SEC Approves Triple-Leveraged Bitcoin Ether and Commodity ETFs for Listing
The U.S. Securities and Exchange Commission (SEC) has given the green light to a new category of triple-leveraged exchange-traded funds (ETFs) covering Bitcoin, Ether, gold, silver, crude oil, and natural gas. On October 2, the SEC approved a rule change by Cboe BZX, allowing Volatility Shares LLC to list six leveraged ETFs designed to move three times the daily price changes of their underlying assets. However, despite this approval, none of the funds are available for trading yet.
The approval process involves two key steps. First, the SEC cleared the exchange-level hurdle on October 2. Next, Volatility Shares must secure additional approval for its Form S-1 registration statement under the Securities Act of 1933. Without this, the funds cannot start trading. Each fund is structured as a Commodity-Based Trust Share, which operates under lighter regulatory oversight compared to traditional registered investment companies.
These leveraged ETFs will not hold the actual assets but instead invest in futures contracts, resetting their leverage daily. This means that while a 1% daily rise in Bitcoin might translate to a 3% gain for the fund, prolonged holding periods can lead to significant divergence due to the daily reset and roll costs associated with futures contracts. This structure is not new, but the inclusion of Bitcoin and Ether alongside traditional commodities marks a notable shift in regulatory normalization of crypto assets.
The potential appeal of these funds lies in their accessibility, offering leveraged crypto exposure through a standard brokerage account without the need for margin agreements or derivatives platforms. However, the same mechanisms that amplify gains can also magnify losses, posing risks for inexperienced investors who may not fully understand the daily reset mechanics. Volatility Shares, already managing 2x leveraged Bitcoin and Ether ETFs, is expanding into this higher-risk territory with the SEC’s latest approval.