To maintain a constant leverage ratio greater than 1x, an ETF must rebalance. This takes the form of buying high and selling low, which produces the lag effect.
However, you may be asking, why does an ETF have to promise to maintain a constant leverage ratio? Couldn't it advertise that, after buying an index with some initial leverage, it will passively keep the same position size per share, allowing leverage to change with the market? (This is separate from adjusting for corporate actions or composition of the index itself.) As far as I know, it could, but this would be less useful to investors/traders for three reasons:
Anyone buying or holding the ETF as time goes on would have to calculate and monitor its current leverage in order to determine the appropriate position size for their hedging or speculation goal. It's easier if name of the ETF tells you (to a good approximation) what the leverage will always be.
If the ETF appreciates greatly, then without rebalancing, its leverage will decrease. Ultimately the leverage would approach 1x (unleveraged) for a "successful" long ETF or 0x (cash-like) for a "successful" short ETF. Then the ETF would lose its raison d'etre. In particular it will not turn, say 7% returns into 21% returns for the long term.
If the ETF depreciates greatly, it will face internal margin calls and a significant chance of going bankrupt. Whereas a 3x daily-rebalanced fund would require a 33% drop in the index in one day to go bust, a non-rebalanced fund with initial 3x leverage would go bust if at any point there is a cumulative drop of 33% from inception. Realistically, before that point, margin calls would effectively force a rebalancing.