- ProShares withdrew its full 3x ETF lineup after the regulator warned that high leverage no longer aligns with asset risk.
- Data showed that over 300 trading sessions had extreme price swings that could erase 3x ETFs in a single day.
- The regulator signaled that leveraged crypto and tech ETFs pose strong failure risks due to steady market volatility.
ProShares has withdrawn its full lineup of proposed 3x leveraged technology and crypto ETFs after the U.S. Securities and Exchange Commission raised concerns about leverage risk. The products aimed to offer 3x daily exposure to Bitcoin, Ether, XRP, Solana and several major tech stocks. The firm paused the launch when the regulator requested amendments and signaled that the products might not reflect the extreme volatility of the underlying assets.
Regulator Flags High Leverage Limits
The Division of Investment Management at the regulator sent a letter to the company outlining its concerns. It cautioned that products targeting leverage above 200% rarely match the actual risk carried by the assets. The letter also noted that the proposed funds did not track the securities or indices they were meant to follow. It listed several Daily Target 3x ETFs that would require changes before any approval.
Industry Pullbacks Increase
A similar retreat occurred when another issuer dropped plans for XRP, Solana and Litecoin ETFs. The move signaled a growing caution in the market about the viability of leveraged products. The abandoned lineup from ProShares included Daily Target 3x Bitcoin, 3x Ether, 3x XRP and 3x Solana . The company also withdrew 3x funds tied to Amazon, Coinbase, Circle, Google, MicroStrategy, Nvidia, Palantir and Tesla.
Data Points to Consistent Volatility
Analysis from Bloomberg Intelligence offered insight into the regulator’s stance. Research showed that 3x leverage across single-stock ETFs and smaller volatile companies carried a high chance of failure. The analysis identified 66 stocks that were listed for future 3x products.
Over the past five years, at least one of those stocks moved 33% in a single trading session during more than 350 sessions. The regulator has blocked several 3x and 5x filings in recent months due to similar volatility issues.
Risk Levels Considered Too High
The data showed that such large swings could mathematically wipe out a 3x leveraged product. About 40 of the 66 stocks crossed the volatility threshold at least once. This suggested that termination risk was not theoretical but statistically likely.
Analysts noted that 2x single-stock ETFs already show extreme price swings, which makes the risks greater for 3x and 5x crypto products. They also indicated that issuers would face greater regulatory pressure if such ETFs entered the market.
Broader Impact on Leveraged ETF Plans
The latest withdrawal highlights the increasing scrutiny surrounding highly leveraged financial products. The regulator emphasized that amplified exposure creates significant risk for traders who expect predictable daily returns.
The firm’s decision adds pressure on other issuers planning similar products as the market reassesses appetite for aggressive leverage structures.
