Fidelity has amended its spot Ethereum ETF to enable staking, with the fund retaining 85% of gross block rewards for quarterly cash distributions to shareholders, according to an SEC filing.
The structural change converts Ethereum's staking yield into a regulated dividend stream accessible through a brokerage account. Fidelity Investments manages more than $7 trillion in assets company-wide; the spot ETH ETF (ticker FETH) held approximately $898 million as of the filing date. The fund will distribute net staking income quarterly to investors, after Fidelity retains its 15% operating fee from gross rewards.
Ethereum generates staking rewards through its proof-of-stake consensus mechanism. Validators who stake ETH earn block rewards denominated in newly issued ETH and transaction fees. The Ethereum network currently secures over $40 billion in staked ETH across all validators. Institutional investors have historically faced friction accessing staking rewards through traditional brokerage channels, since most regulated custodians do not offer native staking services.
Fidelity launched its spot ETH ETF in July 2024, months after the SEC approved spot Bitcoin ETFs in January. The firm has positioned both products as regulated gateways for institutional capital into digital assets. The staking feature on FETH follows a similar pattern in traditional finance: money market funds and bond ETFs distribute income to shareholders as regular payouts rather than holding it in the fund.
The 85% payout ratio is higher than typical ETF expense ratios. iShares and Vanguard spot Bitcoin ETFs charge between 0.20% and 0.25% annually. Fidelity's structure on FETH amounts to a 15% annual fee on staking yields, a material cost that reduces investor returns relative to self-staking or other custody arrangements.
Spot Ethereum ETFs have grown faster than their Bitcoin counterparts since launch. The category holds roughly $15 billion in net assets, compared to spot Bitcoin ETFs at over $50 billion. Staking features could attract additional institutional capital by simplifying tax reporting and custody logistics. The number to watch is FETH's asset growth in the quarter following the staking implementation launch.
