Fidelity is preparing to add staking capability and quarterly payouts to its ether exchange-traded fund, according to a report from CoinDesk. The fund currently holds assets approaching $900 million, making it one of the larger vehicles offering U.S. investors regulated exposure to ether.
Staking allows holders of ether to lock up tokens and participate in validating the Ethereum network, earning rewards in return. Adding this feature to an ETF would let the fund generate additional income from its underlying holdings rather than simply tracking the price of ether.
The proposed quarterly payouts would distribute some portion of that staking income to shareholders on a set schedule. This would mark a shift from a pure price-tracking product toward one that also functions as an income-generating instrument, similar in spirit to dividend-paying equity funds.
The move comes as U.S. regulators have gradually softened their stance on crypto-related financial products. Spot ether ETFs launched in 2024 without staking, largely due to regulatory caution around the practice. Issuers have since pushed for approval to incorporate staking, arguing it better reflects how institutional and retail investors actually hold ether.
Fidelity is among several major asset managers, including BlackRock and Grayscale, that offer spot ether ETFs in the U.S. market. Competition among these funds has centered partly on fees and partly on which features issuers can eventually add, with staking widely viewed as a key differentiator.
Adding staking to an ETF structure is not simple. It requires resolving custody arrangements, ensuring compliance with securities rules, and managing the operational risk of validator penalties known as slashing. How Fidelity plans to address these technical and regulatory hurdles was not detailed in the CoinDesk report.
The timing of any formal filing, along with a target date for implementation, was also not specified. Any change of this kind would likely require review by the U.S. Securities and Exchange Commission before it could take effect.
Sources disagree on this story
This article was published before the reports below were compared. The reporting above stands; what follows is where the published accounts do not agree.
CoinDesk and Coinfomania both report an 85/15 split of staking rewards for Fidelity's FETH fund, but they disagree on which side gets the 85%.
What all sources agree on
- Fidelity plans to add ether staking and quarterly cash distributions to the Fidelity Ethereum Fund (FETH).
- FETH currently holds $898 million in net assets.
- The fund could stake up to 100% of its ETH holdings while retaining some for liquidity needs.
- Net staking rewards would cover fund expenses before any cash distributions are made.
- The reward split described is 85% and 15%.
Where the reports disagree
1Who receives the 85% share of gross staking rewards
Fidelity would retain 85% of gross staking rewards, while the remaining 15% would go to the fund sponsor, custodians and node operators.
The fund will distribute 85% of gross staking rewards to investors, with the remaining 15% allocated for operational costs.
What would settle it: Fidelity's amended registration statement / SEC filing detailing the fee and reward-distribution structure for FETH.
What to make of it
Treat the existence of staking, quarterly payouts, and the 85/15 split as established, but do not assume which party — Fidelity or investors — receives the larger share until the underlying SEC filing is checked.
Market Impact
If approved, staking within an ether ETF could make the product more attractive to income-focused investors who currently hold ether directly to capture validator rewards. It may also pressure competing ether ETF issuers to pursue similar features to remain competitive on total shareholder return, not just fee levels.
A broader shift toward yield-bearing crypto ETFs could also influence how regulators think about staking generally, given how it interacts with existing securities and custody rules. Any precedent set by Fidelity's product could shape how other issuers structure future ether, and potentially other proof-of-stake asset, ETFs.
The proposed changes would represent a notable evolution for U.S. ether ETFs, moving them closer to income-generating products. Confirmation of specific filing details and regulatory timelines will determine how quickly, and in what form, the change reaches investors.
Frequently Asked Questions
What is Fidelity proposing to change about its ether ETF?
According to CoinDesk, Fidelity is moving to add staking capability and quarterly payouts to its ether ETF, which holds assets near $900 million.
Why don't existing ether ETFs already include staking?
Spot ether ETFs launched in the U.S. in 2024 without staking due to regulatory caution around the practice, though issuers have since sought approval to add it.
How would staking benefit ETF shareholders?
Staking allows ether holdings to earn additional rewards from network validation, which could be distributed to shareholders through payouts like the proposed quarterly distributions.
Has the SEC approved this change yet?
The report did not specify a regulatory timeline, and any such change would typically require review by the U.S. Securities and Exchange Commission before taking effect.