Fidelity has filed to enable staking and quarterly cash payouts for its $898 million spot Ethereum ETF, aiming to compete with rivals as U.S. crypto fund structures evolve under new IRS guidance.
Fidelity Investments is moving to expand the capabilities of its spot Ethereum ETF, filing an amended registration with the U.S. Securities and Exchange Commission (SEC) that would allow the fund to stake its Ethereum holdings and distribute net staking rewards to investors on a quarterly basis. The proposal, if approved, would make the Fidelity Ethereum Fund (FETH) one of the few U.S.-listed spot crypto ETFs to offer staking rewards directly within the fund structure.
Staking Structure and Payouts
According to the SEC filing, FETH could stake up to 100% of its Ethereum under normal market conditions, with no minimum threshold. The fund would always retain enough ETH to meet redemption requests and cover expenses. Staking would be managed by third-party node operators-Blockdaemon, Figment, and Galaxy-while Fidelity would retain 85% of the gross staking rewards. The remaining 15% would be split among the fund sponsor, custodians, and node operators. Net staking rewards would first be used to pay fund operating expenses, with any surplus distributed to investors as cash payouts each quarter. Fidelity cautioned that these distributions are not guaranteed and may require selling ETH to generate cash for payouts if necessary.
IRS Guidance and Regulatory Context
The move follows a November 2025 IRS safe harbor bulletin, which clarified that crypto trusts can stake assets without jeopardizing their grantor-trust tax status, provided they distribute net staking rewards to investors at least quarterly. This regulatory change has opened the door for existing spot ETH funds to integrate staking, a feature previously limited by tax and compliance concerns. Fidelity stated that staking would begin as soon as practicable after the prospectus becomes effective, though the filing remains subject to SEC review and potential changes.
Competitive Landscape
Fidelity's proposal comes as competition intensifies among U.S. spot Ethereum ETFs. Grayscale was the first to enable staking within a spot crypto ETF in October 2025, while BlackRock opted to launch a separate staking product, the iShares Staked Ethereum Trust ETF, in February 2026. Bitwise withdrew its own staking proposal in September 2025. If approved, FETH would join Grayscale and 21Shares in offering staking rewards within an existing ETF structure, rather than through a standalone product. The lack of staking had previously been cited as a disadvantage for FETH compared to rivals, according to market commentary.
Fund Performance and Market Data
As of August 12, FETH reported $898 million in net assets, with cumulative net inflows of approximately $2.13 billion since its July 2024 launch, based on data from Farside Investors. On the morning of the SEC filing, FETH was up 2.4% in pre-market trading, outpacing most other U.S.-listed Ethereum funds, according to Yahoo Finance. The fund's move to add staking comes amid broader efforts by ETF issuers to differentiate their products as the U.S. spot crypto ETF market matures. For context, other platforms are also expanding their crypto offerings, such as Robinhood's recent addition of over 50 tradable assets for UK users, as detailed in this EgonCoin report.
Staking in Ethereum involves locking up ETH to help secure the network and validate transactions, with participants earning rewards in the form of additional ETH. For ETF investors, the ability to receive staking rewards through a regulated fund structure could provide exposure to native network yields without the operational complexity of self-staking. However, staking rewards are variable, subject to network conditions, and paid in ETH, which remains volatile against the U.S. dollar. Investors should also consider that fund-level staking introduces additional custody, operational, and regulatory risks compared to holding ETH directly or using self-custody solutions.
