SEC Slaps Crypto ETFs: “Leverage? More Like Leve-rage Against Your Wallet!” 😂

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Well, shucks! The SEC just put the kibosh on them 3x and 5x crypto ETFs, sayin’ they’re breakin’ the rules faster than a riverboat gambler on a losing streak. 🤠

 

The U.S. Securities and Exchange Commission-them fancy folks in Washington-have gone and blocked a whole mess of 3x and 5x leveraged crypto ETF filings. Seems they sent out notices to the issuers like they were handin’ out invitations to a party no one’s invited to. All this ruckus started after a flood of submissions tied to them digital doodads and equities. Firms are now told to either fix their strategies or skedaddle with their tails between their legs. 🐕

SEC Waves Its Rulebook Like a Sheriff’s Badge

The SEC’s got its knickers in a twist over Rule 18f‑4, sayin’ these ETF proposals were tryin’ to slip through loopholes like a fox in a henhouse. Bloomberg’s own Eric Balchunas chimed in, sayin’ these filings were flagged for tryin’ to bypass the 200% VAR limit. Here’s what he had to say:

“Looks like SEC is pushin’ back on all them 3x and 5x filings, callin’ ‘em out on the loophole they were tryin’ to use, to get around the 200% VAR, and ‘requests them to revise the obj and strategy to be consistent with 18f-4 or withdrawal.’ Honestly, it’s for the best. I’m as…”

– Eric Balchunas (@EricBalchunas)

Rule 18f‑4’s got strict controls for any fund usin’ derivatives, makin’ issuers follow a risk program tighter than a drum. The SEC’s sayin’ higher leverage could make the market as stable as a three-legged stool. 🪑

Balchunas added that the Commission warned allowin’ leverage above 2x might lead to more terminations than a soap opera. 🧼

The SEC’s tellin’ issuers to either play by the rules or take their marbles and go home. This notice ain’t just for crypto-it’s for sector-based ETFs and single-stock leveraged products too. Talk about a buzzkill! 🐝

Direxion and Others Get the SEC’s Side-Eye

The SEC’s letter called out Direxion, who’d been cookin’ up multiple leveraged ETF plans tied to crypto and high-beta equities. These products were aim’n to offer amplified exposure with 3x and 5x leverage-like tryin’ to ride a buckin’ bronco blindfolded. 🤠

This notice ain’t just for Direxion; it’s for any firm that thought they could sneak in similar proposals. Even them leveraged ETFs linked to stock sectors and individual stocks are in the hot seat. Issuers were hopin’ for a smoother ride, given the crypto market’s been hotter than a firecracker on the Fourth of July. 🎆

Rule 18f‑4 caps leverage at 200 percent value-at-risk, and the SEC’s stickin’ to it like a barnacle on a ship. Firms gotta prove their products can operate within these controls, or their plans might get tossed out like yesterday’s news. 📰

Related Reading: Vanguard Approves Trading for Crypto ETFs

Leveraged ETF Filings Shot Up Like a Rocket in October

SEC’s investment management director Brian Daly said filings were comin’ in faster than a hound on a scent. “The agency’s received a heap of registration statements for ETFs offerin’ 3x and 5x leveraged, equity-linked exposure,” he said. Daly also noted it’s unclear if these filings fit Rule 18f‑4-like tryin’ to fit a square peg in a round hole. 🔲➡️⭕

Back in October, VolShares submitted 5x ETF filings tied to SOL, ETH, and XRP. They even had leveraged strategies on stocks like Tesla, Nvidia, and Coinbase. GraniteShares jumped in too, filin’ paperwork for a 3x XRP fund. Talk about ambition! 🚀

Morningstar’s Bryan Armour pointed out that more than half of leveraged ETFs launched in the past three years have closed. He said the SEC’s been open to new strategies but added these filings might face more pressure than a balloon at a porcupine convention. 🦔

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2025-12-03 16:07