diff --git a/x/dao/keeper/challenge.go b/x/dao/keeper/challenge.go
index 37f8832..21d5d84 100644
--- a/x/dao/keeper/challenge.go
+++ b/x/dao/keeper/challenge.go
@@ -70,7 +70,7 @@ func (k Keeper) GetChallenges(ctx sdk.Context) (challenges []types.Challenge, er
 	return
 }
 
-func (k Keeper) storeChallangeInitiatorReward(ctx sdk.Context, height int64, amount uint64) {
+func (k Keeper) StoreChallangeInitiatorReward(ctx sdk.Context, height int64, amount uint64) {
 	store := prefix.NewStore(ctx.KVStore(k.storeKey), types.KeyPrefix(types.PoPInitiatorReward))
 	appendValue := util.SerializeUint64(amount)
 	store.Set(util.SerializeInt64(height), appendValue)
diff --git a/x/dao/keeper/challenge_test.go b/x/dao/keeper/challenge_test.go
index 7067d32..41d5a74 100644
--- a/x/dao/keeper/challenge_test.go
+++ b/x/dao/keeper/challenge_test.go
@@ -25,6 +25,7 @@ func createNChallenge(keeper *keeper.Keeper, ctx sdk.Context, n int, popEpochs i
 		items[i].Success = false
 		items[i].Finished = false
 		keeper.StoreChallenge(ctx, items[i])
+		keeper.StoreChallangeInitiatorReward(ctx, blockHeight, types.DefaultParams().ValidatorPopReward)
 	}
 	return items
 }
diff --git a/x/dao/keeper/distribution_test.go b/x/dao/keeper/distribution_test.go
index 62fcfe8..ee90a2c 100644
--- a/x/dao/keeper/distribution_test.go
+++ b/x/dao/keeper/distribution_test.go
@@ -6,6 +6,7 @@ import (
 	"testing"
 
 	keepertest "github.com/planetmint/planetmint-go/testutil/keeper"
+	"github.com/planetmint/planetmint-go/util"
 	"github.com/stretchr/testify/assert"
 
 	sdk "github.com/cosmos/cosmos-sdk/types"
@@ -91,3 +92,40 @@ func TestTokenDistribution(t *testing.T) {
 	assert.True(t, expSum-sum < 0.000001)
 	assert.Equal(t, float64(reissuances), Amount1stBatch+Amount2ndBatch)
 }
+
+func TestValidatorRewardReallocation(t *testing.T) {
+	t.Parallel()
+	k, ctx := keepertest.DaoKeeper(t)
+
+	// create reissuances
+	_ = createNReissuances(k, ctx, 1000, types.DefaultParams().PopEpochs)
+	distribution, err := k.GetDistributionForReissuedTokens(ctx, 780)
+	assert.NoError(t, err)
+
+	// create challenges
+	_ = createNChallenge(k, ctx, 250, types.DefaultParams().PopEpochs)
+	distributionWithPopReallocation, err := k.GetDistributionForReissuedTokens(ctx, 780)
+	assert.NoError(t, err)
+
+	// compare
+	pops := 780 / types.DefaultParams().PopEpochs
+	distributionDaoAmount, err := util.RDDLTokenStringToFloat(distribution.DaoAmount)
+	assert.NoError(t, err)
+	distributionPopAmount, err := util.RDDLTokenStringToFloat(distribution.PopAmount)
+	assert.NoError(t, err)
+
+	distributionWithValidatorPopRewardDao, err := util.RDDLTokenStringToFloat(distributionWithPopReallocation.DaoAmount)
+	assert.NoError(t, err)
+	distributionWithValidatorPopRewardPop, err := util.RDDLTokenStringToFloat(distributionWithPopReallocation.PopAmount)
+	assert.NoError(t, err)
+
+	// Some of DaoAmount is transferred to PopAmount
+	assert.Greater(t, distributionDaoAmount, distributionWithValidatorPopRewardDao)
+	assert.Greater(t, distributionWithValidatorPopRewardPop, distributionPopAmount)
+
+	diffPopAmount := distributionWithValidatorPopRewardPop - distributionPopAmount
+	diffDaoAmount := distributionDaoAmount - distributionWithValidatorPopRewardDao
+	assert.Equal(t, diffPopAmount, diffDaoAmount)
+	assert.Equal(t, pops, int64(diffPopAmount))
+	assert.Equal(t, pops, int64(diffDaoAmount))
+}
diff --git a/x/dao/keeper/msg_server_init_pop.go b/x/dao/keeper/msg_server_init_pop.go
index 228402f..38f1ccb 100644
--- a/x/dao/keeper/msg_server_init_pop.go
+++ b/x/dao/keeper/msg_server_init_pop.go
@@ -25,7 +25,7 @@ func (k msgServer) InitPop(goCtx context.Context, msg *types.MsgInitPop) (*types
 	k.StoreChallenge(ctx, challenge)
 
 	amount := k.GetValidatorPoPReward(ctx)
-	k.storeChallangeInitiatorReward(ctx, msg.GetHeight(), amount)
+	k.StoreChallangeInitiatorReward(ctx, msg.GetHeight(), amount)
 
 	validatorIdentity, err := util.GetValidatorCometBFTIdentity(ctx, k.RootDir)
 	if err != nil {