SEC Bans 4x ETFs: The Wild West of Leverage Comes to a Halt!

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Hold onto Your Wallets, Folks! The SEC Just Said “No More Rocket Fuel”

Key Highlights

  • The SEC, that party pooper, decided that ETFs going over 300% leverage are about as welcome as a skunk at a garden party, so they hit Pause on Roundhill’s latest circus act!
  • Regulators shunned the fancy risk benchmarks-turns out, life’s simpler when you compare your risky helium balloon to a regular boring kite.
  • Thanks to Rule 18f-4, the days of the ‘leverage arms race’ are over-turns out, 4x exposure is now more outlawed than grandma’s secret moonshine recipe.

In a move that has Wall Street traders clutching their even-more-leveraged dreams, the SEC has told Roundhill ETFs, “Nope, no 4x fireworks today!”

They sent a formal note-probably with a nice Christmas sticker-directly to Roundhill’s counsel, Morrison Warren, basically saying, “Nice try, but this circus is not happening.”

The financial world is on the edge of their seats, wondering if crypto ETFs will be next to be shown the door, as the SEC tightens its grip tighter than grandma’s humidifier.

Under Rule 18f-4, funds playing with crypto derivatives must keep their risk lower than grandma’s old kettle-200% of a boring old index’s VaR. So, 2x crypto ETFs are basically riding a very thin wire over the Grand Canyon.

The 18f-4 Rule: The Party Pooper

This rule was made to keep risky business in check-think of it as Uncle Sam’s way of saying, “No more of that crazy 400% leverage dance!”

Since Roundhill wanted to go 4x, or 400%, the SEC rolled its eyes and said, “Nice try, but that’s just not how we roll here.”

The Big No and The Fiduciary Fumble

After Roundhill tried to jump the gun with filings for 400% exposure, the SEC basically said, “Hold your horses!” They demanded the firm put on the brakes and reconsider their strategy-probably with a pointed finger for good measure.

The SEC wondered, “Are the trust’s directors completely insane or just really adventurous?” as they questioned how they could be fiduciaries while flirting with regulations that are about as flexible as grandma’s cornbread.

Risk? What Risk?

Roundhill tried to bend the rules, claiming they used a different risk baseline. Sorry, folks, the SEC wasn’t buying that load of baloney-if you’re tracking the S&P, then that’s your yardstick, not some fancy new measure that makes your risk look as small as a gnat.

While short-term traders love their 2x and 3x thrill rides, the SEC is playing hardball with anything more than 2x-because, spoiler alert, more than that is basically playing with fire while riding a unicycle blindfolded.

Rules, Rules, and More Rules

The SEC’s message is loud and clear: “More than 200% leverage? Nope. Not happening, not now, not ever.”

Issuers are faced with a choice: pack up their leverage dreams or rewrite their entire strategy-like switching from rocket fuel to not blowing up the planet.

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2026-01-30 23:08