Ripple is moving into one of Wall Street’s steadiest fee streams at exactly the moment leveraged ETFs are proliferating, and that creates a clear winner for nonbank finance firms and a new pressure point for bank margins.
Ripple Prime expands into leveraged ETF financing
The company’s expansion into swap financing for leveraged ETFs is economically meaningful because it targets a business built on repeated, balance-sheet-light funding charges that investors ultimately pay inside fund performance. Morningstar Direct says there are 593 leveraged ETFs in the U.S. today with more than $256 billion in assets, including 426 tied to single stocks. That is a large and growing pool of demand for financing, and it helps explain why Ripple, Jane Street and Clear Street are taking share from banks that have traditionally controlled the market.
Ripple’s route into the trade matters just as much as the market itself. The company bought Hidden Road for $1.25 billion last year and renamed the unit Ripple Prime, giving it a ready-made prime brokerage and financing platform instead of trying to build one from scratch. The division then landed Brevan Howard as a client, a sign that sophisticated hedge funds are willing to route business to a nonbank counterparty when banks are constrained by tighter risk limits. In a market where issuers are often startups without entrenched bank relationships, that matters.
For investors, the key point is that this is not just about XRP or crypto speculation. It is about Ripple using crypto-linked infrastructure to move into the plumbing of traditional markets. That is where the durable economics sit. Leveraged ETF financing produces recurring fee income, and the cost is embedded in fund returns rather than appearing as a headline expense. In one filing cited by the report, Tradr’s 2X Long SNDK Daily ETF pays Ripple the overnight bank funding rate plus 4 percentage points, or about 8% annualized this week. That is the kind of spread that can scale quickly if product issuance keeps rising.
The opportunity is attractive, but it is not without blowback. The same leverage that makes the business lucrative also makes it fragile. Janus Henderson’s Dan Aronson warned that a single-day move of more than 50% in an underlying stock could wipe out the fund and leave Ripple holding the loss. That risk is part of the bargain in leveraged products, and it is why these businesses have long been the domain of institutions with deep risk controls.
The broader investment narrative is bigger than Ripple alone. Active ETFs have already pulled in a record $576 billion through September, while the SEC’s approval of a 3x Ethereum ETF underscores how quickly the product set is moving into more exotic territory. As the ETF market keeps shifting from plain-vanilla beta to leveraged, thematic and crypto-linked structures, the firms that provide financing, clearing and prime brokerage stand to collect the tolls. Banks are still the incumbents, but the market is increasingly rewarding the specialists with flexibility, speed and willingness to take collateralized risk.
That is why this story matters now. Ripple is not just challenging Wall Street banks in a niche corner of finance; it is positioning itself inside one of the fastest-growing fee pools in the ETF ecosystem. If leveraged and active ETF assets keep expanding, the real upside may accrue not to the fund sponsors, but to the firms that finance the leverage behind them. Investors looking for the second-order winners should pay close attention to the nonbank platforms building this infrastructure now.
| Entity | Gains | Losses |
|---|---|---|
| Ripple Prime | ▲New fee stream | ▼Execution and counterparty risk |
| Wall Street banks | ▲Legacy franchise pressure | ▼Share in swap financing fees |
| Leveraged ETF issuers | ▲Easier financing access | ▼Higher funding costs |
| ETF investors | ▲More product choice | ▼Lower returns from financing drag |
