Morgan Stanley is moving to sweeten the appeal of its planned Ethereum and Solana exchange-traded funds by formally building staking into their structures. Updated regulatory filings show that both products are designed to keep 95% of all staking rewards inside the trusts, while charging investors a 0.14% annual sponsor fee.
In amended S-1 registration statements, the bank outlined how the Morgan Stanley Ethereum Trust and the Morgan Stanley Solana Trust would put part of their crypto holdings to work through staking, aiming to generate extra yield on top of the underlying asset’s price performance. The intention is to pass that additional income through to fund shareholders rather than divert it to the sponsor.
Under the proposed model, staking service providers and custodians would collectively receive 5% of staking rewards as compensation for operating the technical infrastructure and safeguarding the assets. The remaining 95% would be retained by the funds, effectively boosting the trusts’ net asset value over time, assuming stable network conditions and positive staking returns.
Morgan Stanley emphasized that the sponsor itself will not collect any of these staking rewards, relying solely on the 0.14% management fee for its compensation. This structure is meant to align the sponsor’s role with that of a traditional ETF manager, while clearly separating operational revenues for service providers from investor returns.
The amendments mark another step in Morgan Stanley’s broader digital asset strategy. After entering the spot Bitcoin ETF segment earlier in the year, the bank is now extending its crypto lineup into Ethereum and Solana with products that go beyond simple price tracking and incorporate on-chain yield generation.
The Ethereum-focused filing offers a detailed view of how staking would function in practice. Morgan Stanley explains that the trust’s ETH would be placed into Ethereum staking smart contracts by its custodians. Specialized third-party staking providers would run validators on behalf of the fund, handling the day-to-day technical operations such as uptime, performance, and software maintenance.
The filings also underline that staking is not risk-free. Ether committed to validators remains subject to slashing, a penalty mechanism built into Ethereum’s proof-of-stake design. If validators misbehave, break protocol rules, or fail to maintain required performance and availability, a portion of the staked ETH can be confiscated by the network, reducing the amount held in the trust.
To provide additional context, Morgan Stanley included network-level metrics on Ethereum’s staking capacity. As of May 18, 2026, the bank noted that roughly 3.64 million ETH were queued for validator activation. With Ethereum currently limiting new validator activations to 56 per epoch, this translates to around 57,600 ETH joining the staking set each day.
Based on those constraints, Morgan Stanley estimates that newly staked ETH could wait approximately 63 days before becoming active and able to earn rewards. That delay has direct implications for investors, as there is a lag between the moment the trust allocates ETH to staking and the point at which those assets start generating yield.
These operational details arrive at a time when asset managers are still negotiating with U.S. regulators over how to integrate staking into publicly traded products. The challenge is to balance investor protection and regulatory clarity with the economic realities of proof-of-stake networks, where staking is central to both security and returns.
The separate amendment for the Morgan Stanley Solana Trust describes a broadly similar framework applied to SOL. In this case, staking service providers would run validators that may operate as delegated validators for the trust’s holdings, aggregating client assets while maintaining clear on-chain segregation.
Morgan Stanley points out that custodians participating in the Solana staking process will not hold the private keys for delegated SOL. That distinction is meant to limit custodial control and ensure that the staking structure does not compromise the trust’s security model. Unlike the Ethereum filing, however, the Solana amendment does not specify a daily cap on the amount of SOL that can be moved into staking.
The lack of an explicit daily limit reflects differences between the two networks. While Ethereum has a tightly regulated validator queue and activation rate, Solana’s design allows more flexibility in how quickly stake can be delegated to validators, though it carries its own set of technical and network risks, such as potential downtime or performance issues.
These ETF adjustments are arriving alongside a wider build-out of crypto services across Morgan Stanley’s wealth management business. The bank has recently started working with Galaxy Digital, enabling eligible high-net-worth clients to shift existing digital asset holdings into regulated spot crypto investment products through a streamlined referral arrangement.
