Compounding Effects from Daily Reset
The 3x leverage target resets on a single-trading-day basis. If the benchmark rises 5% in one day, the fund aims to rise approximately 15% before fees and expenses. Conversely, a 5% decline would result in an approximately 15% loss.
This daily reset means that holding periods spanning multiple days can produce returns that diverge significantly from three times the benchmark's performance due to compounding effects. For example, if the benchmark rises 10% and then falls approximately 9.09% to return to its original level, a 3x leveraged fund would rise 30% on the first day and fall approximately 27.27% on the second. Even though the two-day benchmark return is flat, the fund would be down approximately 5.45%.
Sustained directional moves boost performance, while markets that repeatedly reverse direction tend to erode value. The filing positions these products as short-term trading instruments that require position monitoring each session, rather than products that deliver three times the return of bitcoin or ether over any period an investor might choose.
Why Individual Approval Is Required
Cboe BZX seeks to list these products as "Commodity-Based Trust Shares" under BZX Rule 14.11(e)(4). The exchange already has generic listing standards that allow certain commodity products to list without individual rule filings, but those standards prohibit funds that seek returns equal to a specified multiple of a benchmark.
Because the proposed bitcoin and ether ETFs are designed to pursue three times the daily return of their futures benchmarks, they fall outside the generic standards. Cboe BZX therefore sought exemptive approval for these specific products from the SEC through the 19b-4 process under Section 19(b) of the Securities Exchange Act.
The funds will not be registered investment companies under the Investment Company Act of 1940. Instead, they will be structured as commodity pools under the oversight of the U.S. Commodity Futures Trading Commission. Volatility Shares will serve as the commodity pool operator for each fund as a CFTC-registered entity.
Each fund will be created and redeemed in creation units of 10,000 shares, with a minimum of 100,000 shares required to be outstanding at listing. Net asset value will be calculated daily, and an intraday indicative value will be published every 15 seconds during trading hours. Cboe may halt trading if material price or portfolio information becomes unavailable.
Review Just Beginning; No Listing Date Set
The SEC must approve or disapprove the proposal, or institute proceedings, within 45 days of publication in the Federal Register, extendable to a maximum of 90 days. The public comment period runs for 21 days from publication.
However, exchange rule change approval alone does not enable listing. The registration statements for the VS Trust funds must also become effective. The current filing does not include ticker symbols, expense ratios, or listing dates. Until all listing and registration requirements are satisfied, these funds remain at the proposal stage.
Europe has taken the lead on leveraged crypto products. London-based asset manager Leverage Shares listed Europe's first 3x and -3x leveraged ETPs tracking bitcoin and ether on Switzerland's SIX Exchange in November 2025. If 3x leveraged crypto ETFs come to fruition in the U.S. market, they would follow that precedent.
Cboe argues that it can effectively oversee these funds because the primary futures contracts trade on CFTC-regulated markets and are subject to surveillance information-sharing agreements. While market surveillance and transparency measures are in place, they do not mitigate the risks of losses, compounding effects, and tracking error associated with 3x daily exposure.
