Regulatory and Market Background on Yield Distributions
One of the most noteworthy enablers of this evolution was IRS Revenue Procedure 2025-31, which created a safe harbor for certain trust-like products that wanted to hold digital assets without losing their “grantor trust” status under U.S. tax law.
This has mitigated structural uncertainty and also incentivized issuers to distribute staking rewards as distributable cash, rather than quietly reinvesting into NAV.
In October 2025, Grayscale itself started staking ETH for its products, with ETHE and its mini-ETF now among the first set of U.S. spot crypto products to implement staking income in a scaled manner.
The ability to provide staking yield directly to holders is an evolution from previous offerings which are only price performance trackers and are not capable of generating yield.
What then is the Yield War and the Competitive Space?
Grayscale’s distribution is likely to set off a yield-packaging competition among Ethereum ETF issuers. Other issuers, including 21Shares, have already indicated their intention to distribute staking rewards through their Ethereum ETF (TETH), indicating a wider adoption towards yield capabilities among similar products.
As multiple funds make cash or structured yield available, investors will assess them based on net yield, transparency in calculation, distribution timing and fee effects, all dimensions that familiarize traditional market participants with income-oriented funds.
This “yield war” changes the story for Ethereum exposure. This is no longer a growth or speculative asset only, this is Ethereum through ETFs is now packaging recurring income that resembles dividends in conventional finance, even though the payout source is protocol staking mechanics rather than corporate profits.