Fidelity Proposes Ethereum ETF with Staking Feature

Fidelity has proposed a revised Ethereum ETF that allows up to 100% of its holdings to be staked on the Ethereum blockchain, potentially generating regular validation rewards for investors.

The fund's proposal, submitted to the SEC on August 14, 2026, would see 85% of the staking rewards distributed directly to FETH shareholders as quarterly cash dividends, while 15% would go towards custodians and technical node operators managing the staking infrastructure.

This move could attract institutional and retail investors who have been wary of crypto's volatility and lack of income. Chairman Tom Lee from BitMine Immersion Technologies agreed that staking could entice yield-seeking investors and spark new demand for Ethereum-based ETFs.

However, there are risks associated with staking, including liquidity concerns and the risk of 'slashing' due to a penalty mechanism in the Ethereum protocol where misbehaving or malfunctioning validation nodes can lead to partial loss of staked assets. Fidelity has partnered with reputable node operators to mitigate this risk.