Under that arrangement, clients can lend assets such as Bitcoin, Ether, and Solana to Galaxy Digital and receive shares in crypto investment vehicles, including the newly launched Morgan Stanley Bitcoin Trust. According to the firms, this structure can significantly accelerate the process of moving from direct token ownership to regulated products, cutting onboarding timelines by up to 75% while allowing investors to stay exposed to crypto markets without liquidating their holdings first.
Taken together, the ETF staking provisions and the Galaxy Digital partnership illustrate how Morgan Stanley is trying to build a multi-layered crypto offering: direct exposure through spot ETFs, yield enhancement through staking, and conversion pathways for existing token holders who want a more traditional investment wrapper.
For investors, the introduction of staking inside an ETF has several potential implications. First, it creates a more “complete” representation of how these assets function on-chain. In proof-of-stake systems like Ethereum and Solana, staking rewards are a core part of the asset’s economic profile. A fund that ignores them may underrepresent the total return an on-chain holder could earn.
Second, by keeping 95% of the rewards in the trust, the ETF aims to replicate the economics that a sophisticated user might achieve by staking independently, but without the technical overhead of running validators, managing keys, or tracking slashing risks. At the same time, investors must accept that the fund is exposed to those same network-level risks, even if operational tasks are outsourced to professional providers.
Third, the use of professional, third-party validators and institutional custodians may help mitigate some practical risks individual stakers face, such as misconfigurations, downtime, or security failures at the retail level. However, concentration of staked assets under a small group of institutional validators can raise separate concerns around network centralization, which regulators and protocol communities are watching closely.
The 0.14% annual sponsor fee is another key piece of the design. In the context of traditional ETFs, this is relatively low, but in crypto, where investors can directly hold and stake assets without paying a management fee, it becomes part of the trade-off between convenience and cost. Investors need to weigh whether the added simplicity, regulatory structure, and institutional-grade operations justify the fee versus self-custody and self-staking.
Regulators will also be scrutinizing how staking rewards are characterized from a legal and tax perspective. Questions remain about whether staking income should be treated like interest, dividends, or something more akin to a protocol-specific reward, and how that classification interacts with securities law and tax codes. The clarity of Morgan Stanley’s disclosures around risk, reward-sharing, and sponsor compensation will likely be central to regulatory reviews.
From a market structure standpoint, if these products are approved, they could set an important precedent for staking-enabled ETFs in the U.S. Until now, most regulated crypto funds have focused primarily on price exposure, not on-chain yield. If Morgan Stanley’s approach is accepted, other issuers may follow, potentially leading to a new class of “yield-aware” digital asset ETFs designed around proof-of-stake economics.
For Ethereum and Solana themselves, large institutional staking via ETFs could become a double-edged sword. On one side, it may increase the total amount of assets staked, potentially strengthening network security and signaling growing mainstream adoption. On the other, significant ETF-owned stake concentrated with a handful of validators could amplify concerns around governance influence and validator power.
Institutional investors may see these developments as a bridge between the traditional capital markets they know and the emerging world of crypto infrastructure. Products like the Morgan Stanley Ethereum and Solana Trusts fit into an evolving toolkit that includes spot ETFs, structured products, lending and borrowing arrangements, and token-to-ETP conversions, all wrapped in familiar regulatory and custodial frameworks.
As Morgan Stanley continues to expand its offerings around Bitcoin, Ethereum, and Solana, the bank is effectively betting that demand for regulated, professionally managed crypto exposure will keep growing, even as direct token ownership remains popular with more tech-savvy participants. The integration of staking into ETF design is another sign that the line between “on-chain” and “traditional” finance is becoming increasingly thin.
Ultimately, whether these staking-enabled ETFs gain traction will depend on regulatory approval, fee competitiveness, and investor appetite for yield-enhanced crypto exposure delivered through conventional brokerage accounts. If they succeed, they could accelerate the institutionalization of proof-of-stake networks and reshape how both retail and professional investors access crypto’s core economic features.