Three times the swing, still not trading

The Securities and Exchange Commission on Friday 2 October approved a Cboe BZX Exchange rule change that lets the exchange list six triple-leveraged funds from Volatility Shares, including products tied to bitcoin and ether, according to the commission's order. The approval covers the listing rule, not the start of trading. The funds "can't trade yet", CoinDesk reported on Monday, because the issuer still needs the SEC to declare its registration statement effective, and the order sets no deadline for that.

The order, Release No. 34-106577, was issued by the Division of Trading and Markets under delegated authority. Cboe filed the proposal (SR-CboeBZX-2026-065) on 10 August and it was published for comment in the Federal Register on 19 August; the commission said it received no comments. The six funds, each a series of VS Trust, seek three times the daily performance of gold, silver, bitcoin, ether, light sweet crude oil and natural gas, as measured by a portfolio of first- and second-month futures contracts. Volatility Shares LLC is the sponsor, Wilmington Trust the trustee and U.S. Bank the custodian.

A separate rule change was needed because of how the funds are built. They are commodity-based trust shares under BZX Rule 14.11(e)(4), and the order says that rule "precludes" such shares from generic listing if they seek leveraged or inverse exposure. Cboe said the funds meet the rule's other requirements. Despite "ETF" in their names, the order classes them as exchange-traded products: they register their shares under the Securities Act but are not regulated under the Investment Company Act of 1940.

We found no conditions in the order specific to the bitcoin and ether funds. It makes the proposal's representations about benchmarks and holdings continued listing requirements, requires the trust to notify the exchange of any failure to comply, and says Cboe will begin delisting procedures if a fund falls out of compliance. The commission also pointed to Regulation Best Interest, FINRA's "increased sales practice and customer margin requirements" for leveraged products, and the exchange's own suitability rule, BZX Rule 3.7, as existing investor protections.

The order also records that leveraged products on all six commodities already trade. It cites Volatility Shares' 2x bitcoin and ether funds, BITX and ETHU, and the MicroSectors Gold 3x Leveraged ETN, and lists 3x silver, crude oil and natural gas products that were once listed but no longer trade. CoinDesk said crypto funds in the US had until now been capped at 2x leverage. On the order's own evidence, the novelty is the multiple applied to crypto, not triple leverage as such.

The costs are in the preliminary prospectus filed on 17 August, which sets a management fee of 1.85 per cent a year of average daily net assets for each fund. Its breakeven table, which assumes a $15.00 share price, puts total fees and expenses at 2.48 per cent for the bitcoin fund (BITH) and 3.28 per cent for the ether fund (ETHK). After assumed interest income of 0.50 per cent, the 12-month breakeven is 1.98 per cent for bitcoin and 2.78 per cent for ether. An amended registration statement filed on Wednesday 7 October carries the same breakeven figures. The numbers are the sponsor's own.

Because the funds reset daily, returns over longer periods can diverge from three times the underlying move. By our arithmetic, if bitcoin rises 10 per cent and then falls 10 per cent, it ends down 1 per cent; a 3x fund gains 30 per cent and then loses 30 per cent, ending down 9 per cent. The prospectus notes that bitcoin fell from about $90,000 to about $60,000 "in a matter of days" between late January and early February 2026, a drop of about 33 per cent, and warns that a single-day move approaching 33 per cent "could result in the total loss or near total loss" of an investment in a fund. Bloomberg's senior ETF analyst Eric Balchunas, quoted by CoinDesk, wrote on X: "Leveraged ETFs are for trading, not investing."

The next step is the registration statement. The amended filing is still a preliminary prospectus marked subject to completion, and it says in capitals that the funds "have not commenced trading". Its cover carries a date of 20 October 2026, but that is not a launch date, and the SEC's EDGAR system showed no notice of effectiveness for VS Trust as of Sunday. Neither the order nor the filings say when the shares will begin trading.

The approval is separate from the Commodity Futures Trading Commission's work on leveraged retail crypto trading, which Komposite covered in its report on the agency's 5 October notice. Other markets are moving more cautiously: Thailand's new rules for bitcoin and ether ETFs allow no margin at all, as we reported on Friday. The SEC's order answers a narrower question, whether an exchange may list the funds, and leaves the timing to the registration process.