Fidelity Ethereum ETF files to stake ETH and pay quarterly cash

Fidelity filed a pre-effective amendment on Aug. 11 seeking SEC approval for its spot Ethereum ETF, the Fidelity Ethereum ETF (FETH), to stake the ETH it holds. Once the registration becomes effective, FETH could stake up to 100% of its Ethereum under “normal conditions,” and distribute staking rewards as quarterly cash to investors. The amendment also updates the fund objective: FETH would target the Fidelity Ethereum Reference Rate (net of fees) plus an increment tied to staking rewards. Fidelity expects staking rewards to be treated as taxable income, but distributions are not guaranteed and could be suspended or ended if liabilities exceed rewards. Operationally, the Fidelity Ethereum ETF plans to custody staked ETH through providers (including Anchorage Digital, BitGo, and Fidelity Digital Assets) and then route it to validator node operators (e.g., Blockdaemon, Figment, Galaxy Digital Trading Cayman). Key risks include slashing if validators misbehave and liquidity constraints during unstaking, which may extend redemption timelines. For traders, this is a meaningful step because adding an ongoing yield mechanism could attract more flows to ETH products. However, the SEC approval timing and the outlined staking risks keep near-term impact uncertain. Fidelity is not first—Grayscale already pays staking rewards, and the SEC has acknowledged BlackRock’s proposal for staking in ETHA.