The U.S. Securities and Exchange Commission (SEC) said it remains uncertain whether dozens of newly filed 3x and 5x leveraged ETFs comply with existing leverage limits, casting doubt on whether the products will be approved.
SEC investment management director Brian Daly said the agency has received an “unusually high number” of ETF registration statements since the government shutdown began, noting that current rules cap leverage at 2x under Rule 18f-4.
ETF issuer Volatility Shares recently filed for 27 new leveraged products, including the first-ever 5x single-stock ETF in the U.S., intensifying concerns about risk exposure for retail investors. These products aim to magnify daily stock performance — but can equally magnify losses.
Industry analysts expressed caution. Morningstar’s Bryan Armour said that more than half of leveraged ETFs launched over the past three years have closed, and many have lost nearly all their value. JPMorgan estimated that $26 billion in leveraged ETF selloffs last week worsened market volatility.
While the SEC has become more open to financial innovation in recent years, a 5x ETF “will test those limits,” Armour added. Due to the shutdown, SEC staff cannot review filings until operations resume, further delaying potential decisions.
