Grayscale ETHE Shatters Barrier: First U.S. Ethereum ETF to Pay Staking Rewards Directly to Investors
Wall Street's crypto playbook just got a major rewrite. Grayscale's Ethereum Trust (ETHE) has executed a regulatory end-run, transforming into the first U.S.-listed ETF that funnels staking rewards straight into shareholder pockets. Forget synthetic exposure—this delivers the real yield.
The Mechanics of the Move
By converting its structure and securing the necessary approvals, ETHE now bypasses the traditional fund wrapper. It directly participates in Ethereum's proof-of-stake consensus, capturing the network's native inflation rewards. Those rewards—once locked within the fund's NAV—now get distributed as taxable income. It turns a speculative vehicle into a cash-flow asset.
Why This Cuts Through the Noise
The move does more than just add a yield component. It validates staking as a core, bankable financial activity for institutional products. It pressures competitors to follow suit or risk obsolescence. And it gives traditional finance a pure-play on Ethereum's security and utility, without the operational headaches of running validators—a classic finance move, outsourcing the work but keeping the profit.
The New Yield Chase Begins
Expect a scramble. Financial advisors now have a compliant answer for yield-hungry clients eyeing crypto. Treasury departments might look at it sideways as a digital alternative to bond coupons. And the entire ETF landscape shifts, forcing a reckoning on what a 'complete' digital asset product must offer. The era of passive, yield-generating crypto exposure on mainstream exchanges is officially here—just in time for the next cycle, proving once again that innovation in finance is often just repackaging old ideas with a new, blockchain-powered wrapper.
How ETHE’s Staking Model Works
The ETHE provides exposure to Ether while simultaneously engaging in the proof-of-stake process on Ethereum. By choosing to lock a portion of the holdings into the proof-of-stake process, the fund accrues holdings as a result of validating activities on the network. The holdings may subsequently be sold to generate returns for the benefit of the shareholders.
Grayscale initiated the activation of staking for its Ethereum-based products in October 2025, making ETHE the first Ethereum ETP in the US market to do so. A smaller linked product followed suit. Later, the products were renamed to reflect their staking capabilities.
The funds are not registered under the Investment Company Act of 1940. This is one aspect that sets it apart from traditional ETFs and mutual funds. Although this increases the flexibility aspect, it also adds to the risks that need to be considered.
Broader Impact on Crypto Investment Products
This is an indication of a paradigm shift in the value addition to digital asset ETNs. Previously, the value addition in most spot crypto products had been based on the appreciation of value. It is quite evident that the inclusion of the staking element is similar to the income strategy based on traditional finance.
This is also a reflection of a wider trend to map the strengths of blockchain technology into conventional investment products. Grayscale has focused on both educational and reporting efforts with its expansion of staking offerings.
