Leveraged ETFs charge a management fee you can see on the fact sheet, but a second party quietly collects a separate financing fee. A familiar name from the crypto world just bought its way into that hidden revenue stream.
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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 | NVDA Price Prediction). 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.
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.
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.
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