Cboe is seeking a regulatory exemption to list 3x leveraged Bitcoin and Ethereum futures ETFs, even as existing 2x crypto funds have posted steep losses, highlighting the risks of daily resetting leverage for U.S. investors
Cboe BZX is seeking permission from the U.S. Securities and Exchange Commission (SEC) to list exchange-traded funds (ETFs) that aim to deliver three times the daily performance of Bitcoin and Ethereum futures. The proposal, filed in August, would cover six Volatility Shares funds tied to Bitcoin, Ethereum, gold, silver, crude oil, and natural gas. Unlike spot ETFs, these products would use futures contracts traded primarily on CME, not direct holdings of BTC or ETH.
Regulatory Hurdles for 3x Leverage
The proposed 3x leveraged funds do not qualify under Cboe's standard commodity-trust listing rules, which exclude products seeking a multiple of a benchmark's daily return. To move forward, Cboe has filed a Section 19(b) request for a specific SEC exemption. The funds would be sponsored by Volatility Shares LLC, which is registered as a commodity pool operator with the Commodity Futures Trading Commission (CFTC). U.S. Bancorp Fund Services would serve as transfer agent and administrator, while US Bank National Association would act as custodian. The funds would operate as commodity pools registered with the CFTC, not as investment companies under the Investment Company Act of 1940, but would still require an effective registration statement and SEC approval before trading could begin.
How Daily Resetting Leverage Works
Each proposed ETF would reset its leverage daily, targeting three times the daily move of its underlying futures benchmark. This structure means that longer-term returns can diverge sharply from simply tripling the underlying asset's performance, especially during volatile periods. The funds would use first- and second-month CME futures contracts, rolling positions over five business days. If preferred contracts become unavailable due to exchange-imposed limits or risk controls, the funds could use later-month futures, related exchange-traded products, or listed options to maintain exposure. This flexibility is designed to help the funds track their benchmarks, but it also introduces additional tracking and execution risks.
2x Crypto ETFs Reveal Amplified Risks
Volatility Shares already offers 2x leveraged Bitcoin and Ethereum futures ETFs, providing a real-world example of how daily resetting leverage can impact returns. According to sponsor data, the 2x Ethereum ETF (ETHU) posted a -48.81% net asset value (NAV) return for the second quarter of 2026, -79.61% over one year, and an average annualized loss of -96.15% since its June 2024 launch. The 2x Bitcoin ETF (BITX) reported a -29.76% quarterly NAV return and a -78.93% one-year loss for the same period. These results reflect not only leverage but also the effects of futures roll costs, compounding, and market volatility. For context, other crypto companies have also faced pressure from market swings; for example, Riot Platforms recently sold Bitcoin reserves to fund a major data center lease, highlighting the broader impact of volatility on crypto businesses.
Market Impact and Investor Considerations
Daily resetting leveraged ETFs require significant trading to maintain target exposure, especially after large market moves. For a hypothetical $100 million 3x fund, a 5% move in the benchmark could trigger roughly $30 million in additional buying or selling. This trading activity can affect liquidity and execution costs, particularly in less liquid futures markets. The SEC's decision on Cboe's proposal will determine whether these higher-risk products become available to U.S. investors, but even with approval, the funds would still need to complete registration and listing steps before launch.
According to Volatility Shares' filings, the 2x Ethereum ETF (ETHU) experienced a -96.15% average annualized NAV return from its June 4, 2024 inception through June 30, 2026. The 2x Bitcoin ETF (BITX) posted a -78.93% one-year NAV return for the same period. These figures underscore the potential for significant losses in leveraged crypto ETFs, especially when held for more than a single trading day.
Leveraged ETFs that reset daily are designed for short-term trading rather than long-term holding. Because of the compounding effect, returns over multiple days can diverge sharply from the expected multiple of the underlying asset's performance, particularly in volatile or choppy markets. Investors considering these products should understand the mechanics of daily resetting leverage, the risks of futures-based exposure, and the potential for amplified losses compared to unleveraged or spot-based ETFs.
