Fidelity seeks SEC approval for Ethereum staking on $898M FETH

2h ago•

bullish:

bearish:

Fidelity Investments has asked federal regulators for permission to put its Ethereum exchange-traded fund to work. In a filing submitted to the US Securities and Exchange Commission, the asset manager laid out a plan for Fidelity Ethereum staking inside the Fidelity Ethereum Fund, known by its ticker FETH, a move that would let the $898 million fund earn rewards from the very ETH it already holds instead of leaving those coins idle in cold storage.

Key takeaways

Fidelity filed with the SEC on Aug. 11 to add staking to the Fidelity Ethereum Fund (FETH), a spot ETF holding roughly $898 million in assets.
FETH could stake up to 100% of its Ether under normal conditions, keeping only what’s needed for redemptions, expenses and liquidity.
The fund would keep 85% of gross staking rewards, with 15% split among the sponsor, custodians and node operators, and plans quarterly cash payouts that are not guaranteed.
Fidelity named Blockdaemon, Figment and Galaxy Digital Trading Cayman as intended node operators for the staking program.
Grayscale and BlackRock already run staking-enabled Ether ETFs, while Bitwise withdrew a similar proposal in September 2025.

Fidelity Proposes Staking Addition to Fidelity Ethereum Fund

Fidelity’s amended registration statement, submitted to the SEC on Aug. 11, would let FETH generate yield directly from Ethereum’s proof-of-stake network rather than simply tracking the price of ETH. The change formally brings Ethereum ETF staking rewards into a fund that, until now, has functioned purely as a passive price-tracking vehicle.

Filing Details with the SEC

According to the filing, Fidelity would modify FETH’s investment objective so its returns align with Ether by utilizing the Fidelity Ethereum Reference Rate, with adjustments made for costs and obligations, in addition to added component tied to staking income. The preliminary prospectus remains subject to change before the registration statement becomes effective, and Fidelity said it expects staking to begin “as soon as practicable” once the prospectus takes effect. There is no fixed minimum amount of ETH the fund must stake.

Staking Capacity and Operational Framework

FETH could stake as much as 100% of its Ether “under normal conditions,” a term the filing defines as periods when Ethereum’s network runs without major disruption, redemption activity stays within expected ranges, and no extraordinary event forces Fidelity to hold back extra ETH. Some Ether would always remain unstaked to cover redemptions, fund expenses, distributions and general liquidity needs. Fidelity named three node operators, Blockdaemon, Figment and Galaxy Digital Trading Cayman, that would run the validator infrastructure, while the fund’s custodians would retain control of the private keys. How much ETH goes to each operator would depend on factors like security track record, technical experience and how concentrated the fund’s holdings become with any single provider.

Staking Rewards Structure and Distribution Plans

Under the proposed model, FETH shareholders would keep the large majority of what the fund earns from staking, while a flat fee covers the parties that make the staking possible in the first place.

Allocation of Staking Rewards

The fund would retain 85% of gross staking rewards, with the remaining 15% shared among the sponsor, custodians and node operators as a flat fee. That leftover income would first go toward sponsor fees and other trust expenses, then to quarterly shareholder distributions, followed by redemption needs and any additional staking.

Planned Quarterly Cash Distributions and Their Terms

Rewards would accumulate in ETH until Fidelity declares a record date, at which point a trading counterparty would sell the portion of ETH earmarked for distribution and convert it into dollars ahead of the payment date. Under normal conditions, Fidelity expects to make these cash payouts every quarter, though the exact size would swing with Ethereum staking yields, validator performance, network rules, fees and any slashing events. Crucially, Fidelity said the quarterly distributions are not guaranteed, and a payout could be suspended if the fund’s liabilities exceed the staking rewards it has collected, with those rewards instead held back to cover the trust’s obligations.

This is where the filing gets interesting for anyone tracking the broader US SEC Ethereum ETF landscape. Fidelity’s structure leans on a fairly recent piece of federal tax guidance: Revenue Procedure 2025-31, issued by the Treasury Department and IRS in November 2025, which created a safe harbor allowing qualifying investment trusts holding digital assets to stake without losing their tax classification as investment trusts and grantor trusts. Fidelity said FETH intends to run its staking and liquidity operations in line with that safe harbor, a signal that the regulatory groundwork for ETF staking has matured considerably since the first spot Ether products launched in 2024.

Competitive Landscape and Market Context

Fidelity is not the first mover here, and that matters. Staking has quietly become a dividing line among US Ether ETFs, separating funds that simply track price from those that also generate on-chain income for their holders.

Comparison with Other US Ethereum ETFs Offering Staking

Grayscale became the first US issuer to enable staking in a spot crypto ETF back in October 2025, and its Grayscale Ethereum Staking ETF later distributed $0.083178 per share, roughly $9.4 million in total, after earning rewards between Oct. 6 and Dec. 31 of that year. BlackRock took a different path, launching a standalone iShares Staked Ethereum Trust ETF, ticker ETHB, in early 2026, designed to keep somewhere between 70% and 95% of its ETH staked through validators run by Figment, Galaxy and Attestant. Bitwise, meanwhile, tried to add staking to its own Ethereum ETF but withdrew that proposal in September 2025, an outcome that hinted at the regulatory and structural hurdles issuers still had to clear at the time. Morgan Stanley took its own approach in June, proposing a 95%/5% rewards split for its Ethereum and Solana ETFs, a slightly more generous cut for investors than Fidelity’s 85/15 arrangement, though Morgan Stanley’s filing also flagged that validator activation queues, roughly 3.64 million ETH deep as of mid-May, could delay new staking rewards by around 63 days.

Market Reception and Fund Performance

A Seeking Alpha contributor, Ryne Mauck, wrote back in May that FETH’s absence of staking left it at a “relative disadvantage” compared with Grayscale’s and BlackRock’s staking-enabled products, a gap Fidelity now appears to be closing. The fund has still managed to attract steady demand without staking: as of Aug. 11, FETH had pulled in roughly Farside Investors reports $2.13 billion of cumulative net inflows received following its July 2024 debut. Preceding Wednesday’s US market open, FETH was leading pre-market gains across most Ether funds, up 2.4%, per Yahoo Finance data, a reaction that suggests investors are already pricing in the potential upside of yield-bearing exposure.

Why this matters goes beyond one fund’s fee structure. If staking becomes the default feature rather than the exception among spot Ether ETFs, issuers without it risk losing assets to rivals offering an extra layer of return on the same underlying exposure. That competitive pressure helps explain why Fidelity, one of the largest asset managers in the world, moved to close the gap rather than let ETHB and Grayscale’s staking products pull further ahead in the broader crypto ETF market.

There’s also a liquidity trade-off worth flagging. Locking Ether into validators means part of the fund’s assets become temporarily inaccessible, since exiting a validator and completing a withdrawal can take anywhere from about a day to several weeks or months depending on network demand. Fidelity has built in a liquidity risk management program with daily monitoring and an annual review by its Fair Value and Liquidity Risk Management Committee, along with backup options like credit arrangements or transfers of validator positions, precisely because staked ETH can’t always be converted back to cash on short notice. The filing also flags slashing, validator failures, custodial breaches or operational errors during reward transfers, as a risk that could shave value off the fund’s staked holdings.