New York, USA – ProShares, a leading provider of exchange-traded funds (ETFs), has withdrawn registration requests for certain highly leveraged ETFs after receiving a warning from the U.S. Securities and Exchange Commission (SEC). The regulator flagged potential risk exposures and temporarily paused the review of these innovative products.

The SEC’s letters, sent on Tuesday to nine ETF providers including ProShares, Direxion, and GraniteShares, requested additional clarity on funds that seek to replicate up to five times the performance of underlying stocks. These highly leveraged ETFs are designed to amplify returns, but carry significant market and volatility risks that the SEC wants issuers to address before approval.

Details of ProShares’ Withdrawn ETFs

ProShares had aimed to launch ETFs targeting three times the returns of major technology stocks, including Meta Platforms (META) and Broadcom (AVGO). The withdrawals reflect the company’s acknowledgment of the SEC’s concerns, stating:

“We understand and appreciate the recently published view of the SEC staff regarding certain novel leveraged ETFs filed by several issuers, indicating that such funds do not comply with relevant legal requirements.”

In addition to tech-focused leveraged ETFs, ProShares had sought approval for funds tracking specific sectors, countries, and cryptocurrencies, highlighting the growing trend of innovative and complex ETF structures in the U.S. financial market.

Broader Market Implications

The SEC’s move signals heightened regulatory scrutiny of leveraged and high-risk ETFs, emphasizing the need for transparency and investor protection. Industry analysts note that the warning could impact other ETF providers seeking to launch similar high-leverage products, potentially slowing the pace of new ETF launches in volatile sectors.

Two other recipients of the SEC letters, Tidal Financial and Volatility Shares, declined to comment on the regulatory correspondence, underscoring the cautious approach many ETF issuers are taking in light of the review.