Grayscale requires quarterly sales of $1.1B in staking rewards

Grayscale amended the terms of its Ethereum Staking ETF (ETHE), Solana Staking ETF (GSOL) and Avalanche Staking ETF (GAVA) to require that staking rewards be converted to cash at least quarterly and that net proceeds be distributed to shareholders. The trust amendments were executed on Aug. 6 and disclosed on Form 8-K filings on Aug. 7.

The filings state the three trusts currently plan monthly distributions, but the quarterly requirement is now the minimum cadence. The requirement applies to staking rewards earned by the trusts and does not mandate liquidation of the funds’ principal ETH, SOL or AVAX holdings.

As of June 30, ETHE reported $1.22 billion in total assets, with $999.96 million shown as staked ETH (about 81.7%). GSOL reported $101.16 million in assets and $101.05 million staked SOL (about 99.9%). GAVA reported $4.27 million in assets and $3.45 million staked AVAX (about 80.9%). The amendments formalize a recurring process to convert earned reward tokens into cash and distribute net payments to ETF holders.

The trusts will sell earned reward tokens to generate cash distributions, creating a recurring market sell flow for those reward tokens. The filings do not set fixed sale amounts; the volume sold each period will depend on the rewards the trusts actually receive, the amount staked, protocol-level reward rates, token prices at the time of sale, and deductions for fees and trust expenses. Existing disclosures continue to permit token sales for other purposes, including meeting redemptions and covering fees and expenses.

Fee structures and reward deductions will affect investor receipts. ETHE charges a 2.5% annual sponsor fee, and its sponsor staking fee plus validator fees accounted for an aggregate 23% of gross rewards as of June 30. GAVA disclosed a 0.35% annual sponsor fee and the same 23% aggregate staking-related deduction. GSOL disclosed a 0.19% annual sponsor fee and a 7% aggregate deduction for sponsor and validator fees. Grayscale’s filings note the different fees use different bases and should not be treated as simple additive percentages.

Grayscale provided an operating precedent but not a forecast for future distributions. The fund paid about $9.4 million, or $0.083178 per share, on Jan. 6 after selling staking rewards it earned from Oct. 6 through Dec. 31, 2025. Variations in asset levels, staking participation, reward rates and token prices mean past payments do not predict future amounts across the three products.

The conversion-and-distribute process adds tax complexity for investors. Under the filings’ grantor-trust position, a U.S. holder generally is treated as receiving a pro rata share of staking income when the trust earns it. A subsequent trust sale of reward tokens to fund a cash distribution can allocate a pro rata capital gain or loss to holders. Receiving the cash distribution itself should not be a separate taxable event under that treatment, but the grantor-trust position is not guaranteed. Filings also flag possible unrelated business taxable income for some tax-exempt holders and unresolved sourcing or withholding questions for non-U.S. holders.

The operational loop in the amended terms is: earn reward tokens on staked assets, convert those earned tokens into cash at least quarterly, and distribute net cash to shareholders after applicable fees and trust expenses. The size and timing of distributions will vary with actual staking rewards, fee deductions and market conditions.