Who’s Really Making Money on Leveraged ETFs? Ripple Wants In
Who’s Really Making Money on Leveraged ETFs? Ripple Wants In
Ryne MauckWed, October 21, 2026 at 9:03 PM UTC
0
TopMicrobialStock / Shutterstock.com (TopMicrobialStock / Shutterstock.com)Quick Read -
The Tradr Sandisk (SNDK) 2x ETF pays Ripple Prime roughly 8% annually in financing fees that silently erode shareholder returns.
Morningstar data counts 593 leveraged ETFs holding $256 billion, giving non-bank lenders like Ripple a vast new revenue pool.
Ripple paid $1.25 billion for prime brokerage Hidden Road and now collects swap financing fees that never appear on an ETF's fact sheet.
It sounds nuts, but SoFi is giving new Active Invest users up to $1,000 in stock for a limited time, and all it takes is a $50 deposit to get started. See for yourself (Sponsor)
Who's really making money on leveraged ETFs? The issuer collects a management fee, the number printed on every fact sheet. Behind many of these funds sits a second earner. It's the firm that supplies the leverage, which charges the fund a financing fee that rarely gets mentioned.
Ripple, the crypto payments company, now collects that second fee. Its prime brokerage arm, Ripple Prime, is financing leveraged stock ETFs, according to reporting by The Wall Street Journal that CoinDesk shared. In one example, CoinDesk estimated that a single Tradr fund pays Ripple roughly 8% a year in financing at current rates.
How a Fund Doubles a Stock Without Buying Double the Shares
Say a fund promises twice the daily return of NVIDIA (NASDAQ:NVDA). The reporting shows the fund can get that leverage by signing a total return swap. That's a contract where a broker pays the fund whatever the stock returns, and the fund pays the broker a fee in exchange.
The broker provides the exposure and hedges its own risk, and the fund pays a financing fee for this, separate from the management fee shareholders see on the fact sheet.
SoFi Active Invest is offering a limited-time promotion. Open an account, fund it with $50 or more, and you could receive up to $1,000 in complimentary stock for Active Invest accounts. See for yourself by clicking here now. (Sponsor)
What One Sandisk Fund Pays Ripple Each Year
CoinDesk cited The Wall Street Journal in its report. The Tradr fund targeting twice the daily move of Sandisk (NASDAQ:SNDK) pays Ripple the overnight bank funding rate plus four percentage points. The overnight bank funding rate is a benchmark for what banks pay to borrow money overnight.
CoinDesk puts the total at roughly 8% annualized at current rates, charged on the swap exposure and separate from the ETF's management fee. That figure applies to this one fund. Other leveraged ETFs and their financing firms set their own terms.
This is real money flowing out of the fund on top of the management fee, and shareholders pay it indirectly because the cost reduces the fund's returns.
Banks Stepped Back, So Ripple Bought Its Way In
Banks have traditionally supplied much of this financing. The reporting indicates tighter capital and risk requirements opened space for nonbank firms, including Ripple Prime, Jane Street and Clear Street.
Advertisement
The client base is large. CoinDesk cited Morningstar Direct. The database from Morningstar (NASDAQ:MORN) shows the U.S. market has 593 leveraged ETFs holding more than $256 billion, including 426 funds tracking individual stocks.
Ripple got in through an acquisition. CoinDesk reported that Ripple paid $1.25 billion for Hidden Road, a multi-asset prime brokerage, in October 2025. A prime brokerage handles the back office for big traders: it clears their trades, loans them money, and finances their positions.
In August, Ripple launched a Delta One business offering total return swaps tied to U.S. stocks, market indexes, and digital assets. "Delta One" is Wall Street shorthand for products that move one-for-one with an underlying asset. Ripple said at the time that the operation had more than $1 billion in regulatory net capital. That's the buffer of liquid assets regulators require a broker to hold.
Ripple also said, as reported by CoinDesk, that it had completed a $275 million senior debt offering to help finance further growth. It also announced an expanded agreement with hedge fund manager Brevan Howard.
Ripple hasn't disclosed how much revenue this business brings in. It also hasn't said how much of the activity uses XRP (CRYPTO:XRP) or the XRP Ledger. The reporting doesn't connect this business to demand for the token.
Daily Resets Put the Lender at Risk, and the Costs Reach Your Returns
The fee comes with risk for the lender. Leveraged ETFs reset their exposure every day. The reporting notes a sharp move in a single stock can leave the financing firm exposed if a fund's assets aren't enough to cover the losses. The fee is what the lender earns for carrying that risk.
For investors, this business sits inside a crowded market. Hundreds of funds compete for the same traders. Part of the cost of running leveraged exposure lands on shareholders through financing charges that never show up as a separate line item. Leveraged products belong in the speculation portion of a portfolio, not the core, and we wrote a free guide on sizing that portion correctly here.
So when you buy a leveraged ETF, at least two parties get paid. The issuer collects the management fee. The firm financing the leverage collects a spread, like the one the Tradr Sandisk fund pays Ripple. You see the first cost on the fact sheet. The second one is buried inside the fund's returns.
Want Up To $3,000 In Stock? SoFi Is Giving New Active Invest Users Complimentary Stock
Looking to grow your money but unsure where to begin? SoFi Active Invest is offering a limited-time promotion; open a new Active Invest account, fund it with $50 or more, and you could receive up to $1,000 in complimentary stock.
From $0 commission trading3 to fractional shares4 and automated investing, this app is designed to simplify investing for everyone, whether you’re just starting or already experienced. Its easy to sign up and secure your bonus. (Sponsor)
Contact editorial@247wallst.com for any questions or corrections.
Source: “AOL Money”
