Why The Free Markets ETF (FMKT) Has Invested in Peabody Energy (BTU)
It might seem counterintuitive for a newly launched exchange-traded fund to take a top position in a 140-year-old coal mining company. Yet The Free Markets ETF (FMKT) recently made Peabody Energy (NYSE: BTU) one of its largest holdings, at roughly 4% of the portfolio. What’s behind this allocation? In a word: deregulation. FMKT is an actively managed fund built to capitalize on companies poised to benefit from rollbacks of federal rules. And with a sweeping wave of U.S. environmental deregulation now underway, Peabody’s investment case has taken on a new sheen.
Deregulation Tailwinds Breathing New Life into Coal
In March 2025, the Environmental Protection Agency announced a “greatest day of deregulation” – unveiling plans to undo or relax dozens of environmental rules, many aimed at the power sector. The agency, under a new administration, set out to “unleash American energy” by reconsidering regulations that had made it uneconomical to keep coal-fired power plants running. This includes a proposal to suspend enforcement of strict mercury emission limits for two years while new rules are written. It also involves giving states more say over coal ash disposal and easing water discharge standards for coal plants. In short, Washington is dialing back several Obama/Biden-era policies that had added hefty compliance costs and hastened coal plant closures. For coal producers like Peabody, these moves offer a potential reprieve – lowering costs for their power-plant customers and extending the lifespan of coal-burning generators.
The impact was felt almost immediately. Over the summer, the EPA’s intent to revisit mercury and air toxics standards (known as MATS) grabbed the market’s attention. That Biden-era rule had been so stringent it drew legal challenges from 23 states. News that it may be softened – along with a renewed federal push to boost domestic energy output – suddenly put coal back on traders’ radar. Peabody’s stock, which had been drifting down for months, saw a surge in retail interest on the day of the announcement. The EPA also flagged it would review coal ash regulations that utilities long complained were costly to implement. From an investor’s standpoint, these are not just bureaucratic footnotes: they directly affect coal demand. If fewer plants shut down due to regulatory pressure, Peabody stands to sell more coal for longer.
Why Peabody Caught FMKT’s Attention
Even before these policy shifts, Peabody Energy wasn’t exactly on its last legs – but it was underappreciated. The company had been posting solid results. In fact, Peabody topped analysts’ sales expectations in its most recent quarterly report. Management is projecting on the order of 14–15 million tons of thermal coal shipments to overseas buyers this year (plus up to 9 million tons of metallurgical coal for steelmaking). These figures suggest that global demand for coal remains resilient, even as U.S. electricity generation has pivoted toward gas and renewables. (Coal’s share of U.S. power output fell to an all-time low in 2024, and only ~200 coal plants are still operating nationwide, down from roughly 600 in 2011.) But domestic decline aside, worldwide coal consumption is buoyed by emerging markets and energy-hungry sectors. Notably, data centers in the U.S. are projected to gobble up 12% of all U.S. electricity by 2028, up from just 4% in 2023. Power providers will need every reliable source available to meet that kind of demand growth. With natural gas prices volatile and renewables not yet able to carry the full load, old-fashioned coal could see a tactical revival. Peabody, as America’s largest coal miner, is poised to benefit from any such pickup in coal burn.
For FMKT, this convergence of policy and economics made BTU an attractive play. The Free Markets ETF specifically looks for “deregulation winners” across industries – those companies whose earnings can leap when red tape is cut. Peabody checks that box. By slashing environmental rules, the government is effectively removing a “hidden tax” on coal producers and their customers. Costs go down; profit margins widen. Peabody’s substantial domestic mining operations become more valuable if its U.S. utility buyers aren’t facing as many expensive upgrades or shutdown mandates. And if power companies start running their coal generators harder to meet surging demand (say, during heat waves or to support data center loads), Peabody’s volume outlook only improves.
A Thematic Bet with Eyes Wide Open
None of this is to say that coal is staging a long-term comeback or that Peabody is without risks. Investing in a coal miner in 2025 means embracing a controversial, cyclical industry that faces secular headwinds from the clean energy transition. Regulations could swing back just as quickly as they swung away – lawsuits and the 2026 midterm elections could yet slow or reverse some of the recent deregulatory initiatives. Peabody’s fortunes still rise and fall with global commodity prices and geopolitics (e.g. Europe’s energy crunch or China’s steel demand).
What FMKT offers investors is a basket approach to this theme. Rather than betting the farm on Peabody or any single stock, the ETF holds a diversified mix of companies primed for freer markets – from uranium miners to fintech firms. The idea is that while any one holding might face idiosyncratic hurdles, the broader trend of deregulation could lift many boats. So far, that theme has been playing out quietly even as headlines fixate on interest rates and AI. Think of deregulation as an underpriced catalyst: when a government figuratively “deletes half the rulebook,” it can unlock value in unexpected places. Peabody Energy just happens to be a vivid example. A year ago, few everyday investors would have considered a coal producer a potential comeback story. But as rules ease and demand perks up, companies like BTU are getting a second look – and funds like FMKT are making sure they’re in position to capture that upside, just in case.
