SEC is pushing back 3x and 5x filings as Regulators Tighten Oversight of Leveraged ETF Proposals

• SEC demands revisions to leveraged ETF proposals that exceed Rule 18f-4’s risk limits.
• Filings tied to tech and crypto indices face regulatory challenges over value-at-risk rules.
• Grayscale expands ETF lineup as the Chainlink Trust converts despite broader SEC scrutiny.

The U.S. SEC is pushing back 3x and 5x filings submitted by several ETF issuers, signaling heightened scrutiny of leveraged fund structures that attempt to operate around the limitations imposed by Rule 18f-4. Recent correspondence shows the agency requesting revisions to investment objectives and strategy disclosures after identifying efforts to use mechanisms that could bypass the 200% value-at-risk threshold.

SEC is pushing back 3x and 5x filings Under Rule 18f-4 Requirements

The SEC is pushing back 3x and 5x filings by instructing issuers to either modify their proposals or withdraw them if they cannot demonstrate compliance with existing derivatives rules. Rule 18f-4 sets out mandatory risk-management protocols and limits the degree of leverage permissible within registered investment companies. Applications seeking exposure levels beyond the rule’s structure were flagged for inconsistent language that required correction.

However, documents reviewed by market participants show the regulator questioning whether certain filings attempted to rely on design features that would circumvent the value-at-risk calculation. Issuers were informed that any strategy not aligned with the rule must be revised to meet the same standards applied across the broader ETF market. Direxion, known for its leveraged and inverse fund lineup, appeared among the firms receiving notices from the agency.

Many of the affected submissions were tied to technology-sector benchmarks and crypto-asset-linked indices, such as those related to Bitcoin and Ethereum. The intervention reflects the consistency with which regulators continue applying derivatives oversight to both traditional and digital-asset ETFs.

Market Activity Continues as Filings Face Additional Review

Even as the SEC is pushing back 3x and 5x filings, new crypto-related products are entering regulated markets. Grayscale has completed the conversion of its Chainlink Trust into the Grayscale Chainlink Trust ETF (GLNK), which is now trading on the NYSE Arca. The ETF holds more than $17 million in assets that were previously held in the private trust and offers exposure to Chainlink’s market value through a regulated exchange structure.

According to the company, the timing corresponds to the expanding role of decentralized oracle networks in blockchain-based systems. Chainlink is used across applications involving tokenized assets, cross-chain data transmission, and external data verification for smart-contract environments.

GLNK joins several newly launched products from the firm, including ETFs referencing XRP, Dogecoin, and Solana. Grayscale is also seeking approval for an ETF tied to Zcash, extending efforts to expand regulated access to specific areas of the digital-asset ecosystem.