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SEC Halts Review of 3x–5x ETF Filings Over 2x VaR Rule

Issuers have been told to revise strategies to meet the 200% risk cap or withdraw their applications.

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The U.S. Securities and Exchange Commission (SEC) headquarters in Washington on Nov. 25, 2024.
SEC
The logo for ProShares, the first Short Bitcoin Strategy ETF, is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 27, 2022. REUTERS/Brendan McDermid

Overview

  • The SEC issued nine warning letters to major providers including Direxion, ProShares, Tidal Financial and GraniteShares, pausing evaluations of ultra‑leveraged funds.
  • Officials questioned how funds chose their unleveraged reference portfolios for Rule 18f‑4 compliance and flagged attempts to skirt the leverage cap.
  • Filings sought 3x to 5x daily exposure to volatile assets such as Bitcoin, Ether, Tesla and Nvidia, with Volatility Shares among those proposing 5x products.
  • Reviews remain on hold until firms amend objectives and risk controls, and ProShares has already withdrawn several applications following the letters.
  • Separately, Chair Paul Atkins said an innovation exemption for certain on‑chain crypto products is being finalized, with timing described as expected soon but not yet confirmed.