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Deregulation Strategy Risks.The Fund’s strategy of investing in companies that may benefit from deregulatory measures entails significant risks, including those stemming from the unpredictable nature of regulatory trends. Deregulation is influenced by political, economic, and social factors, which can shift rapidly and in unforeseen directions. Changes in government priorities, political leadership, or public sentiment may result in the reversal of existing deregulatory policies or the introduction of new regulations that could adversely affect certain industries or companies. Further, while the Fund invests in companies expected to benefit from deregulatory initiatives, not all of these companies may achieve the expected advantages, whether fully, partially, or at all. The actual impact of deregulatory measures may vary widely depending on a company’s specific operational, financial, and competitive circumstances. Companies may also face challenges adapting to new regulatory environments, or their competitive positioning may be undermined by other market factors unrelated to deregulation. These risks could negatively affect the performance of the Fund’s portfolio.
Underlying Digital Assets ETP Risks. The Fund’s investment strategy, involving indirect exposure to Bitcoin, Ether, or any other Digital Assets through one or more Underlying ETPs, is subject to the risks associated with these Digital Assets and their markets. These risks include market volatility, regulatory changes, technological uncertainties, and potential financial losses. As with all investments, there is no assurance of profit, and investors should be cognizant of these specific risks associated with digital asset markets.
● Underlying Bitcoin and Ether ETP Risks: Investing in an Underlying ETP that focuses on Bitcoin, Ether, and/or other Digital Assets, either through direct holdings or indirectly via derivatives like futures contracts, carries significant risks. These include high market volatility influenced by technological advancements, regulatory changes, and broader economic factors. For derivatives, liquidity risks and counterparty risks are substantial. Managing futures contracts tied to either asset may affect an Underlying ETP’s performance. Each Underlying ETP, and consequently the Fund, depends on blockchain technologies that present unique technological and cybersecurity risks, along with custodial challenges in securely storing digital assets. The evolving regulatory landscape further complicates compliance and valuation efforts. Additionally, risks related to market concentration, network issues, and operational complexities in managing Digital Assets can lead to losses. For Ether specifically, risks associated with its transition to a proof-of-stake consensus mechanism, including network upgrades and validator centralization, may add additional uncertainties.
●Bitcoin and Ether Investment Risk: The Fund’s indirect investments in Bitcoin and Ether through holdings in one or more Underlying ETPs expose it to the unique risks of these digital assets. Bitcoin’s price is highly volatile, driven by fluctuating network adoption, acceptance levels, and usage trends. Ether faces similar volatility, compounded by its reliance on decentralized applications (dApps) and smart contract usage, which are subject to innovation cycles and adoption rates. Neither asset operates as legal tender or within central authority systems, exposing them to potential government restrictions. Regulatory actions in various jurisdictions could negatively impact their market values. Both Bitcoin and Ether are susceptible to fraud, theft, market manipulation, and security breaches at trading platforms. Large holders of these assets (”whales”) can influence their prices significantly. Forks in the blockchain networks—such as Ethereum’s earlier split into Ether Classic—can affect demand and performance. Both assets’ prices can be influenced by speculative trading, unrelated to fundamental utility or adoption.
● Digital Assets Risk: Digital Assets like Bitcoin and Ether, designed as mediums of exchange or for utility purposes, are an emerging asset class. Operating independently of any central authority or government backing, they face extreme price volatility and regulatory scrutiny. Trading platforms for Digital Assets remain largely unregulated and prone to fraud and operational failures compared to traditional exchanges. Platform shutdowns, whether due to fraud, technical issues, or security breaches, can significantly impact prices and market stability.
● Digital Asset Markets Risk: The Digital Asset market, particularly for Bitcoin and Ether, has experienced considerable volatility, leading to market disruptions and erosion of confidence among participants. Negative publicity surrounding these disruptions could adversely affect the Fund’s reputation and share trading prices. Ongoing market turbulence could significantly impact the Fund’s value.
● Blockchain Technology Risk: Blockchain technology underpins Bitcoin, Ether, and other digital assets, yet it remains a relatively new and largely untested innovation. Competing platforms, changes in adoption rates, and technological advancements in blockchain infrastructure can affect their functionality and relevance. For Ether, the dependence on its proof-of-stake mechanism and smart contract capabilities introduces risks tied to network performance and scalability. Investments in blockchain-dependent companies or vehicles may experience market volatility and lower trading volumes. Furthermore, regulatory changes, cybersecurity incidents, and intellectual property disputes could undermine the adoption and stability of blockchain technologies.
Recent Market Events Risk. U.S. and international markets have experienced and may continue to experience significant periods of volatility in recent years and months due to a number of economic, political and global macro factors including uncertainty regarding inflation and central banks’ interest rate changes, the possibility of a national or global recession, trade tensions and tariffs, political events, war and geopolitical conflict. These developments, as well as other events, could result in further market volatility and negatively affect financial asset prices, the liquidity of certain securities and the normal operations of securities exchanges and other markets, despite government efforts to address market disruptions.
New Fund Risk. The Fund is a recently organized management investment company with no operating history. As a result, prospective investors do not have a track record or history on which to base their investment decisions.
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