Themes ETFs Expands High-Risk Leveraged Funds Amid Regulatory Scrutiny

GREENWICH, Conn. – December 18, 2025 – Leverage Shares by Themes today expanded its suite of complex financial products, launching seven new single-stock leveraged Exchange-Traded Funds (ETFs). The move signals an aggressive push into a high-risk, high-reward segment of the U.S. market, making tools once reserved for sophisticated traders increasingly accessible to the retail public.

The new funds offer investors 200% of the daily return on individual stocks, including volatile names like Chinese EV maker Nio Inc. (NIOG), social media firm Snap Inc. (SNAG), and Chinese tech giant Baidu Inc. (BIDG). Also included are healthcare firm Centene Corp. (CNCG), semiconductor equipment supplier KLA Corp. (KLAG), and Brazilian commodity giants Petroleo Brasileiro (PBRG) and Vale (VALG).

This launch, which brings the firm’s total number of leveraged single-stock ETFs to 60, comes at a time of intense competition and growing regulatory concern over the suitability of such products for everyday investors. While promising amplified gains, these instruments carry the explicit risk of magnified losses and the potential for total capital erosion within a single trading day.

The Double-Edged Sword of Daily Leverage

At the heart of these products is a mechanism that is often misunderstood by the uninitiated. Unlike traditional ETFs, which may be held for long periods, these leveraged funds are designed to achieve their stated objective—in this case, twice the performance of the underlying stock—on a daily basis only. This daily rebalancing creates a mathematical quirk known as compounding risk, or “volatility decay.”

Over periods longer than one day, the fund's performance can significantly diverge from a simple 2x multiple of the stock's return. In a volatile or sideways market, an investor can lose money even if the underlying stock ends the period flat or slightly up. For this reason, both regulators and the issuers themselves issue stern warnings.

Financial watchdogs like the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have repeatedly cautioned that leveraged ETFs are generally unsuitable for buy-and-hold investors. The prospectus for these new funds echoes this, stating they are “designed to be utilized only by knowledgeable investors who understand the potential consequences” and are “not appropriate for, investors who do not intend to actively monitor and manage their portfolios.”

The risks are stark: an investor could lose their entire principal in one day if the underlying stock falls by 50% or more. The lack of diversification, inherent in a single-stock product, further concentrates this risk, removing the safety net that a broader index-tracking fund might provide.

An Aggressive Play in a Competitive Field

The launch is the latest move in a rapid expansion for Themes ETFs, which was established in 2023 by the co-founders of Leverage Shares, a major European issuer of similar products. “We are closing out 2025 very strong, completing a year where we launched 59 new strategies,” said Paul Marino, Chief Revenue Officer at Themes ETFs, in a press release. “Our commitment to product innovation remains strong, with plans to continue expansion in the new year.”

This aggressive strategy is bolstered by a competitive fee structure. The new funds carry a 0.75% management fee, which the company touts as an “industry-low” for this specific category. The claim appears to hold weight in the current market. Competitors like AXS Investments and GraniteShares have offered similar products with expense ratios of 1.15%, while industry giant Direxion prices its single-stock leveraged funds closer to 0.97%.

By undercutting competitors on fees, Themes ETFs is making a clear play for market share in a niche but growing corner of the $8 trillion ETF industry. The demand is driven by active traders seeking to make tactical bets on short-term market movements without the complexity or requirements of a traditional margin account. These ETFs offer a simplified way to gain leveraged exposure, with losses capped at the initial investment.

However, the stated expense ratio doesn't tell the whole story. Leveraged ETFs rely on derivatives like swaps to achieve their amplification, which involves borrowing costs. These financing costs, not always transparent in the headline fee, can further erode returns over time, acting as a constant drag on performance, particularly in a higher interest rate environment.

Accessibility vs. Suitability: A Regulatory Tightrope

The proliferation of these complex instruments has not gone unnoticed by regulators. The SEC’s adoption of Rule 6c-11 in 2019 streamlined the process for launching new ETFs, including leveraged products, contributing to their recent boom. Yet, this has also intensified the debate around investor protection.

The core tension lies in the marketing and distribution of these funds. While the fine print is filled with warnings about their complexity and risk, the ETFs are readily available on retail-friendly trading platforms like Robinhood, Webull, and SoFi. This broad accessibility places sophisticated, high-risk tools directly into the hands of potentially inexperienced investors who may be attracted by the prospect of outsized gains without fully grasping the associated dangers of daily compounding and volatility decay.

The selection of underlying stocks—ranging from highly volatile tech and EV names to commodity producers subject to global macroeconomic swings—further underscores the speculative nature of these instruments. They are designed to capitalize on significant price movements, which by definition involves substantial risk.

As issuers like Themes ETFs continue to innovate and compete on fees, the line between empowering investors and exposing them to undue risk becomes finer. The market's expansion places a greater onus on brokerage firms to ensure suitability and on investors to heed the stark warnings. For now, the growth of single-stock leveraged ETFs continues unabated, offering a potent, if perilous, new chapter in the democratization of finance.