CoinDesk
Fidelity filed to add staking and quarterly cash payouts to its Fidelity Ethereum Fund (FETH), one of the largest spot ether ETFs in the United States, in an amended registration statement. FETH holds $898 million in net assets and could stake as much as 100% of its ether under normal conditions, though no minimum was set. The fund would retain 85% of gross staking rewards, with the remaining 15% flowing to the fund sponsor, custodians and node operators including Blockdaemon, Figment and Galaxy.
Why it matters
The filing leans on an IRS safe harbor bulletin issued in November 2025 that lets qualifying crypto trusts stake assets without losing grantor-trust tax status, the legal runway that cleared the path for staking inside U.S.-listed ether products. Fidelity's move signals that wave is broadening: Grayscale and 21Shares have already moved to add staking to existing ether funds, while BlackRock chose to launch a separate staking product rather than retrofit its spot ETF.
Net staking rewards must first cover fund expenses before flowing to shareholders as mandatory quarterly cash distributions under the IRS rules. Fidelity said the fund may also sell some ETH to raise cash for payouts.
Market impact
Yield-bearing ether ETFs materially change the investment case for spot ETH exposure by adding a native staking return on top of price. For institutional allocators who benchmark against dividend-paying funds, that closes a long-standing gap with traditional products. The competitive backdrop is now crowded: FETH at $898 million joins Grayscale, 21Shares and BlackRock's standalone staking wrapper, with most major issuers migrating toward yield-bearing structures.
The signal for ETH itself is incrementally bullish. More staked ETH inside U.S. wrappers means more supply locked in validator queues under regulated structures, tightening effective float. Watch FETH's next S-1 amendment for a launch date, and watch for peer filings from issuers still sitting on plain-vanilla ether ETFs.
Frequently asked questions
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What is Fidelity's FETH ether ETF?
FETH is Fidelity's spot ether ETF, a U.S.-listed fund currently holding about $898 million in net assets that Fidelity now plans to upgrade with staking and quarterly cash distributions.
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How will staking rewards be split in FETH?
Fidelity will retain 85% of gross staking rewards for the fund, while the remaining 15% goes to the fund sponsor, custodians and node operators including Blockdaemon, Figment and Galaxy.
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What IRS rule allows staking inside FETH?
An IRS safe harbor bulletin issued in November 2025 lets qualifying crypto trusts stake their assets without losing grantor-trust tax status, opening the door for staking inside U.S.-listed crypto funds.
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Which other ether ETFs are adding staking?
Grayscale and 21Shares have already moved to add staking to existing ether funds, while BlackRock chose a separate staking product rather than retrofitting its spot ether ETF.
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How will staking payouts work for FETH investors?
Net staking rewards must first cover fund expenses, then flow to shareholders as mandatory quarterly cash distributions. Fidelity may also sell some ETH to raise the cash needed for those payouts.
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