SEC forces revisions to proposed high‑leverage ETFs tied to crypto and tech
The U.S. Securities and Exchange Commission has asked multiple issuers to revise filings for proposed 3x and 5x leveraged exchange-traded funds (ETFs) that include exposure to crypto assets and technology stocks, citing compliance with Rule 18f‑4. The rule mandates registered investment companies to adopt derivatives risk‑management programs and meet value‑at‑risk (VaR) limits; proposals that exceed permitted leverage thresholds face heightened scrutiny and may need modification or withdrawal. Direxion, a prominent issuer of leveraged and inverse funds, is among those required to amend filings for ETFs tied to Bitcoin (BTC), Ethereum (ETH) and tech sector indices. The SEC’s action signals ongoing regulatory oversight of leverage and derivatives use in ETF structures and increases the likelihood that highly leveraged crypto-linked ETF proposals will be scaled back or delayed.
Bearish
The SEC’s enforcement of Rule 18f‑4 and requests for revisions to 3x/5x leveraged ETF filings increase regulatory uncertainty around highly leveraged crypto products. For traders, this raises the probability that proposed leveraged ETFs tied to BTC and ETH will be delayed, scaled back, or withdrawn—reducing near‑term institutional leverage demand and potential new inflows into crypto markets. Historically, regulatory pushback (e.g., past SEC rejections or delays for crypto ETFs) has dampened speculative buying and slowed price momentum. Short term: likely negative price pressure and reduced volatility as anticipated institutional buying is pushed out. Long term: if issuers redesign products to meet compliance, approved lower‑leverage or better‑controlled ETFs could bring more sustainable institutional demand, which would be neutral-to-bullish once clarity is achieved. Overall, immediate market reaction should be cautious/negative due to increased regulatory friction.