ETF issuers continue to push the boundaries of product innovation and unconventional strategies attract greater attention, as regulators consider the next wave of novel ETFs outlined in my previous research note. Recent rule changes for listing 3x leveraged commodity-based products and a wave of CFTC-regulated sports futures are recent milestones since I last covered the topic. While these developments demonstrate how far ETF innovation has evolved, they also raise important questions about regulatory approval, underlying investment exposure, and the risks investors may be taking.The Key Takeaways:
The potential listing of 3x crypto and commodity ETPs is a significant milestone but does not necessarily pave the way for higher-leveraged single-stock ETFs.
Proposed sports-performance ETFs offer exposure to team statistics rather than binary outcomes, introducing new regulatory and investment considerations.
Sports-related equity ETFs provide an alternative to performance-based strategies, offering exposure to businesses benefiting from the sports industry.
Leveraged ETFs Potentially Push Beyond the Current 2x LimitOn October 2, the SEC approved a rule change allowing the exchange listing of six new 3x leveraged products from Volatility Shares, offering exposure to bitcoin, ether, gold, silver, crude oil, and natural gas. These products seek to deliver three times the daily performance of their respective futures-based benchmarks, expanding the range of leveraged strategies available to investors.
Under Rule 18f-4 of the Investment Company Act of 1940, leveraged ETFs are subject to derivatives risk limits that cap targeted daily leverage at 2×. Certain existing 3x ETFs were grandfathered in when the rule was adopted in 2020, but new funds generally cannot provide 3x leverage. As a result, the rule has limited the introduction of higher-leverage strategies including 3x, 4x, and 5x within traditional 1940 Act-registered ETFs.
The potential new Volatility Shares products, however, follow a different regulatory path. They are structured as commodity-based exchange-traded products under the Securities Act of 1933 rather than investment companies under the 1940 Act. That means they are not subject to Rule 18f-4’s leverage restrictions. However, because leveraged commodity-based products do not qualify for generic exchange listing under existing rules, their listing required separate SEC approval.
Currently, Volatility Shares offers a 2x Bitcoin ETF (BITX C+), which has over $1.2 billion in assets. This ETF is a popular tactical trading tool that tends to see higher flows when bitcoin prices are more volatile. A 3x leveraged bitcoin ETF would potentially attract traders seeking even greater exposure to short-term price movements, particularly during these periods of heightened volatility. However, it is unclear whether a new product would generate additional investor demand or shift trading activity away from existing leveraged bitcoin ETFs.These Changes Don’t Necessarily Open Doors for 4x & 5x ETFsThis distinction is particularly relevant as the SEC continues reviewing novel ETFs, including filings involving higher leverage and unconventional assets. That review primarily focuses on questions involving the 1940 Act framework, while commodity-based exchange-traded products (ETPs) can operate outside it (although that doesn’t mean they lack SEC regulation). Other familiar products, including the iShares Bitcoin Trust ETF (IBIT ) and the SPDR Gold Shares (GLD B), also use trust structures outside the 1940 Act, although they are not leveraged.
The rule change approval of 3x commodity-based ETPs does not necessarily open the door to 4x or 5x leveraged ETFs because there is no precedent for that amount of leverage — particularly for single-stock ETFs. Because individual stocks are securities rather than commodities, issuers cannot use the same commodity-based structure to avoid the leverage restrictions applicable to registered investment companies. For now, the approvals seem to show greater flexibility for certain commodity-linked ETP structures rather than a broader relaxation of leverage limits across the ETF industry.Team-Specific ETFs May Make Sports Performance an InvestmentCME group has recently launched trading of CFTC-regulated hockey futures in late September and baseball futures more recently in October (see full list on the CME Group website). This makes approval of NHL and MLB filings for team-specific sports ETFs from Roundhill, Volatility Shares, REX, and LeagueShares more possible. (There are also NBA sports ETF filings, but those futures are not yet live.)
