 2022 resulted primarily from a decrease in prepaid insurance of $9.4 million, an increase in operating lease liabilities of $4.2 million, and an increase in accounts payable and accrued liabilities of $0.7 million, which were partially offset by an increase in accounts receivable of $7.2 million, an increase in other assets and liabilities of $2.4 million and an decrease in deferred revenue of $2.4 million.
Net cash inflows from changes in our operating assets and liabilities for the year ended December 31, 2024 resulted primarily from a $55.6 million increase in customer funds, a $9.1 million decrease in prepaid insurance, and a $5.4 million decrease in accounts receivable, which were partially offset by a $15.6 million decrease in accounts payable, a $3.3 million decrease in deferred revenue and $3.6 million decrease in operating lease liabilities.
Such change will be calculated under the TRA without regard to any transfers of Bakkt Common Units or distributions with respect to such Bakkt Common Units before the exchange under the Exchange Agreement to which Section 743(b) or 734(b) of the Code applies. As of December 31, 2023, 25,952,197 Opco common units were exchanged for Class A Common Stock.
Such change will be calculated under the TRA without regard to any transfers of Opco Common Units or distributions with respect to such Opco Common Units before the exchange under the Exchange Agreement to which Section 743(b) or 734(b) of the Code applies.
Professional Services ($ in thousands) Year Ended December 31, 2023 Year Ended December 31, 2022 $ Change % Change Professional services $ 10,382 $ 11,483 $ (1,101) (9.6 %) Professional services expense includes fees for accounting, legal and regulatory fees.
Professional Services ($ in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 $ Change % Change Professional services $ 16,804 $ 10,382 $ 6,422 61.9 % Professional services expense includes fees for accounting, legal and regulatory fees.
The following table presents a reconciliation of net loss, the most directly comparable GAAP operating performance measure, to our Adjusted EBITDA for each of the periods indicated (in thousands): Year Ended December 31, 2023 Year Ended December 31, 2022 Net loss $ (225,812) $ (1,989,934) Depreciation and amortization 13,932 25,350 Interest income, net (4,338) (1,877) Income tax expense (benefit) 444 (11,320) EBITDA (215,774) (1,977,781) Acquisition-related expenses 4,299 5,675 Share-based and unit-based compensation expense 16,761 32,114 Cancellation of common units (13) (185) Loss (gain) from change in fair value of warrant liability 1,571 (16,638) Goodwill and intangible assets impairments 60,499 1,822,089 Impairment of long-lived assets 30,265 11,494 Restructuring expenses 4,608 2,336 Transition services expense 3,902 1,168 Adjusted EBITDA loss $ (93,882) $ (119,728) Adjusted EBITDA loss for the year ended December 31, 2023 decreased by $25.8 million, or 21.6%, as compared to the year ended December 31, 2022.
The following table presents a reconciliation of net loss, the most directly comparable GAAP operating performance measure, to our Adjusted EBITDA for each of the periods indicated (in thousands): Year Ended December 31, 2024 Year Ended December 31, 2023 Net loss $ (103,447) $ (225,812) Depreciation and amortization 343 13,932 Interest income, net (4,318) (4,338) Income tax expense (benefit) 170 444 EBITDA (107,252) (215,774) Acquisition-related expenses 128 4,299 Share-based and unit-based compensation expense 15,841 16,761 Cancellation of common units — (13) Loss (gain) from change in fair value of warrant liability 17,186 1,571 Goodwill and intangible assets impairments — 60,499 Impairment of long-lived assets 889 30,265 Restructuring expenses 8,194 4,608 Shelf registration expenses 200 — Transition services expense 600 3,902 Adjusted EBITDA loss $ (64,214) $ (93,882) Adjusted EBITDA loss for the year ended December 31, 2024 decreased by $29.7 million, or 31.6%, as compared to the year ended December 31, 2023.
At the Third-Party Closing, pursuant to the Third-Party Purchase Agreement, we issued and sold to the Third-Party Purchasers an aggregate of 34,917,532 shares of our Class A Common Stock, Class 1 Warrants (“Class 1 Warrants”) to purchase an aggregate of 23,068,051 shares of Class A Common Stock, Class 2 Warrants (“Class 2 Warrants”) to purchase an aggregate of 23,068,051 shares of Class A Common Stock and Pre-Funded Warrants (“Pre-Funded Warrants”) to purchase an aggregate of 11,218,570 shares of Class A Common Stock.
