Fidelity is adding ether staking and quarterly cash distributions to its Fidelity Ethereum Fund (FETH), which holds $898 million in net assets. The fund would retain 85 percent of gross staking rewards, with the remaining 15 percent going to service providers.
Fidelity is adding ether staking and quarterly cash distributions to its Fidelity Ethereum Fund (FETH), which holds $898 million in net assets.
The fund could stake as much as 100 percent of its ether under normal conditions, with no minimum staking requirement, according to an amended registration statement filed with the SEC on Aug. 11.
Fidelity would retain 85 percent of gross staking rewards, with the remaining 15 percent going to the fund sponsor, custodians and node operators. Blockdaemon, Figment and Galaxy are named as the trust's node operators. Net staking rewards would first cover fund expenses, then fund quarterly cash distributions.
The move follows an IRS safe harbor issued in November 2025 that permits qualifying crypto trusts to stake assets without losing their grantor-trust tax status. Fidelity joins Grayscale and 21Shares in adding staking to existing ether funds, while BlackRock launched a separate staked ether product that drew $15 million in first-day trading.
The fund may also sell some ether to raise cash for payouts, Fidelity said. Under IRS rules, funds must distribute net staking rewards at least quarterly. The trust charges a unified sponsor fee of 0.25 percent per year on ether holdings, with the sponsor covering ordinary operating costs. Custody is split across Anchorage Digital, BitGo and Fidelity Digital Assets.
Staking carries risks including slashing penalties and temporary loss of liquidity during the activation and exit processes on Ethereum's proof-of-stake network. The fund will keep some ether reserved for redemptions, expenses and other liquidity needs. The trust has also adopted a liquidity risk management program to address potential redemption stress, including options to extend settlement timelines or fulfill redemptions in cash if unstaked reserves are insufficient.
The staking yield on FETH could be a meaningful differentiator in the competitive ether ETF market. As of the filing, the fund's $898 million in net assets places it among the largest spot ether ETFs in the U.S., and the ability to earn staking rewards while maintaining ETF liquidity could attract both retail and institutional investors. The IRS safe harbor under Revenue Procedure 2025-31 requires qualifying trusts to distribute net staking rewards at least quarterly, which Fidelity's proposed structure satisfies.
The addition of staking to FETH could also pressure other ether ETF issuers to follow suit as investors seek yield on top of price exposure. The sponsor may explore liquid staking tokens or purchasing rights to staked ether in the future, subject to regulatory and tax considerations. For investors, the staking feature effectively converts a pure price-tracking product into one that generates income, potentially reshaping how ether ETFs are evaluated in the broader digital asset fund landscape.
This article is for informational purposes only and does not constitute investment advice.
