Reference: KNOT

Grayscale withdrawal proposal could change the shape of Ethereum and Solana funds

Grayscale is proposing changes that would allow staking rewards from its Ethereum and Solana products to be paid to investors in cash, which could make it easier for conventional fund holders to understand cryptocurrency exposure.

The proposed changes apply to Grayscale Ethereum and Solana custody structures, with cash payouts from staking proceeds expected on a quarterly basis if the changes come into effect. The target date specified in the validation materials is approximately August 7, 2026.

This matters because staking has always been one of the awkward elements of regulated crypto products.

Both Ethereum and Solana are proof-of-stake networks, which means their holders can earn rewards for helping secure the network. But once these assets are placed in trust or ETF products, the question becomes more complicated: who receives the staking rewards, how are they handled, and can investors receive them without disrupting the structure of the product?

Grayscale’s proposal is an attempt to answer this question in a more investor-friendly way.

TL;DR

• Grayscale has proposed cash rewards for staking Ethereum and Solana products.
• If implemented, the plan would involve quarterly distribution of staking proceeds.
• The change may escalate the attractiveness of ETH and SOL trust products, but payouts are not guaranteed.

Why staking rewards matter

Staking is not a side feature for Ethereum or Solana. This is part of how the network works.

Validators lock tokens, participate in consensus, and earn rewards for helping secure the chain. For direct holders, staking can be a way to generate domestic income. In the case of institutional products, the situation is more complicated.

A trust or ETF-like fund may hold ETH or SOL on behalf of investors, but this does not automatically mean that investors receive rewards for staking. Custody rules, tax treatment, product documents, liquidity needs and regulatory expectations influence what a sponsor can do.

That’s why Grayscale’s proposed change is vital.

If staking proceeds can be distributed in cash, investors can have a cleaner way to benefit from network rewards without having to manage validators, wallets, risk mitigation or direct staking operations themselves.

This can make it easier to explain products to advisors and institutions.

Instead of claiming that the fund holds proof-of-stake assets but does not go through the economics of staking, the structure could offer a more evident link between the underlying asset and its return potential.

Ethereum and Solana are different staking stories

The proposal also matters because Ethereum and Solana do not have identical staking narratives.

Ethereum is a deeper institutional asset, with a larger validator infrastructure, more established custodial integration, and a broader ETF conversation. Solana has a faster trading rate, higher retail footprint, and is often traded as a high-beta Tier 1 asset with sturdy ecosystem activity.

Both networks offer rewards for staking, but investors may interpret these rewards differently.

In Ethereum’s case, staking payouts could strengthen the argument that ETH is not only a price-sensitive asset, but also a productive network asset. This has been central to institutional issues surrounding ETH for years.

In Solana’s case, staking payouts could make regulated exposure more competitive, showing that SOL products can also take network-level economics into account. If conventional investors view Solana as a primary Tier 1 allocation, staking distributions could make the product structure more attractive.

However, it’s still the details that count.

Cash payouts depend on actual rewards, spend, time and product terms. They should not be treated as fixed income payments or guaranteed dividends.

The adjustment angle is the real test

The rate debate has always had a regulatory shadow.

U.S. regulators have spent years scrutinizing staking services, especially when they involve intermediaries that pool assets or offer yield-like products. For fund sponsors, the challenge is to capture staking rewards without creating a product structure that regulators consider problematic.

That is why formal corrections are vital.

Grayscale is not simply a matter of randomly adding a staking. Proposes changes through product documents and processes required by the SEC. This gives investors a clearer paper trail and gives regulators a chance to evaluate the structure.

If approved or continues, the move could impact the way other crypto product sponsors think about staking.

Ethereum and Solana products that pass through rewards could become more attractive than products that simply hold assets without generating a profit. This could create market-wide pressure on staking-enabled structures.

But the result is not automatic.

The proposal still depends on implementation, product approvals, operational execution and whether final terms are accepted by regulators and investors.

Payouts are useful but not guaranteed

Investors should approach the proposal with caution.

Quarterly cash payouts sound attractive, but the staking rewards vary. Online reward rates are subject to change. Validator performance matters. Fees and expenses reduce revenues. How you are taxed can influence what is distributed and when.

There is also cutting risk and operational risk, even if professional maintainers and validators reduce these risks.

So proper framing is not about grayscale creating a product with guaranteed performance. The idea is that the company is trying to navigate the economics of staking in a regulated package.

This is still significant.

Crypto investment products are becoming more and more sophisticated. The first generation focused on access: Can investors access Bitcoin, Ethereum or Solana through known channels? The next generation is whether these products can better reflect the underlying economics of the network.

Grayscale’s proposal is in its second phase.

If this works, crypto staking products could become a larger part of institutional portfolios. If they encounter regulatory or operational friction, the market will know where the limits are.

Either way, the proposal shows that staking is moving deeper into the discussion about regulated investment products.

This article is based on grayscale SEC filing materials.

This article was written by the News Desk and edited by Samuel Rae.