Fidelity has asked the SEC to let its spot Ethereum ETF, FETH, participate in staking. A pre-effective amendment filed on Aug. 11 changes the fund's stated objective so that, in addition to tracking the Fidelity Ethereum Reference Rate, FETH can incorporate staking rewards. Under normal conditions the trust could stake up to 100% of the ETH it holds, although it would not be required to maintain any minimum staking percentage.
The ETH would move through custodians including Anchorage Digital, BitGo and Fidelity Digital Assets to one or more validator operators. Rewards would be shared among node operators, custodians and Fidelity as fees, with the remainder accruing to the trust. If the structure becomes effective, FETH plans to convert distributable staking rewards into dollars and make quarterly cash payments to shareholders of record.
The extra yield comes with operational risks. Staked ETH can be temporarily unavailable during the unstaking process, and validator failures can create slashing losses. Fidelity says distributions are not guaranteed and can be suspended or discontinued. The fund may also extend redemption timelines if enough ETH is locked in staking queues and immediate liquidity is insufficient.
Fidelity is not the first U.S. issuer moving in this direction. Grayscale has already distributed ETH staking rewards, while the SEC has acknowledged a similar proposal from BlackRock for ETHA. FETH launched with the first U.S. spot Ethereum ETFs in 2024 and charges a 0.25% fee. The staking amendment only takes effect once the SEC declares the updated registration statement effective.