Fidelity Wants to Stake Almost All of Its Ethereum ETF

Fidelity Investments has taken a major step toward turning its spot Ethereum exchange-traded fund into a yield-generating product. In a Form S-3 registration statement filed with the SEC on July 24, 2026 and later surfaced on EDGAR, the asset manager proposed allowing the Fidelity Ethereum Fund (FETH) to stake up to 100% of its ether holdings under normal conditions, with aggregate staking fees set at 15% of rewards received by the trust.

The filing does not impose a minimum staking threshold, meaning Fidelity could choose to stake a smaller portion depending on operational needs. As of mid-August 2026, FETH held approximately $898 million in net assets, according to DailyCoin. The 15% staking fee is not kept entirely by Fidelity; it covers compensation for the sponsor, FD Funds Management, as well as custodians Anchorage Digital Bank and BitGo Bank & Trust, Fidelity Digital Assets, and the node operators running validators. The trust would retain the remaining 85% of staking rewards.

If the amendment becomes effective, FETH's investment objective would shift from simply tracking ether's price, minus expenses, to tracking price returns plus an amount derived from staking rewards, adjusted for fund expenses and liabilities. The prospectus indicates the fund is expected to outperform its price-tracking index before expenses because staking income is added to the return calculation. Fidelity also plans quarterly cash distributions funded by net staking rewards, though it warns that distributions are not guaranteed and could be modified or suspended.

The move introduces a structural challenge: staking nearly all available ETH could conflict with daily ETF redemptions. Ethereum's proof-of-stake exit queue means unstaking can take anywhere from hours to weeks, or even longer during network congestion. To manage this, Fidelity's proposed liquidity program may extend redemption settlement periods or use cash settlements when unstaked reserves are insufficient. In practice, the fund may never keep 100% of its ETH staked continuously, and the sponsor could use credit facilities, borrow digital assets, or trade validator positions to meet liquidity demands.

Fidelity is not the first to bring staking into the U.S. Ethereum ETF arena. Grayscale activated staking for its ETHE product in October 2025 and distributed $0.083178 per share in January 2026, covering rewards from October 6 through December 31, 2025. BlackRock instead launched a separate iShares Staked Ethereum Trust ETF (ETHB) in early 2026. Grayscale CEO Peter Mintzberg called distributing rewards to ETHE shareholders "a landmark moment" for the Ethereum community and ETPs at large.

With FETH's aggregate staking fee of 15% on top of a 0.25% annual sponsor fee, the product sits within the competitive range. But the more decisive factor for investors may be how much ETH a fund can keep staked without impairing redemptions. The SEC has not set a public timeline for reviewing Fidelity's filing. Notably, Fidelity withdrew an earlier 19b-4 staking proposal for FETH in September 2025, per CoinTelegraph. As staking-enabled spot Ethereum ETFs multiply, the competition appears to be shifting from management fees to net staking yield delivered to shareholders.