At the Third-Party Closing, pursuant to the Third-Party Purchase Agreement, we issued and sold to the Third-Party Purchasers an aggregate of 1,396,701 shares of our Class A Common Stock, Class 1 Warrants (“Class 1 Warrants”) to purchase an aggregate of 922,722 shares of Class A Common Stock, Class 2 Warrants (“Class 2 Warrants”) to purchase an aggregate of 922,722 -86- shares of Class A Common Stock and Pre-Funded Warrants (“Pre-Funded Warrants”) to purchase an aggregate of 448,742 shares of Class A Common Stock.
In addition, we may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies or intellectual property rights. However, we have no agreements or commitments with respect to any such acquisitions or investments at this time. Our expected uses of available funds are based on our present plans, objectives and business condition.
However, we have no agreements or commitments with respect to any such acquisitions or investments at this time. Our expected uses of available funds are based on our present plans, objectives and business condition.
Income Tax (Expense) Benefit ($ in thousands) Year Ended December 31, 2023 Year Ended December 31, 2022 $ Change % Change Income tax (expense) benefit $ (444) $ 11,320 $ (11,764) (103.9 %) Income tax expense in the year ended December 31, 2023 primarily consists of current state tax expense related to certain state jurisdictions wherein we are required to file income tax returns.
Income Tax (Expense) Benefit ($ in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 $ Change % Change Income tax (expense) benefit $ (170) $ (444) $ 274 (61.7 %) Income tax expense in the years ended December 31, 2024 and 2023 primarily consist of current state tax expense related to certain state jurisdictions wherein we are required to file income tax returns.
Loyalty Services Revenue ($ in thousands) Year Ended December 31, 2023 Year Ended December 31, 2022 $ Change % Change Loyalty services, net $ 53,148 $ 54,479 $ (1,331) (2.4 %) Loyalty services revenue decreased by $1.3 million, or 2.4%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Loyalty Services Revenue ($ in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 $ Change % Change Loyalty services, net $ 49,164 $ 53,148 $ (3,984) (7.5 %) Loyalty services revenue decreased by $4.0 million, or 7.5%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Technology and communications expense increased by $3.8 million, or 22.0%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily due to an increase in software license fees.
Technology and communications expense decreased by $3.1 million, or 15.0%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease was primarily due to lower software license fees.
Related Party Expenses ($ in thousands) Year Ended December 31, 2023 Year Ended December 31, 2022 $ Change % Change Related party expenses $ 3,902 $ 1,168 $ 2,734 234.1 % Related party expenses consist of fees for transition services agreements.
Related Party Expenses ($ in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 $ Change % Change Related party expenses $ 600 $ 3,902 $ (3,302) (84.6 %) Related party expenses consist of fees for transition services agreements.
Compensation and benefits decreased by $37.0 million, or 26.6%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Compensation and benefits decreased by $18.9 million, or 18.5%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Crypto Services Revenue ($ in thousands) Year Ended December 31, 2023 Year Ended December 31, 2022 $ Change % Change Crypto services $ 726,988 $ 1,745 $ 725,243 n/m Crypto services revenue increased by $725.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Crypto Services Revenue ($ in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 $ Change % Change Crypto services $ 3,441,056 $ 726,988 $ 2,714,068 373.3 % Crypto services revenue increased by $2,714.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.
The global market for crypto, while nascent, is rapidly evolving and expanding. We believe we are well-positioned to provide -77- Table of Contents innovative, multi-faceted product solutions and grow with this evolving market. Our platform is uniquely positioned to power commerce by enabling consumers, brands, and financial institutions to better manage, transact with and monetize crypto in exciting new ways.
We believe we are well-positioned to provide innovative, multi-faceted product solutions and grow with this evolving market. Our platform is well positioned to power commerce by enabling businesses, institutions, and consumers, to better manage, transact with and monetize crypto.
The increase was primarily driven by increased crypto trading volume due to our acquisition of Bakkt Crypto.
The increase was primarily driven by increased crypto trading volume.

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