ProShares Withdraws 3x Crypto ETFs Following SEC Volatility Warning

TLDR

• ProShares withdrew its 3x crypto ETFs following SEC concerns about leverage risks.
• The SEC highlighted high volatility in 3x leveraged crypto ETFs like Bitcoin and Ethereum.
• ProShares’ 3x leveraged funds would have targeted extreme returns on volatile assets.
• SEC blocked 3x ETF plans, citing risks of significant losses during market swings.

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ProShares has withdrawn its proposed lineup of 3x leveraged exchange-traded funds (ETFs) targeting Bitcoin, Ethereum, XRP, and Solana. This decision comes after the U.S. Securities and Exchange Commission (SEC) raised concerns about the funds’ ability to manage volatility and leverage risks.

SEC Concerns Over High-Leverage Risk

The SEC expressed its concerns regarding ProShares’ 3x leveraged ETFs, which were designed to provide amplified daily returns on assets such as Bitcoin, Ethereum, XRP, and major technology stocks. The SEC warned that the proposed funds may not properly reflect the extreme volatility of the underlying assets and could expose investors to excessive risk. 

The SEC’s concerns were related to Rule 18f-4 under the Investment Company Act of 1940, which limits a fund’s leverage to no more than 200% of its reference portfolio.

The letter from the SEC, dated December 2, 2025, asked ProShares to revise its filings to ensure that the funds’ objectives aligned with the legal requirements. ProShares, in response, decided to withdraw the filings for its 3x leveraged ETFs. This includes the Bitcoin, Ethereum, XRP, and Solana funds, as well as leveraged ETFs targeting tech stocks like Tesla and Nvidia.

Why ProShares Called Off the 3x ETFs

ProShares suspended its ETF filing after the SEC raised concerns over the risk associated with the extreme leverage of the products. The SEC’s intervention emphasized that these funds would have exposed investors to substantial risks due to the high volatility of the underlying assets, such as cryptocurrencies and tech stocks.

The SEC’s request for changes or delays in the filings prompted ProShares to pull back, acknowledging that the funds did not meet the required legal standards. The proposed 3x leveraged ETFs were designed for traders seeking larger returns, but their amplified exposure to volatile assets raised questions about their stability in unpredictable market conditions.

The Risk of Leveraged ETFs

Leveraged ETFs, particularly those with 3x or 5x leverage, carry significant risks. Research has shown that these funds can experience extreme losses in volatile markets. A 1% drop in the price of Bitcoin, for example, could lead to a 3% to 5% loss for investors holding a 3x leveraged ETF. The Bloomberg Intelligence analysis also found that 3x leveraged ETFs targeting single stocks or volatile assets often face “blow-up” scenarios, where the funds’ value can decrease sharply due to market fluctuations.

For ProShares, this risk was apparent when the SEC highlighted that 3x leveraged ETFs could potentially face market events where the underlying assets moved more than 33% in a single day. Over the past five years, stocks like Tesla and Nvidia have experienced such extreme volatility. This underlined the statistical likelihood of significant losses for investors holding leveraged positions in these assets.

ProShares Joins Other Issuers in Scrapping High-Leverage Plans

ProShares is not the only firm that has faced challenges with high-leverage crypto ETFs. Recently, CoinShares also canceled plans for 3x leveraged ETFs on assets like XRP, Solana, and Litecoin.

Other issuers, such as Direxion and Tidal Financial, have also encountered resistance from the SEC over their 3x leveraged crypto and tech stock ETF proposals. The SEC’s regulatory actions reflect growing concerns about the risks associated with high-leverage products, particularly in the volatile cryptocurrency market.

Although 2x leveraged ETFs are allowed in the U.S., no 3x or 5x leveraged ETFs exist on the market yet. The SEC’s intervention has highlighted the need for further scrutiny of such products to protect investors from extreme losses in volatile markets.

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