Fidelity Investments has filed an amended registration statement with the U.S. Securities and Exchange Commission (SEC) seeking to add staking capabilities and quarterly cash distributions to its $898 million Fidelity Ethereum Fund (FETH). The proposal, filed on Aug. 11, could enable the fund to stake as much as 100% of its Ethereum holdings and pass staking-related proceeds to investors. The SEC filing is not yet effective, meaning Fidelity cannot begin staking through the fund until the SEC declares the amended registration statement effective.

Ethereum has operated on a proof-of-stake consensus mechanism since The Merge in September 2022, under which validators who lock up ETH help secure the network and earn rewards in return. Spot Ethereum ETF holders have not had access to this yield stream, which direct ETH stakers have been able to capture through self-custody or staking services.

Proposed Staking Structure

Under the proposed framework, FETH could stake up to 100% of its ETH under normal market conditions. The fund would not be subject to a minimum staking requirement and could retain a portion of its ETH to meet redemption requests, cover operational expenses, and maintain liquidity.

Of the gross staking rewards generated, 85% would be allocated to FETH. The remaining 15% would be distributed among the fund's sponsor, custodians, and node operators. Fidelity has named Blockdaemon, Figment, and Galaxy Digital Trading Cayman as the intended node operators responsible for running validator infrastructure.

The 85% share directed to the fund would not be paid directly to shareholders. Instead, those proceeds would first be applied to the fund's operating expenses, with any remaining amount distributed to investors in cash on a quarterly basis. The distributions would be subject to the applicable tax treatment under the fund's grantor-trust structure and would not be guaranteed. If FETH lacked sufficient cash to fulfill a distribution, the fund could sell ETH to raise the necessary funds.

Custody Arrangements for Staked Assets

Fidelity has established new custody arrangements with Anchorage Digital Bank and BitGo Bank & Trust to hold the fund's staked assets. Under this setup, the custodians would hold the private keys associated with the staked ETH, while the designated node operators would manage validator operations. This arrangement deliberately separates asset custody from validator operation.

Fidelity's ability to commence staking activities remains contingent on the SEC declaring the amended registration statement effective.

Broader Industry Context

Fidelity's filing comes as U.S. asset managers increasingly pursue staking as a means of generating additional income within Ethereum investment products. Grayscale began staking through its Grayscale Ethereum Staking ETF (ETHE) in October 2025 and started distributing staking proceeds to shareholders in January 2026. 21Shares also commenced distributions of staking rewards from its Ethereum ETF products during the same month.

BlackRock opted for a different strategy, launching the iShares Staked Ethereum Trust ETF (ETHB) in March 2026 as a standalone product rather than integrating staking into its existing spot Ethereum ETF.

Significance of the Proposal

The addition of staking to an established spot ETF such as FETH could reshape the competitive landscape among Ethereum ETF issuers by converting a price-tracking instrument into a yield-generating product. For investors, the change would narrow the return gap between holding ETH through a brokerage account and staking it directly on-chain, though the fund's 15% fee on gross staking rewards and quarterly distribution schedule introduce structural differences from self-staking. The proposal also reflects growing regulatory familiarity with staking mechanisms housed within existing grantor-trust structures.

FETH, the Fidelity Ethereum Fund, is a U.S. spot Ethereum ETF launched in July 2024 that tracks the price of ETH.