Ether ETP Filers Dropped Staking as SEC Decision Neared

Fidelity filed an amended registration statement for its proposed spot ether exchange-traded product on May 21, 2024, declaring that the trust would not stake its ether or otherwise use the holdings to generate income. NYSE Arca filed a parallel rule-proposal amendment for Grayscale Ethereum Trust on the same date with an equivalent restriction.

The filings mattered because they supplied public, documentary evidence of substantive revisions immediately before the Securities and Exchange Commission’s pending decisions on spot ether products. They did not establish that the SEC had approved any fund, that trading could begin or that the agency had resolved ether’s broader legal status.

What changed in the filings

Fidelity’s Form S-1/A was accepted by the SEC at 6:07 a.m. Eastern time on May 21. The prospectus said the Fidelity Ethereum Fund would custody ether with Fidelity Digital Asset Services and would not participate in Ethereum’s proof-of-stake validation mechanism to earn additional ether or seek another form of income from its holdings.

That language replaced Fidelity’s earlier proposal to permit staking through one or more providers. Staking commits ether to Ethereum’s validator system, where correctly performing validators can receive protocol rewards and misconduct can expose stake to penalties.

NYSE Arca’s Amendment No. 2 for Grayscale Ethereum Trust was also filed on May 21. It stated that neither the trust, its sponsor, custodian nor another associated party would place any portion of the trust’s ether into proof-of-stake validation or use it to generate additional ether or other earnings. The amendment replaced the exchange’s earlier rule proposal in its entirety.

These were proposed product terms, not a general prohibition on staking. Nor did the documents say that staking itself had been declared unlawful. Their verified effect was narrower: the products then under consideration would offer passive ether-price exposure without validator rewards.

A procedural signal, not an approval

Contemporaneous reports said the SEC had asked exchanges to return revised Rule 19b-4 submissions on an accelerated timetable. That account came from journalists and market participants describing private regulatory communications; the public filings verify the resulting amendments but do not independently disclose who requested each change or why.

Two separate regulatory steps also remained. An exchange needed an approved Rule 19b-4 proposal before listing shares, while an issuer’s registration statement needed to become effective before the product could begin trading. Fidelity’s May 21 S-1/A explicitly remained preliminary and could be changed.

The removal of staking simplified the proposed products but also created an economic difference from directly held, staked ether. Fund shareholders would receive price exposure, less applicable expenses, without the potential protocol rewards available to a qualifying validator or staking participant. The filings did not quantify that opportunity cost because staking returns vary with network conditions, validator performance, fees and other factors.

Market repricing and its limits

Ether had already rallied as approval expectations changed. K33 Research’s May 21 report displayed ETHUSD at $3,774 and a seven-day return of 28%, with its accompanying market material sourced to TradingView and Coinbase/Binance. K33 did not identify the snapshot’s exact intraday timestamp, so those figures should not be treated as a universal daily close.

Axios separately described ether moving from around $3,000 on May 20 to around $3,800 on May 21 using CoinGecko data. Crypto trades continuously across fragmented venues, and neither observation proves that the Fidelity or Grayscale amendments alone caused the move. The defensible interpretation is that the filings reinforced a broader repricing of the probability of regulatory approval.

Later context

The SEC’s May 23 order later identified seven exchange amendments filed on May 21 and one filed on May 22. It approved eight exchange rule proposals while stating that the products could not trade until their registration statements became effective. The order also confirmed that none of the proposals before the agency contemplated staking. That later decision clarifies the May 21 record but was not known when the amendments were filed.