Fidelity Investments filed with the SEC to allow its Ethereum ETF to stake up to 100 percent of its holdings and distribute the resulting rewards to shareholders as quarterly cash distributions, pending regulatory approval.
The move would make Fidelity's FETH fund one of the few spot Ethereum ETFs structured to generate yield directly for holders through network staking. Most existing spot Ethereum ETFs, including those from iShares and Grayscale, hold Ethereum without staking it. Staking involves locking cryptocurrency to validate blockchain transactions and earn rewards, typically paid in additional tokens.
Fidelity's amended shelf registration statement, filed July 24 and disclosed August 11, outlines the fund's intent to stake Ethereum and pass quarterly rewards to investors rather than reinvesting them or holding them as separate assets. The filing specifies that up to 100 percent of the ETF's Ethereum holdings could be staked at any time, a significant departure from more conservative staking strategies that diversify to reduce operational or slashing risk.
The Boston asset manager already operates Fidelity Crypto Services, which offers institutional staking for crypto held in custody. FETH itself manages approximately 898 million dollars in assets, according to fund disclosures. The quarterly distribution structure differs from Ethereum staking pools that typically offer liquid staking tokens allowing users to trade their position while staking, and differs from single-validator setups that lock assets without liquidity.
Regulatory approval remains uncertain. The SEC has approved spot Bitcoin ETFs and spot Ethereum ETFs that hold the underlying assets, but has not yet approved an ETF that actively stakes those assets and distributes rewards as cash to shareholders. The question of whether staking income qualifies as a security-like yield has been debated among regulators and market participants since the SEC's approval of spot Ethereum ETFs in June 2024.
Other asset managers have explored similar structures. Grayscale launched a Ethereum staking pool in 2024 separate from its spot ETF, and announced plans to add staking to its Bitcoin mini trust. Fidelity's filing represents the first major push to integrate staking directly into a regulated ETF wrapper with cash distributions to holders.
Fidelity's proposal would require investors to receive quarterly staking rewards as taxable income distributions rather than as reinvested growth, a tax treatment that differs from reinvestment structures and may affect investor demand depending on tax efficiency preferences. The filing does not specify a timeline for SEC review or approval.
