Franklin’s Bitcoin DRIP ETFs Buy BTC, Then Sell It Back

Franklin Templeton ETF Trust filed a Form 8-A on October 22, 2026, to list two US stock funds that buy bitcoin with dividends. The funds, tickered FBEQ and FIBT, are set to trade on Nasdaq. A companion prospectus takes effect on October 27, 2026.

Each fund starts at 95% stocks and 5% bitcoin. Dividends purchase more bitcoin. Quarterly rules then sell that sleeve back if it runs above 5%.

Franklin Files Form 8-A for Two Nasdaq Tickers

The October 22 filing is a listing registration under Section 12(b) of the Securities Exchange Act, not a separate product blessing from the SEC. Franklin Templeton ETF Trust used it to register both series on Nasdaq as shares of beneficial interest with no par value.

Harris Goldblat, vice president and secretary of the trust, signed the form that day. It points to Post-Effective Amendment No. 172 on Form N-1A, filed the same morning, for the description of the shares. The amendment is set to become effective on October 27, 2026, under Rule 485(b).

The series are the Franklin US Equity Bitcoin DRIP Index ETF (FBEQ) and the Franklin US Innovation Bitcoin DRIP Index ETF (FIBT). Both sit in Franklin Templeton ETF Trust, a Delaware statutory trust formed on October 9, 2015, and run from One Franklin Parkway in San Mateo, California. The funds first appeared in a June 2026 registration, before tickers and fees were in the paperwork.

THE LISTING CALENDAR

1. June 2026: Franklin Templeton ETF Trust first registers the two Bitcoin DRIP series, still without tickers or fees.
2. October 9, 2026: Crypto Task Force staff meet Franklin Templeton, Inc. on tokenized funds and the Innovation Exemption, a separate file from these ETFs.
3. October 22, 2026: The trust files Form 8-A for Nasdaq and the N-1A amendment that names FBEQ and FIBT.
4. October 27, 2026: The prospectus is dated and set to become effective, the first session the shares can trade once Nasdaq lists them.

Until those shares actually change hands, the products are still on the runway. The October 22 papers are what put them on it.

How the Dividend-to-Bitcoin Switch Works

FBEQ tracks the VettaFi US Large-Cap 500 Bitcoin DRIP Index, built on VettaFi’s US Equity Large Cap 500 parent of the 500 largest US companies by market cap. FIBT tracks the VettaFi US Innovation 100 Bitcoin DRIP Index, drawn from the 100 largest non-financial US issuers listed on Nasdaq. VettaFi LLC maintains and calculates both.

The equity sleeve is a price-return book. That means the index keeps the capital gain in stocks and pulls the cash dividend out of that sleeve’s math. The cash does not go to the shareholder and does not buy more of the stock that paid it.

The Underlying Index includes an allocation to bitcoin that is achieved by systematically reinvesting dividends from the equity securities in the Underlying Index into bitcoin.

Franklin Templeton ETF Trust, Form N-1A prospectus dated October 27, 2026

The same prospectus says all regular and special dividends are systematically reinvesting dividends into bitcoin at the market open on the day after each ex-date. That is the whole drip: one business day after a name goes ex-dividend, the cash is scheduled into the bitcoin sleeve, and the weight of bitcoin rises.

The Indexes Start at 95% Stocks

At inception each index is 95% component stocks and 5% bitcoin. Under normal conditions each fund must keep at least 80% of net assets in those index stocks and in bitcoin-related investments meant to match the bitcoin weight. Stocks are weighted by float-adjusted market cap, with a 20% cap on any single name and a 40% cap on the combined weight of names above 5%.

The indexes rebalance quarterly and reconstitute twice a year. Bitcoin in the index is priced off the Kaiko Bitcoin New York Reference Rate at 4:00 p.m. Eastern time.

Dividends Move the Next Morning

The funds do not hold bitcoin on a chain. They copy the index weight with bitcoin-related investments: exchange-traded products, including bitcoin-backed ETPs sponsored by affiliates of the manager; options and futures on bitcoin or on those ETPs; and depositary receipts. Some of that book can sit in a wholly owned Cayman Islands subsidiary, capped at 25% of total assets at each fiscal quarter-end so the fund can stay a regulated investment company.

Tax rules cut across the drip. Because a regulated investment company must pay out substantially all of its net income, the fund may have to limit those dividend reinvestments or sell other holdings to raise cash, including on days when that sale is a poor trade. Tracking the index is the goal; the tax code still has a claim on the cash.

The Quarterly Trim Sells Bitcoin Back Into Stocks

The drip is only half of the rule set. The other half is a sale. Bitcoin is written in as a secondary sleeve, and the index forces that ranking at two checkpoints.

THE BITCOIN SLEEVE RULES

• Quarterly test: If bitcoin’s weight is above 5% at the rebalance, the index cuts it to 4.5%; at 5% or below, the weight stays put.
• Hard cap: If bitcoin closes above 20% of the index between quarterly dates, the weight is reset to 4.5% on the close of the second business day after the breach.
• Where the cash goes: When bitcoin is cut, the equity weight rises by the same amount and the stocks are rescaled on the index’s float-cap rules.

That pair of tests turns the product into a scheduled buyer and a scheduled seller in one wrapper. Dividend days add bitcoin. Quarter-end, and any 20% spike, take bitcoin off and put the proceeds back into stocks. A strong bitcoin run does not get to take over the fund. It gets sold down to 4.5%.

The 4.5% reset sits below the 5% test on purpose. After a trim there is room before the next quarterly check fires. Holders who think they have bought a slow bitcoin accumulator are holding a stock fund with a bitcoin overlay on a leash. The 5% start is small by design, so most of the daily risk is still the equity book.

