The US SEC has sent out a new wave of ETF proposal rejection letters to ProShares, Direxion, and GraniteShares  For the first time, the SEC added the ProShares, Direxion and GraniteShares ETFs that attempted to offer 3X and 5X leverage on Bitcoin and other digital tokens.

This marks the end of the hyper-leverage era for crypto ETFs.  Most of the affected firms, especially ProShares, have already begun withdrawing their leveraged offerings on Bitcoin, Ethereum, Solana, and XRP. Other affected firms have begun discussing the next steps to address the <a href="https://x.com/i/trending/1996228868957667828" target="_blank" rel="nofollow noopener">SEC's issues</a>.
<h2>The SEC Is Obstructing The 200% Leverage Rule</h2>
The SEC’s objection relates primarily to its imposition of Rule 18f-4, which governs leverage funds, and the SEC’s exercise of its 200% leverage regulatory authority for ETPs holding highly risky ETPs. The proposed funds, which focused on volatility in crypto and certain equities, were of far greater magnitude and posed ETP risks which the SEC considered unreasonable, especially given the positions of the issuers’ benchmarks which were considered to be clearly unreasonable in their expectations of volatility and, ultimately, large movements of disproportionate magnitude.

The SEC’s inaction in this instance is protective of the retail investor and the unreasonable risks of highly leveraged products in highly leveraged markets. Cramer of the CNBC Investing Club praised the SEC’s inaction as “a gutsy pro-investor move” which “will save <a href="https://www.cryptoknowmics.com/news/400-million-xrp-offload-hits-market-as-whales-take-profits-post-etf-launch/" target="_blank" rel="noopener">ETF</a> investors billions.”

The sponsoring firms must now postpone the effectiveness of their filings, and the SEC has said it will stop considering the proposals for the period of time it expects to take to eliminate the leverage issues, which will mean a considerable period of time for these highly speculative crypto-linked products.

SEC Stops Crypto ETF  Filings Due to Leverage under 18F4

The SEC halted 3x and 5x leveraged crypto ETF filings, including Solana and XRP products, citing Rule 18f-4's strict 200% leverage cap.

SEC Stops Crypto ETF Filings Due to Leverage under 18F4

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