Roundhill Investments is poised to introduce the first US exchange-traded funds tied to prediction markets, with the launch of six funds that track Democratic and Republican control of the White House, Senate, and House, set to debut on May 5. The funds, including the Roundhill Democratic President ETF, Republican President ETF, Democratic Senate ETF, Republican Senate ETF, Democratic House ETF, and Republican House ETF, will provide exposure to election outcomes through swap agreements referencing binary event contracts traded on CFTC-regulated markets. These contracts will settle at $1 if the predicted outcome occurs and $0 if it does not. The prospectus cautions that if the targeted party does not win, the fund will lose nearly all its value.
Notably, the funds will not be terminated after settlement; instead, they will roll into the next cycle once the market prices a winner at above $0.995 or below $0.005 for five consecutive trading days. Other asset managers, including Bitwise and GraniteShares, have also filed to launch similar products, with Bitwise's funds terminating shortly after each outcome is determined, while GraniteShares' funds will roll into the next election. This development could expand access to election trading by allowing these funds to be held in ordinary brokerage accounts and some retirement accounts, following the CFTC's withdrawal of a proposal to ban political event contracts in February.