The Captive Bid for Franklin’s Own Bitcoin ETF

The bitcoin sleeve is also a distribution line. The prospectus says bitcoin exposure can come through bitcoin-backed ETPs sponsored by affiliates of the investment manager. Franklin already lists a spot bitcoin product, EZBC, with a 0.19% management fee. These new funds can park the drip inside that vehicle rather than sending the order to a rival issuer.

Advisory Services has voluntarily agreed to waive part of each new fund’s unified management fee by the sponsor fees it or its affiliates actually earn on money the fund puts into affiliated ETPs, “such as an affiliated spot bitcoin ETP.” If the new fund’s own fee is lower than that inner sponsor fee, the waiver uses the lower rate. The waiver can be changed or ended at any time. On paper, the structure avoids charging twice for the same bitcoin sleeve. In practice, FBEQ and FIBT still feed assets toward Franklin’s crypto shelf.

EZBC AGAINST THE SPOT TAPE

• Fund assets: EZBC held $467.3 million in net assets in the October 23 fund table.
• Since-launch inflows: Cumulative net inflows were $337.1 million, a small book next to the rest of the spot complex.
• Recent tape: EZBC took in $7.3 million on October 21 and $0 on October 22, the day of the 8-A.
• Category print: US spot bitcoin ETFs as a group posted a $635.5 million net outflow on October 22.

Equity investors who never open a coin account still create a bid for that affiliated ETP every time a name in the 500-stock or 100-stock sleeve goes ex-dividend. The bid is real. It is also small until these funds gather assets, and the quarterly trim can send some of that bitcoin weight back out.

FBEQ Charges 0.09%, FIBT Charges 0.19%

Franklin Advisory Services, LLC is the investment manager. Franklin Templeton Institutional, LLC is the sub-advisor. Both funds use a unified management fee: the manager pays ordinary operating costs and keeps the stated rate, with the usual carve-outs for brokerage, taxes, interest, litigation and other non-routine bills. Neither fund charges a 12b-1 fee. Other expenses are estimated at 0.00% for the current fiscal year.

TWO NASDAQ TICKERS

FBEQ’s total annual operating expense is 0.09%. The prospectus example puts the cost of a $10,000 stake, assuming a 5% annual return and steady fees, at $9 after one year and $29 after three years. FIBT’s total annual operating expense is 0.19%, the same rate EZBC charges for a full bitcoin book. The cheaper share class is the broad 500-stock fund, the one built to sit next to a core US equity sleeve.

Dina Ting, CFA, a senior vice president of Advisory Services, is a portfolio manager of the funds since inception in October 2026. She joined Franklin Templeton in 2015. Hailey Harris, a portfolio manager at Franklin Templeton Institutional, is on the same team. The funds are non-diversified series, so a smaller set of names can drive results, and they are newly offered, with no portfolio-turnover history to report.

Franklin Already Asked the SEC About Tokenized Funds

Thirteen days before the 8-A, Crypto Task Force staff sat down with Franklin Templeton, Inc. The October 9, 2026 memo lists Mike Muir, SVP and head of FIRST Technology, and two senior associate general counsel, Navid Tofigh and Sarah Bessin. The agenda was not FBEQ or FIBT. It was tokenized products and the SEC’s Innovation Exemption.

Franklin wanted a read on 1940 Act issues for tokenized money market funds, including FOBXX, and for NMS ETFs trading on a trading-securities venue that is not a national securities exchange. The questions ran to Section 22(d) and Rule 22c-1, fees charged by a liquidity provider, and whether extra relief is needed for those shares to trade in a pair with tokenized NMS stock, a permitted payment stablecoin, or a tokenized money fund. Liquidity-pool interests were on the list too.

That meeting and the DRIP listing sit on the same calendar and the same firm’s crypto docket. One file asks how a tokenized Franklin fund could trade outside a classic exchange. The other files a classic 1940 Act ETF that buys bitcoin with stock dividends and holds the bitcoin through ETPs the firm already sponsors. The DRIP funds are the product that can go on Nasdaq next. The tokenized questions are still a staff memo.

Spot Bitcoin Funds Posted a $635.5 Million Outflow

The 8-A landed on a heavy day for the spot bitcoin complex. The US spot bitcoin ETF flow tape shows a $635.5 million net outflow on October 22, 2026, across the listed funds, with combined net assets of $104.71 billion and cumulative net inflows of $57.32 billion since launch. EZBC did not take in new cash that session.

FBEQ and FIBT will not fix that tape. They are equity funds. Their bitcoin weight starts at 5% and is built to stay a side account, funded by dividends and cut back when it fattens. For an investor who already wanted a 500-stock or Nasdaq-innovation book and was never going to buy EZBC, the drip is how bitcoin shows up anyway, at 0.09% on the broad fund and 0.19% on the innovation fund, with the affiliated-ETP waiver sitting underneath.

The prospectus is dated October 27, 2026. Nasdaq listing of the shares is what the Form 8-A requested. The first ex-dividend dates after launch are when the drip, and the trim, leave the paper and hit the tape.

Disclaimer: This article is news reporting and analysis of SEC filings and market data. It is for information only and is not investment advice, tax advice, or a recommendation to buy or sell FBEQ, FIBT, EZBC, bitcoin, or any other security or digital asset. Readers should consult a licensed financial adviser and, where tax treatment of fund distributions or bitcoin-linked instruments is at issue, a qualified tax professional before acting. Fees, listings, flows and fund statuses are those in the cited filings and data tables and can change after the dates those sources carry.