Fidelity Moves to Add Staking Rewards to Its Ethereum ETF

Fidelity is preparing to turn its Fidelity Ethereum Fund (FETH) into a yield-generating investment product. The firm has filed an amended registration statement with the U.S. SEC seeking permission to stake up to 100% of the fund’s ETH holdings and pass the resulting net rewards to shareholders through quarterly cash distributions.The filing is still preliminary, so the changes cannot begin until the registration statement becomes effective.How FETH’s Staking Model Would WorkFETH held about $898 million in net assets at the time of the filing. Under normal conditions, Fidelity could stake nearly all of its ETH while keeping enough available for redemptions, expenses and other liquidity needs.The proposed reward structure is straightforward:FETH would keep 85% of gross staking rewards.The remaining 15% would be shared among Fidelity, custodians and staking operators as fees.Net rewards would first cover fund expenses.Any amount left could be distributed to investors quarterly in cash.Fidelity ($898M Assets Under Management) just filed a massive update with the SEC to enable 100% Staking on its Spot Ethereum ETF.This turns from passive ETH exposure into a cash-flowing institutional yield product 👇Key Details:• Yield: 85% of rewards paid quarterly… Fidelity says staking could begin “as soon as practicable” after the registration becomes effective. However, payouts would not be guaranteed, and the fund could sell ETH to generate cash for distributions.Meanwhile, Ethereum ETFs have recorded modest net outflows for two consecutive days, totaling $16.3 million, following $244.9 million of inflows last week, their strongest weekly performance since mid-April. Despite that improvement, total ETF net assets remain relatively subdued at $10.48 billion amid broader weakness in the cryptocurrency market.Custody, Operators and Staking RisksThe filing names Anchorage Digital Bank, BitGo Bank & Trust and Fidelity Digital Assets as custodians. Blockdaemon, Figment and Galaxy are listed as node operators.The structure also carries normal staking risks, including slashing penalties and temporary restrictions while ETH is being activated or unstaked. Fidelity says these issues could sometimes require longer redemption settlements or cash redemptions.Importantly, the filing does not mean FETH is already staking ETH. The registration statement must first become effective.Why the Move Matters for FETHFETH has attracted around $2.13 billion in cumulative net inflows since launching in July 2024. Adding staking could make the fund more competitive against products already offering ETH rewards.The regulatory path was helped by an IRS safe-harbor bulletin issued in November 2025, which allows qualifying crypto trusts to stake while maintaining their grantor-trust tax treatment and requires net staking rewards to be distributed at least quarterly.Grayscale was the first U.S. issuer to add staking to an existing spot crypto ETF, while BlackRock launched a separate staking-focused product, ETHB, in February 2026. If approved, Fidelity would join issuers such as Grayscale and 21Shares using staking within an existing ETH fund.For investors, the main change is simple. FETH could eventually offer ETH price exposure plus staking income inside the ETF structure, although the yield and distributions remain subject to the fund’s costs, risks and final SEC approval.