SEC Halts Leveraged ETF Approvals Above 200% Leverage for Direxion, ProShares, and Tidal Under the Investment Company Act of 1940

The latest briefing from COINOTAG News, citing Cointelegraph, reports that the U.S. SEC has issued warning letters to ETF sponsors Direxion, ProShares, and Tidal, halting applications for leveraged funds that exceed a 200% risk exposure threshold.

The regulator bases the action on the Investment Company Act of 1940, which limits a fund’s risk exposure to no more than 200% of its reference portfolio, defined as the unleveraged assets or benchmark indices used to calibrate leverage.

For investors, the move signals enhanced risk controls and stricter disclosure around leveraged vehicles. The development could influence ETF launches and the diligence required for leveraged product pipelines, reinforcing market credibility and compliance standards.