Grayscale has moved to refresh its plans for an Avalanche-based fund, inserting the AVAX ETF structure into a broader strategy that leans on staking income.
Grayscale updates S-1 for Avalanche (AVAX) ETF
The latest S-1 amendment filed with the U.S. Securities and Exchange Commission details a proposed Avalanche (AVAX) exchange-traded fund that would list on Nasdaq.
The document, submitted in 2025, seeks regulatory clearance to launch the ETF and spells out how the trust will operate once approved.
Moreover, the trust is designed to hold AVAX tokens directly and offer investors regulated market exposure to the asset. Grayscale positions the product as a bridge between traditional finance and the Avalanche ecosystem, while still following existing securities rules.
Staking up to 70% of AVAX holdings
The most notable change in the updated filing is a new plan to stake up to 70% of the fund’s AVAX holdings on the Avalanche Network. However, the remaining portion of the tokens would stay liquid to support redemptions, trading activity, and operational needs.
According to the filing, staking rewards generated on-chain will be passed through to shareholders. This structure aims to transform the ETF from pure price exposure into a yield-generating product, with the trust distributing income to investors under a clearly defined framework.
Income distribution and governance framework
Grayscale outlines in the S-1 how the trust will calculate and distribute staking income. Moreover, it explains the governance rules around validator selection, risk management, and how the AVAX tokens will be delegated on the network to help secure transactions.
The document also covers custody arrangements for the underlying tokens and the mechanics of creation and redemption of ETF shares. That said, the proposal still depends on SEC approval, with no specific green light or launch date yet disclosed in the filing.
Market reaction and institutional trend toward staking
Following news of the updated ETF plan, Avalanche (AVAX) has recorded a price gain of more than 9% over the past week. Traders have linked the move to renewed interest sparked by the filing and to speculation around potential future avax etf approval on a major U.S. exchange.
Grayscale’s strategy of combining spot AVAX exposure with ongoing staking income could help differentiate the product from traditional equity or commodity funds. Moreover, the approach aligns with a broader shift in crypto markets toward yield-enhancing structures that still fit within a regulated wrapper.
Rival filings from VanEck and Bitwise
Other asset managers have also adjusted their plans around Avalanche-focused products. VanEck and Bitwise recently amended their own proposed Avalanche ETFs to incorporate staking rewards, signaling that institutional players see passive yield as a core feature rather than an add-on.
However, regulators have yet to signal how they will treat staking inside exchange-traded structures at scale. The convergence between ETF rules, custody practices, and on-chain validation mechanics remains a key area of scrutiny for the industry.
Why staking is central to the Avalanche model
Staking allows holders of proof-of-stake tokens like AVAX to help validate and secure transactions on the Avalanche Network in exchange for periodic rewards. In contrast to proof-of-work mining, this consensus approach is widely viewed as more energy-efficient and capital-efficient.
Moreover, as more ETF sponsors integrate staking rewards Avalanche investors may see into regulated vehicles, the distinction between on-chain participation and traditional finance products could narrow. That said, investors will still need to weigh validator risk, slashing risks, and regulatory uncertainty when evaluating funds built around staking.
In summary, Grayscale’s updated filing for an Avalanche ETF on Nasdaq, with the ability to stake up to 70% of AVAX holdings, underscores how income-generating features are becoming central to next-generation crypto investment products.
Source: https://en.cryptonomist.ch/2025/12/24/avax-etf-staking-nasdaq-grayscale/
