WASHINGTON—Asset managers are offering funds that invest in cryptocurrencies whose legal viability has been questioned by regulators, underscoring the risks investors are taking to try to benefit from the sector’s rapid growth.

Grayscale Investments, which calls itself the world’s largest digital-currency asset manager, launched a fund two months ago that invests in tokens tied to crypto-trading platforms including Uniswap and SushiSwap. Wealthier U.S. investors are eligible to buy the Grayscale Decentralized Finance (DeFi)...

WASHINGTON—Asset managers are offering funds that invest in cryptocurrencies whose legal viability has been questioned by regulators, underscoring the risks investors are taking to try to benefit from the sector’s rapid growth.

Grayscale Investments, which calls itself the world’s largest digital-currency asset manager, launched a fund two months ago that invests in tokens tied to crypto-trading platforms including Uniswap and SushiSwap. Wealthier U.S. investors are eligible to buy the Grayscale Decentralized Finance (DeFi) Fund’s shares, which don’t freely trade now but could in the future, according to the company.

That and other, similar funds offer exposure to some of the riskiest cryptocurrencies. The Securities and Exchange Commission is investigating the startup behind Uniswap, The Wall Street Journal reported earlier this month. SEC Chairman Gary Gensler has said regulators are examining whether crypto lending and trading platforms operate in violation of SEC rules. That analysis might turn on whether the assets the platforms allow to be exchanged are securities.

SEC Chairman Gary Gensler told the Senate Banking Committee earlier this month that many cryptocurrencies are securities.

Photo: Evelyn Hockstein/Reuters

Grayscale earlier this year dissolved a fund created to invest in the cryptocurrency XRP and returned cash to investors after the SEC sued the company behind that digital asset. The SEC alleged late last year that XRP is a security that its distributor, Ripple Labs Inc., should have registered before selling to the public. Ripple disputes the SEC’s claims and is litigating with the agency in federal court.

Grayscale warns shareholders of its other crypto funds that liquidation can be “disadvantageous to shareholders,” a reference to the risk that forced selling could yield lower prices.

Asset managers say they analyze whether tokens they buy for the funds are securities and only pick ones they believe are not. Investors, which include hedge funds, are told about the regulatory risks, they say.

“It’s a new space, and they are very intrigued by the innovation but also understand that these are risks that do come along with this asset class, given how new it is and the regulatory uncertainty that we currently have,” said Craig Salm, head of legal at Grayscale Investments.

The SEC has said bitcoin isn’t a security, giving Grayscale’s Bitcoin Trust more legal certainty regarding its holdings.

Photo: Michael Nagle/Bloomberg News

Grayscale’s experience with the XRP fund highlights the challenge of wading into a market that is increasingly at odds with the SEC. A small number of cryptocurrencies aren’t securities, while many are, Mr. Gensler told the Senate Banking Committee earlier this month.

Unlike Grayscale’s Bitcoin Trust, which has $28.5 billion in assets under management and trades like stock, the DeFi funds are small and focus on a narrower investor base. The SEC has said that bitcoin isn’t a security, giving Grayscale’s bitcoin fund more legal certainty about its holdings.

Grayscale’s DeFi Fund manages $10 million. Another DeFi fund, managed by Bitwise Asset Management Inc., declines to disclose its assets under management. Shares can only be purchased by wealthier investors, including people with annual income over $200,000 or net worth of at least $1 million. Shareholders agree to hold their stake for at least a year.

The term “DeFi” encompasses a variety of projects that seek to automate traditional financial activities, such as trading or lending, using cryptocurrencies. Software developers write the computer code that powers the projects, which typically operate on the internet as “protocols”—ways for distributed networks of computers to communicate with each other, without a central server running the program. The developers often say they no longer control the protocols, which might diminish their liability under securities laws.

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Mr. Gensler has said DeFi projects aren’t immune from regulatory scrutiny. They might still be controlled by developers or intermediaries that benefit from incentives such as trading fees and tokens that give holders governance rights over the protocol, he has said.

Uniswap’s governance token, UNI, constitutes 50% of the Grayscale DeFi Fund’s holdings. The Bitwise DeFi Crypto Index Fund has just over 30% of assets in UNI, according to its website.

Other Grayscale DeFi Fund holdings include tokens tied to the crypto lending platforms Aave and Compound Finance. The SEC recently told Coinbase Global Inc., one of the world’s biggest crypto trading platforms, that a lending program it planned to launch would need to comply with investor-protection laws.

Coinbase said it disagreed with the SEC’s view but decided against launching the product. State regulators, including in New Jersey, have accused other crypto lending platforms, including one offered by BlockFi Inc., of violating securities laws. BlockFi has said it is conferring with the states and believes the products are lawful.

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Those regulatory actions should raise concerns for asset managers looking to launch funds composed of assets tied to crypto lending platforms, said Richard Levin, chair of the fintech and regulation practice at Nelson Mullins Riley & Scarborough LLP.

About 3% of the Grayscale DeFi Fund is a token tied to Synthetix, a protocol that has allowed traders to create derivatives tracking the value of Apple Inc. shares and commodities such as oil and gold. Synthetix’s founder, Kain Warwick, didn’t return a message seeking comment.

In July, Uniswap Labs, the startup behind the Uniswap platform, restricted trading in tokens created by Synthetix, citing “the evolving regulatory landscape.” The move came after Mr. Gensler warned about platforms that offered trading in unregistered securities and after Dan Berkovitz, a member of the Commodity Futures Trading Commission, cautioned that some DeFi markets might be subject to that agency’s oversight. In the U.S., derivatives such as futures and swaps generally must be traded on regulated markets overseen by the SEC or CFTC.

Write to Dave Michaels at dave.michaels@wsj.com