SEC Halts ProShares: XRP & Leveraged Crypto ETFs Blocked in Regulatory Crackdown
The SEC just slammed the brakes on Wall Street's crypto ambitions. ProShares, the firm behind the first Bitcoin futures ETF, got its latest filing for leveraged XRP and crypto ETFs unceremoniously stopped. No new data, no public comment period—just a regulatory wall.
The Leverage Play Gets Shut Down
This wasn't about a simple spot ETF. ProShares wanted to launch funds that would use derivatives to amplify returns—and losses—on a basket of cryptocurrencies, including XRP. The SEC's move signals a hard line against complex, high-risk crypto products for the mainstream market. It's a classic case of the regulator playing defense, opting for outright prevention over complicated oversight.
A Chilling Effect for Innovation
The immediate fallout? A major roadblock for institutional crypto investment vehicles. Other asset managers eyeing similar leveraged or inverse products are now on notice. The message is clear: the path for novel crypto ETFs remains fraught, especially for assets like XRP that carry their own regulatory baggage. It prioritizes investor protection but at the potential cost of market evolution.
So, the innovation pipeline hits another snag. The traditional finance giants want a piece of the crypto action, but the gatekeepers aren't ready to hand over the keys to the more speculative tools—proving once again that in finance, the only thing that moves faster than a bull market is a regulator's red tape.
The U.S. Securities and Exchange Commission (SEC) has halted ProShares’ plans to launch a new lineup of 3× Leveraged crypto funds, including products tied to Bitcoin, Ethereum, Solana, and XRP. The regulator says the proposals do not meet the agency’s leverage rules, and nothing can move forward until ProShares fixes the filings or withdraws them completely.
What Triggered the Block?
Earlier this month, ProShares submitted amendments seeking approval for several high-leverage ETFs designed to deliver triple the daily performance of major assets, including cryptocurrencies and popular tech stocks. However, the SEC responded with a detailed letter stating that the funds violate Rule 18f-4, an Investment Company Act rule that limits how much leverage an open-end fund can take on.
Under this rule, a fund’s Value-at-Risk (VaR) cannot exceed 200% of an equivalent unleveraged portfolio. The SEC says ProShares’ proposed 3× products exceed that limit, making them incompatible with the standards that govern leverage risk.
SEC: “Fix These Issues or Withdraw the Filings”
In its letter, the SEC made it clear that it will not continue reviewing any of the proposed products until ProShares rewrites the strategies to properly follow Rule 18f-4. According to the agency, funds that track leveraged versions of assets must use those same assets as their “designated reference portfolio” when calculating risk. The SEC argues that ProShares’ filings did not fully reflect that requirement.
The regulator also reminded ProShares that it must delay the effectiveness of the filings until these problems are resolved.
XRP, Bitcoin, Ether, and Solana Among Blocked Products
The halted lineup includes:
- ProShares Daily Target 3× Bitcoin ETF
- ProShares Daily Target 3× Ether ETF
- ProShares Daily Target 3× Solana ETF
- ProShares Daily Target 3× XRP ETF
Dozens of other proposed 3× leveraged stock and commodity ETFs were also affected, as listed in the SEC’s Appendix.
What Happens Next?
ProShares now has two options:
Until ProShares responds, the SEC will not MOVE forward with any review
