SEC Freezes All 3× Crypto ETF Plans as ProShares Withdraws Filings After Leverage Warning

SEC halted all 3× crypto ETF filings after ruling the proposals exceeded federal leverage limits.

ProShares withdrew its 3× Bitcoin, Ether, Solana and XRP filings after receiving SEC warning letters.

Regulators tightened scrutiny as firms pushed 3× and 5× leveraged products during volatile markets.

The U.S. Securities and Exchange Commission has moved to block a new round of 3× leveraged crypto ETFs after warning that several proposed products broke federal limits on fund leverage. The action paused filings tied to Bitcoin, Ether, Solana, and XRP and left issuers unable to advance their applications.

SEC Cites Leverage Limits and Stops New Product Filings

The agency sent formal notices to ProShares, Direxion, and Tidal Financial. According to the letters, the proposed funds exceeded limits set by Rule 18f-4 under the Investment Company Act. The rule places a cap on a fund’s value-at-risk, and the SEC said the new products crossed that boundary.

ProShares acted quickly and withdrew its filings for new 3× Bitcoin, 3× Ether, 3× Solana, and 3× XRP funds. The firm had also planned several equity-linked leveraged products, yet none can move forward until the leverage issue is addressed. The SEC confirmed it would not review the filings until issuers made changes or withdrew them.

The notices arrived at a time when ETF approvals had expanded across several areas. The agency approved spot Bitcoin and Ethereum ETFs earlier in the year, and it allowed other structured products that used limited leverage. The new proposals attempted to extend that progress to higher-risk assets.

Leverage Debate Grows as More Issuers Test Boundaries

Several firms had already prepared filings aimed at even higher leverage. Volatility Shares submitted proposals for 5× leveraged crypto and equity funds, while 21Shares sought approval for a token-linked product. These filings triggered a closer regulatory review as they pushed derivative exposure far beyond past levels.

Leveraged ETFs have grown to more than $162 billion in assets, and some large funds recorded strong returns this year. Others reported steep losses, which added to the SEC’s concern about exposure during volatile markets

Market analysts said the speed of the warning letters showed the agency’s intent to draw a clear boundary on leverage. The notices left issuers with a choice to amend their strategies or abandon their plans. The SEC declined further comment due to the active review process.

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