These ETF filings allow individuals to gain exposure to sports teams through a familiar ETF wrapper. These are not like binary event contracts, nor would investors own an equity stake in the teams. Instead, the proposed funds would gain exposure to derivatives tied to indexes that measure team performance throughout the season.
The underlying indexes are developed by FutureSports, which uses official league statistics to calculate a numerical value for each team. For example, each NHL or MLB team index begins the season at 7,500 points, with positive statistics adding points and negative statistics subtracting points. This means a team could win a game without necessarily generating a positive return for its performance index, depending on its underlying statistics. Below is an example of the current index levels for MLB and NHL indexes displayed on the CME Group website.Are Sports ETFs Considered Novel ETFs?The SEC has not specifically named sports ETFs as a category of novel ETFs (they only name “crypto assets, commodity-focused instruments, single-stock strategies, heightened leverage, blockchain-enabled opportunities, private assets, and event contracts”). But its recent request for comment also covers funds investing in “unconventional asset classes or pursuing innovative strategies,” which means sports performance ETFs could be included.
While swaps and futures are already widely used within ETFs, these ETFs would link investment returns to benchmarks based on sports statistics rather than traditional financial assets. While this seems less like sports betting than event contracts, it still introduces new considerations around valuation, markets, and whether the proposed structures satisfy investment-company requirements. Ultimately, sports-performance ETFs could become another test of how regulators balance product innovation with investor protection.Prediction Markets Help Grow Broader DemandWhile sports ETFs seem like a niche investment with small demand potential, prediction markets like Kalshi and Polymarket have brought more mainstream popularity into this space (again — prediction markets are different from performance-based sports teams indexes, but both may share an overlap in interest). According to an October 8 Supreme Court brief filed by the NFL, approximately $1.8 billion of the $3.3 billion traded on prediction markets during the opening Sunday of the 2026 NFL season involved NFL-related contracts. This illustrates how rapidly sports have become a major driver of prediction market activity.
Investors looking for exposure to sports do not necessarily need to trade on game outcomes or team performance. Several ETFs already invest in publicly traded companies across the sports industry, including the Gabelli Opportunities in Live and Sports ETF (GOLS), Corgi Sports Betting & Gambling ETF (ODDZ), and Roundhill Sports Betting & iGaming ETF (BETZ C). While GOLS focuses on sports, media, and entertainment businesses, ODDZ and BETZ offer more targeted exposure to companies benefiting from sports betting and gaming activity.Publicly traded companies represent only a portion of the sports industry, as many of the world’s most valuable professional franchises remain privately held. This creates an opportunity for issuers to expand beyond traditional equity investments and offer exposure to assets that have historically been difficult for retail investors to access.
Amplify is taking this approach with its proposed Amplify Pro Sports Private & Public Ownership ETF PROS, which would combine publicly traded sports-related companies with up to 15% exposure to private investments. Unlike broader sports ETFs, PROS would focus on businesses that own or operate professional sports teams, leagues, venues, and related real estate. Its public equity portfolio is expected to reference the VettaFi Sports Index, which targets companies involved in professional sports ownership and operations.
Similarly, other products provide more specialized exposure to businesses participating in newer areas of sports-related trading among other types of prediction markets. For example, the Tema Trading & Prediction Markets ETF (DICE) invests in trading platforms and financial infrastructure companies, including private market exposure to Kalshi and Polymarket. Rather than directly holding event contracts, these funds allow investors to participate in the underlying businesses that could benefit from increased trading activity.Investors will have to distinguish among products tied to event outcomes, statistical team performance, and the underlying businesses generating sports-related revenue. Although all three approaches offer exposure to the growing sports economy, their underlying mechanics and risk can differ significantly.Bottom Line:As ETF issuers continue to push the boundaries of product innovation, recent developments in leveraged and sports-related products demonstrate how regulatory structures could potentially bring newer strategies into the market. A broader range of potential investment opportunities, however, does not necessarily translate into sustained investor demand and if approved, many will likely exist as niche, tactical tools.
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