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In a landmark move for digital asset regulation, the U.S. Treasury Department and the Internal Revenue Service (IRS) have approved a framework that permits crypto ETF staking while preserving current tax treatment for regulated investment vehicles.
Published on November 10, 2025, under Revenue Procedure 2025-31, the ruling removes a key legal and tax barrier that had long prevented U.S.-listed crypto funds from earning on-chain yield from proof-of-stake (PoS) networks such as Ethereum and Solana.
The guidance introduces a “safe harbor” provision clarifying how staking rewards should be reported and distributed to investors. It also ensures these funds maintain their classification as grantor trusts, the same tax structure used by spot Bitcoin ETFs.
“This is the most consequential regulatory update since spot crypto ETFs were approved,” said Rebecca Patterson, digital assets strategist at Galaxy Research. “Allowing crypto ETF staking bridges the gap between traditional finance and on-chain participation.”
Under the new procedure, spot crypto ETF staking products may stake their assets through qualified custodians, provided they meet transparency, risk disclosure, and compliance requirements. These products must continue to hold only cash and a single digital asset, in line with existing Commodity Exchange Act stipulations for commodity-style funds.
Staking rewards, once earned, will now be taxed as ordinary income to investors when they gain control of the tokens rather than being taxed at the trust or fund level. This design prevents double taxation and preserves the integrity of the ETF structure.
Issuers must publicly disclose the terms of their staking participation, including validator risk, potential “slashing” penalties, and yield rates. Transparent reporting will also be required to show how staking income is calculated and distributed.
“This guidance gives issuers the clarity they’ve been waiting for,” said Lisa Smith, partner at Andersen Tax, in a note to clients. “It confirms that crypto ETF staking is compatible with existing IRS frameworks, provided funds maintain strict custody and disclosure standards.”
Analysts estimate that crypto ETF staking could generate annual yields of 3–5% for Ethereum-based products and up to 7% for Solana ETFs, depending on validator participation rates and network performance.
The ruling is expected to reshape the competitive landscape for U.S.-listed crypto ETFs, which have so far lagged behind their European and Asian counterparts that already incorporate staking. Major issuers like BlackRock, Fidelity, and VanEck are reportedly preparing amendments to their ETF prospectuses to include staking functions.
“This change will make U.S. products more attractive to both institutional and retail investors,” said Mark Jennings, managing director at ETF Store. “For the first time, crypto ETF staking can deliver the same economic benefits that direct network participants enjoy, without requiring technical expertise or self-custody.”
By aligning with global trends and closing a structural gap, the Treasury’s decision could also encourage other jurisdictions especially under the EU’s MiCA framework to harmonize staking standards across markets.
The crypto ETF staking framework reflects growing U.S. efforts to integrate blockchain-based yield generation into traditional financial systems. It also signals a willingness by regulators to adapt existing securities and tax laws to emerging technologies, rather than waiting for Congress to craft bespoke legislation.
The IRS emphasized that the guidance was designed to “promote compliance, transparency, and investor protection while supporting responsible innovation.” Industry experts view it as a balancing act offering clarity without introducing new bureaucratic obstacles.
Market watchers believe this move could pave the way for staking to become a default feature of future digital asset ETFs, especially as network rewards remain one of the few organic yield sources in crypto markets.
With the safe harbor provisions now in effect, fund managers are expected to move swiftly to integrate crypto ETF staking into their offerings. The ruling marks another pivotal step in the U.S.’s gradual embrace of blockchain innovation within regulated finance which is a long-awaited convergence of Wall Street discipline and decentralized technology.
