Wall Street tests SEC with bids for 3x Tesla and Bitcoin ETFs
A trio of issuers – Defiance ETFs, Themes and Direxion – have lodged filings for exchange‑traded funds (ETFs) designed to deliver three times the daily return of popular trades, including single stocks such as Tesla and crypto exposures like Bitcoin. If approved, they would mark a rare step‑up in risk for U.S. ETFs and another test of regulators’ tolerance for complex products.
Single‑stock 3x vehicles don’t currently trade in the U.S. because of Securities and Exchange Commission (SEC) guidance that capped new launches at 2x leverage about five years ago. The new proposals are light on the mechanics of how they’d square that circle, but point to the usual toolset – swaps, options and other derivatives – alongside daily rebalancing to target 3x performance.
The pitch arrives in a hyper‑competitive ETF market that has ballooned toward $13 trillion in assets. After years of fee wars, sponsors are differentiating on income, yield and leverage, pushing the envelope to hold investor attention. Roughly a third of ETFs launched this year have some leverage component, according to industry tallies. Regulators have warned about the risks. Triple‑levered products can decay quickly in choppy markets due to compounding and the daily reset. The point is illustrated overseas: a 3x Tesla product listed in Europe has fallen sharply this year even as the underlying stock gained – a reminder that path matters as much as destination when leverage is involved.
For crypto readers, the hook is obvious. A 3x Bitcoin ETF would pull options‑style exposure into a standard brokerage wrapper, potentially broadening access far beyond dedicated crypto venues. But the same caveats apply: these funds aim to magnify one‑day moves, they rebalance every session, and performance over longer windows can diverge from “3x the chart” that investors have in mind.
The regulatory backdrop is fluid. While some 3x funds tied to broad indexes pre‑date current guidance and continue to trade, the SEC has generally limited fresh leverage to 2x to prevent catastrophic losses among retail users. Issuers may be betting that today’s policy mood is more permissive and that clearer rules around what can underlie a single‑stock leveraged ETF will help their case. The agency did not immediately comment amid the ongoing U.S. government shutdown.
What exactly is on the table? Defiance’s lineup targets triple long exposure and includes inverse (‑3x) concepts as well, with Milliman Financial Risk Management listed as a sub‑adviser in the paperwork. Direxion and Themes submitted similar requests on Friday. Each would seek 3x of daily returns via financial instruments and would rebalance every day to maintain the target factor.
From here, the key variables are straightforward. The SEC can request changes, slow‑roll, or deny, nudging issuers toward 2x versions. If any 3x funds get a green light, particularly those tied to Bitcoin, expect a scramble among market‑makers, hedging counterparties and rivals to stand up competing products. If not, the message is equally clear: the U.S. market stays in the 2x lane for now, and the complexity race pauses at the guardrail.
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