The announcement states that Fidelity submitted a pre-effective amendment on August 11, seeking approval to allow its spot Ethereum ETF, the Fidelity Ethereum Fund (FETH), to stake its held ETH and distribute related earnings to investors as quarterly cash distributions. If approved by the U.S. Securities and Exchange Commission, this fund would transition from a purely price-tracking product to a spot ETF that also generates yield.
The fund's objective is to include staking rewards.
According to the latest disclosure, FETH currently aims to track the Fidelity Ethereum Reference Rate, net of fees. After staking is added, the fund’s objective will shift to adding a portion of ETH staking yield on top of this index.
The document states that, before fees, the trust's expected performance will exceed that of the original reference index. However, the fund does not guarantee that it will achieve a minimum staking ratio.
Up to 100% of your ETH holdings can be staked.
Fidelity stated in the filing that, under normal circumstances, the fund may allocate up to 100% of its ETH holdings for staking. The associated assets will be transferred through a custodian to one or more node operators, who will be responsible for operating the node infrastructure.
- Anchorage Digital participates in custody arrangements
- BitGo participates in custody arrangements
- Fidelity Digital Assets is also on the list.
Staking rewards will not all be allocated to the fund. Documents show that node operators, custodians, and Fidelity itself will each receive fees, with the remaining portion retained in the trust and ultimately distributed to investors.
Similar products have already begun implementing staking functionality.
Fidelity is not the first issuer to promote this arrangement. Previously, Grayscale became the first U.S. ETF issuer to pay ETH staking rewards to holders. BlackRock has also had its ETHA fund’s staking feature accepted by the U.S. Securities and Exchange Commission.
This change follows a safe harbor provision previously offered by the U.S. Department of the Treasury and the IRS, which reduced tax and regulatory barriers for crypto trusts earning staking rewards. When the first spot Ethereum ETFs were approved in the U.S. in 2024, none of the products permitted staking—a key limitation for such offerings.
Liquidity and slashing risks still need to be addressed.
The document also notes that staking ETH carries slashing risks, meaning validators may be penalized for misconduct. Unstaking also takes time, which could impact liquidity arrangements for fund redemptions.
Fidelity stated that, if necessary, the fund can address related issues by extending the redemption period.
Additional information: FETH was launched in 2024 alongside the first U.S. spot Ethereum ETFs, with a current fee of 0.25%. This revision will take effect only after the U.S. Securities and Exchange Commission declares the registration statement effective.