Fidelity files to add staking to its Ethereum ETF

Fidelity Investments has filed a pre-effective amendment with the SEC to add staking to its spot Ethereum ETF, FETH. The proposal allows FETH to stake up to 100% of its holdings, distributing 85% of the yield to investors as quarterly cash payments. This move follows a Treasury and IRS safe harbor and aims to close the competitive gap with rivals Grayscale and BlackRock, which already offer or pursue staking, despite risks like validator slashing and unstaking liquidity delays.

Fidelity Ethereum ETF staking proposal

• ▪Fidelity Investments filed a pre-effective amendment with the SEC on August 11, 2026, to allow its spot Ethereum ETF, the Fidelity Ethereum Fund (FETH), to stake its Ethereum holdings.
• ▪As of August 11, 2026, the Fidelity Ethereum Fund (FETH) had accumulated approximately $2.13 billion in cumulative net inflows since its launch in July 2024.
• ▪Under normal conditions, the Fidelity Ethereum Fund (FETH) could stake up to 100% of its Ethereum holdings, excluding assets reserved for redemptions, expenses, and liquidity.

Custodian validator node infrastructure

• ▪Fidelity Investments plans to route the staked Ethereum of the Fidelity Ethereum Fund (FETH) through custodians, including Anchorage Digital, BitGo, and Fidelity Digital Assets, to validator node operators.
• ▪Staking rewards from the Fidelity Ethereum Fund (FETH) will be split, with the trust retaining 85% of the rewards and 15% allocated to staking fees for node operators, custodians, and Fidelity.

Quarterly cash reward distributions

• ▪Fidelity Investments stated that quarterly cash distributions from the Fidelity Ethereum Fund (FETH) are not guaranteed and can be suspended or terminated at the firm's discretion.
• ▪If approved by the SEC, the Fidelity Ethereum Fund (FETH) will distribute staking rewards to shareholders as quarterly cash distributions after converting the staked Ethereum into U.S. dollars.

Treasury IRS safe harbor

• ▪When the SEC initially approved spot Ethereum ETFs in 2024, the products did not allow staking, which became a competitive disadvantage for the funds.
• ▪A U.S. Treasury and IRS safe harbor cleared the path for cryptocurrency trusts to generate staking yields without facing tax or regulatory penalties.

Grayscale BlackRock industry precedent

• ▪Bitwise filed a proposal to add staking to its Ethereum ETF but subsequently withdrew the application in September 2025.
• ▪Grayscale became the first U.S. spot cryptocurrency ETF issuer to enable Ethereum staking rewards for holders in October 2025.
• ▪BlackRock launched its separate iShares Staked Ethereum Trust ETF (ETHB) in February 2026, and the SEC has acknowledged its proposal to add staking to its ETHA fund.

Slashing liquidity operational risks

• ▪Staking Ethereum introduces slashing risks, which are penalties imposed on validator nodes for misbehavior or operational failures.
• ▪To manage liquidity risks associated with lockup periods during the Ethereum unstaking process, the Fidelity Ethereum Fund (FETH) plans to extend redemption timelines if necessary.