SEC blocks multiple 3x and 5x crypto ETF filings, citing Rule 18f‑4 limits and warning issuers to revise strategies or withdraw.
The U.S. Securities and Exchange Commission has moved to block multiple 3x and 5x leveraged crypto ETF filings. The regulator sent formal notices to issuers after a surge of submissions tied to digital assets and equities.
Firms have now been told to change their strategies or withdraw their plans.
SEC Flags Filings Over Leverage and Risk Rules
The SEC raised concerns that several ETF proposals attempted to work around Rule 18f‑4. The rule limits value‑at‑risk to twice the level of a chosen benchmark. Bloomberg analyst Eric Balchunas said the filings were flagged for attempting to bypass that quota.
Looks like SEC is pushing back on all the 3x and 5x filings, calling them out on the loophole they were trying 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… pic.twitter.com/J8p6o1ND2B
— Eric Balchunas (@EricBalchunas) December 2, 2025
Rule 18f‑4 requires strict controls for any fund that uses derivatives. The rule forces issuers to follow a documented risk program and maintain ongoing monitoring. The SEC said that higher leverage could create unstable trading conditions.
Balchunas reported that the Commission warned that allowing leverage above 2x may lead to frequent termination events.
He added that the SEC told issuers to either meet current rules or withdraw their applications. The notice also covered sector‑based ETFs and single‑stock leveraged products.
Direxion and Other Issuers Pulled Into Review
The SEC letter made reference to filings from Direxion. The firm submitted multiple leveraged ETF plans tied to crypto assets and high‑beta equities. These products aimed to offer amplified exposure using 3x and 5x leverage.
The notice affects other firms that submitted similar proposals for digital asset exposure. It also extends to leveraged ETFs linked to stock sectors and individual stocks. Issuers had expected a more open process due to rising demand in the crypto market.
Rule 18f‑4 capped leverage at 200 percent value‑at‑risk.
The SEC repeated that limit when addressing the new filings. The agency said firms must show that their products can operate within current controls. Without those changes, the plans may be removed from consideration.
Related Reading: Vanguard Approves Trading for Crypto ETFs
Leveraged ETF Filings Grew Rapidly During October
SEC investment management director Brian Daly said filings rose at a fast rate in October. “
The agency has received a large number of registration statements for ETFs seeking to offer 3x and 5x leveraged, equity‑linked exposure,” he stated. Daly also said it is unclear if these filings fit Rule 18f‑4.
During that time, VolShares submitted 5x ETF filings tied to SOL, ETH, and XRP. Their proposals also included leveraged strategies on stocks such as Tesla, Nvidia, and Coinbase.
GraniteShares also filed paperwork for a 3x XRP fund.
Morningstar researcher Bryan Armour said that more than half of leveraged ETFs launched in the past three years have closed. He noted that the SEC has been open to new strategies. However, he also said current filings may face more pressure due to the leverage level.
