Fidelity's FETH fund seeks SEC approval to stake up to 100% of its ETH and pay quarterly cash distributions, joining Grayscale and 21Shares.
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Fidelity has filed an amendment with the SEC to add staking and quarterly cash distributions to the Fidelity Ethereum Fund (FETH), which holds $898 million in net assets.
The document, filed last week, allows the fund to stake up to 100% of its ether under normal conditions, with no minimum requirement. Fidelity said it would adjust participation based on liquidity needs, network conditions, and redemption requests. A portion of ETH would be reserved to cover redemptions, expenses, and other obligations.
The move follows an IRS safe harbor bulletin that lets qualified digital asset trusts stake without losing their grantor trust tax status. Fidelity joins Grayscale and 21Shares, which already offer staking in their Ethereum funds. BlackRock took a different path, launching a standalone staking product.
Under the proposed structure, the fund would keep 85% of gross staking returns. The remaining 15% would go to the fund sponsor, custodians, and node operators. Fidelity named Blockdaemon, Figment, and Galaxy Digital Trading Cayman as the selected operators.
Net staking rewards would first cover fund expenses, then flow to quarterly cash distributions. The amounts depend on staking performance, validator results, network rules, and outstanding obligations. Fidelity said it does not guarantee a distribution every quarter; the fund could retain rewards when obligations exceed income.
The asset manager also warned about operational and liquidity risks from staking. Validator exits can be delayed during periods of high network demand. The fund plans daily liquidity monitoring and internal controls for custody, slashing, and liquidation risks.
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