Grayscale has made history by distributing staking rewards from its Ethereum Staking ETF (ETHE) as a cash payment to shareholders, marking a pivotal shift in how Ethereum is packaged for mainstream investors. On January 6, the fund paid approximately $0.083 per share, totaling $9.39 million, sourced from staking rewards earned on its ETH holdings between October 6 and December 31, 2025, and subsequently sold for cash. Investors of record as of January 5 received the distribution, with ETHE trading ex-distribution on that date, mirroring the calendar mechanics of traditional stock and bond funds.
This move is more than a niche product detail; it represents a significant milestone in Ethereum's institutional adoption. Staking, central to Ethereum's economics, has traditionally been experienced indirectly by most investors. By converting staking yield into a recognizable cash distribution, Grayscale reframes ETH as an asset with a recurring income stream. This could fundamentally change how institutional allocators model Ethereum exposure, viewing it not just as a volatile asset but as one with a yield component.
The distribution sets the stage for intense competition among ETF issuers. "Once multiple funds are distributing staking proceeds, the ranking criteria shift," the analysis notes. Investors will begin comparing ETH funds on dimensions like net yield, distribution schedule, transparency, and fees—metrics standard for income products. Following Grayscale, 21Shares has already announced a staking-rewards distribution for its 21Shares Ethereum ETF (TETH), signaling a rapid industry move towards yield-based competition.
A key enabler for this development is regulatory clarity from the U.S. Internal Revenue Service (IRS). Revenue Procedure 2025-31 provides a safe harbor, allowing certain qualifying trusts to stake digital assets without jeopardizing their grantor trust status for tax purposes. This reduction in structural anxiety has made issuers more willing to operationalize staking and pass proceeds to investors.
The technical translation of variable, protocol-derived staking rewards into a predictable securities-market product is complex. Grayscale's model involves selling the earned rewards for cash and distributing it, creating an "income" line item for shareholders rather than letting rewards invisibly accrue to the fund's Net Asset Value (NAV). This design choice influences investor perception and behavior, potentially attracting a different investor base that prioritizes yield.
As this practice becomes standard, it merges Ethereum's dual narratives: the "tech platform" focused on smart contracts and scaling, and the "asset" camp focused on scarcity and monetary policy. The evolution signifies that Ethereum yield is being standardized into a product experience that can be compared across issuers and integrated into traditional portfolio allocation frameworks.
