Fidelity Investments is seeking regulatory approval to add Ether staking and quarterly cash distributions to its Fidelity Ethereum Fund (FETH), an $898 million fund that ranks among the largest U.S. spot Ether ETFs. If approved, the proposal would allow the fund to stake up to 100% of its Ether holdings under normal market conditions. As with other material changes to U.S. ETFs, the request requires approval from the U.S. Securities and Exchange Commission, which regulates the funds, before it can take effect — making the regulator's decision the next step to watch for the proposal.

Staking involves locking cryptocurrency to help operate and secure a proof-of-stake network such as Ethereum, earning rewards in return. Ethereum has run on proof-of-stake since its 2022 transition, known as the Merge, which made staked validators the mechanism that secures the network and earns rewards. For FETH, whose value otherwise moves with Ether's market price, the proposal would introduce a recurring income component. Under the proposed structure, FETH would retain 85% of gross staking rewards, with the remaining 15% going to its sponsor, custodians, and node operators — the firms that run validator infrastructure — including Blockdaemon, Figment, and Galaxy. Net rewards would first be applied to cover fund expenses before being distributed to investors in cash at least quarterly. Fidelity said the fund could also sell some of its Ether to raise cash for the payouts.

The filing follows similar staking initiatives by Grayscale and 21Shares, as asset managers look to add yield to U.S. spot Ether ETFs — funds that hold Ether directly and began trading in the United States in mid-2024. It also comes just two weeks after crypto asset manager Hashdex introduced a staking structure for its Nasdaq CME Crypto Index ETF (NCIQ), which allows the fund to retain the first portion of staking income before sharing additional rewards with investors, underscoring how issuers are increasingly using staking to differentiate their crypto investment products.

More broadly, the proposal reflects a shift among asset managers toward packaging cryptocurrency exposure with recurring income as competition intensifies beyond spot Bitcoin ETFs. According to staking platform EverStake, staking now generates 60% of revenue for Ethereum treasury firms. Fidelity, one of the largest asset managers in the United States, also offers a spot Bitcoin ETF and has steadily expanded its digital asset business in recent years.