Fidelity Seeks SEC Approval to Add Staking to Its Spot Ethereum ETF

Fidelity has filed a pre-effective amendment dated Aug. 11 requesting permission for its spot Ethereum ETF, the Fidelity Ethereum Fund (FETH), to stake the ETH it holds and pass the resulting earnings to investors via quarterly cash distributions, CoinDesk reported. If the U.S. Securities and Exchange Commission approves the change, FETH would evolve from a product focused solely on price exposure into a spot ETF that also generates yield. The latest disclosure says the fund currently seeks to track the Fidelity Ethereum Reference Rate, net of fees. Under the proposed update, its objective would shift to tracking that benchmark while adding a portion of ETH staking yield on top. The filing states that, before fees, the trust's expected performance would exceed that of the original reference index. Fidelity does not commit to any minimum level of staking activity. The filing says that under normal circumstances the fund may stake up to 100% of its ETH holdings. The staked assets would be moved through a custodian to one or more node operators responsible for running validator infrastructure. The document lists Anchorage Digital and BitGo in custody arrangements, with Fidelity Digital Assets also included. Staking rewards would not flow entirely to the fund: node operators, custodians and Fidelity would each receive fees, while the remaining rewards would stay in the trust and ultimately be distributed to investors. Fidelity is not the first issuer to pursue staking within an ETF wrapper. Grayscale previously became the first U.S. ETF issuer to distribute ETH staking rewards to holders, and BlackRock's ETHA fund's staking feature has also been accepted by the SEC. The move follows a safe-harbor provision previously offered by the U.S. Department of the Treasury and the IRS, which reduced tax and regulatory friction for crypto trusts that earn staking rewards. When the first U.S. spot Ethereum ETFs launched in 2024, none permitted staking, leaving yield generation as a key missing feature. The filing also highlights operational risks. Staking carries slashing risk, where validators can be penalized for misconduct. Unstaking can take time, which may complicate liquidity management for redemptions. Fidelity said the fund could address such issues, if needed, by extending the redemption period. FETH launched in 2024 alongside the first U.S. spot Ethereum ETFs and currently charges a 0.25% fee. The proposed revision would take effect only after the SEC declares the registration statement effective.