Yield Hits Ethereum ETFs: Grayscale ETHE Distributes Staking Rewards in First-Ever US Crypto ETP Move

Grayscale Investments has made history as its Ethereum Staking ETF (ETHE) becomes the first US-listed spot crypto ETP to distribute staking rewards to shareholders. The $0.083178 per-share payout represents proceeds from staking rewards earned between October 6, 2025, and December 31, 2025 according to Cointelegraph. The distribution is set to be paid on January 6, 2026, to shareholders of record as of January 5 according to Marketscreener. The move introduces a new dimension to crypto-based investment products by linking on-chain yield to traditional financial instruments.

The distribution of staking rewards in cash reflects a structural shift in how Ethereum-based ETPs generate and distribute income. Previously, US-listed crypto ETFs were designed to track price movements without engaging in staking activities. This development aligns with broader regulatory clarity provided by the US Treasury and IRS in late 2025 according to Yahoo Finance. The shift enables investors to access yield-bearing crypto exposure within a regulated investment vehicle.

ETHE shareholders will receive their payout based on holdings recorded at market close on January 5, 2026 according to Cointelegraph. The distribution was funded by the sale of staking rewards, which means the fund's underlying Ether holdings remain unchanged. This approach avoids reducing the principal exposure to Ethereum while still delivering tangible returns to investors.

Why Did This Happen?

Grayscale enabled staking for its Ethereum products in October 2025, making ETHE and its counterpart, the Grayscale Ethereum Staking Mini ETF (ETH), the first US ETPs to gain staking capabilities according to Marketscreener. Staking involves locking up cryptocurrency to secure the Ethereum network in exchange for rewards. Grayscale's move leverages institutional custodians and third-party validator providers to manage staking operations according to Cointelegraph.

The firm's leadership emphasized the significance of this milestone. Peter Mintzberg, CEO of Grayscale, stated that the payout reinforces the company's role in integrating digital asset innovations into the ETP framework according to Marketscreener. The move also aligns with Grayscale's broader strategy to expand staking features to other crypto products and improve investor education and transparency.

How Did Markets React?

The ETHE ETF has shown positive market response. As of early trading on January 6, 2026, the ETF was up around 2% according to Cointelegraph. The cash payout model simplifies tax reporting and attracts a new class of income-focused investors who previously avoided direct on-chain staking according to CryptoNews. The distribution could also shift competitive dynamics among ETF providers, as other firms seek to replicate or surpass Grayscale's offering.

Competitors like BlackRock and Fidelity are actively exploring staking-enabled Ethereum ETFs. In November 2025, BlackRock registered a staked Ethereum trust, while Fidelity and others have filed proposals to incorporate staking into their products according to Cointelegraph. This development sets the stage for a potential "yield war" as firms compete to offer the most attractive Ethereum-based investment vehicles.

What Are Analysts Watching Next?

Analysts are closely monitoring how this new model affects fund flows and investor behavior. The ability to generate yield from crypto ETPs could reshape how institutional investors approach Ethereum exposure. Unlike traditional ETFs, Grayscale's ETHE and ETH are not registered under the Investment Company Act of 1940, which means they operate under a different regulatory framework according to Cointelegraph. This distinction brings greater flexibility but also introduces additional risks related to staking protocols, validator performance, and market volatility.

The market will also watch how the SEC evaluates similar proposals from other firms. Cboe BZX and 21Shares have submitted filings to enable staking in their Ethereum ETFs according to Cointelegraph. The regulatory response will determine how widely this model is adopted and whether it leads to a broader structural shift in the crypto investment landscape.

Grayscale's move marks a clear turning point in the evolution of crypto ETPs. The ability to distribute staking rewards in cash without reducing underlying holdings bridges the gap between traditional finance and blockchain-native economics. As more investors seek yield in a low-interest rate environment, this model could become a key driver of demand for Ethereum-based products in 2026 and beyond according to CryptoNews.