Morgan Stanley is handing over every penny of staking rewards to investors in its new Ethereum and Solana exchange-traded funds. The move, announced this week, makes the bank the first major Wall Street issuer to pass through 100% of staking income rather than keeping a cut for itself. It's a direct challenge to the industry standard — and one that could force rivals to follow suit.
How the new ETFs work
The funds, which began trading earlier this month, hold the underlying crypto and stake it through third-party validators. Staking rewards — the new tokens generated by the network — typically range from 3% to 7% annually, depending on the asset. Most ETF issuers have historically pocketed a portion of those yields as a management fee or operational buffer. Morgan Stanley is doing the opposite: every satoshi and wei goes straight to the fund's shareholders, on top of any price appreciation.
The bank's prospectus makes the structure explicit. Investors get the full staking yield, minus only standard custody and administrative costs. That's a stark contrast to competitors like BlackRock and Fidelity, whose spot Bitcoin and Ethereum ETFs don't stake at all — and whose proposed staking ETFs have yet to detail reward-sharing terms.
Pressure on competitors
The timing isn't great for the rest of the pack. Crypto ETF issuers have been racing to add staking features after the SEC softened its stance earlier this year. But most have been vague about how much of the yield they'd pass along. Morgan Stanley's all-in approach sets a clear benchmark. If BlackRock or Fidelity offer a staking ETF that keeps, say, 20% of rewards, they'll have to explain why their product is worse for investors.
That's a tough sell in a market where every basis point of yield matters. Staking rewards are one of the main reasons investors buy crypto ETFs over direct holdings — they get exposure plus passive income. A fund that skims off the top looks like a raw deal next to Morgan Stanley's offer.
This isn't just about fees. It's about trust. Crypto investors have long complained that traditional finance firms treat digital assets as a side hustle, charging high fees and offering little transparency. Morgan Stanley's decision to pass through 100% of staking rewards signals that it's serious about competing on merit, not just brand name. If other issuers match the move, the entire category could see a wave of fee compression and better disclosure — exactly what regulators and investor advocates have been pushing for.
For now, the ball is in the competitors' court. BlackRock and Fidelity have both filed for staking ETFs but haven't published their reward-sharing structures. The market will be watching their next filings closely. Morgan Stanley just raised the bar — and everyone else has to decide whether to jump or explain why they won't.
