Fidelity is moving to add staking and quarterly cash distributions to its Ethereum Fund (FETH), which currently holds $898 million in net assets. Under the plan, the fund could stake up to 100% of its ether under normal conditions with no minimum staking requirement, while keeping enough ether liquid to cover redemptions and operating expenses.
The staking rewards would flow through a specific split: the fund keeps 85% of gross staking rewards, with the remaining 15% going to the node operators actually running the validators — Blockdaemon, Figment and Galaxy. Net staking rewards would first cover fund expenses, with anything left over funding the new quarterly cash distributions to shareholders. If staking income alone isn't enough to cover a distribution, Fidelity has left itself room to sell a portion of the fund's ether holdings to raise the difference.
Built on a Regulatory Opening From Late 2025
The move follows an IRS safe harbor bulletin issued in November 2025 that lets qualifying crypto trusts stake their assets without jeopardizing their grantor-trust tax status — the specific structural concern that had kept most spot Ethereum ETFs from staking since launch. That safe harbor has already opened the door for competitors: Grayscale and 21Shares have added similar staking features to their own Ethereum products, and BlackRock has launched a separate staking-enabled offering.
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Turning a spot ETF into a yield-generating product changes its risk and return profile in ways passive holders should understand before the feature goes live — staking introduces validator and slashing risk, and the fund's ability to sell ether to fund distributions means shareholders are effectively trading some principal stability for income, a tradeoff that didn't exist in Ethereum ETFs before this wave of safe-harbor-enabled staking launches.
