Roundhill Investments is poised to introduce the first U.S. exchange-traded funds tied to prediction markets, with a launch date set for May 5, according to Bloomberg ETF analyst James Seyffart. This move is part of a broader trend, with two other asset managers, Bitwise and GraniteShares, preparing to launch similar products.
The six funds to be listed by Roundhill are the Democratic President ETF, Republican President ETF, Democratic Senate ETF, Republican Senate ETF, Democratic House ETF, and Republican House ETF. These funds will provide exposure to the outcome of U.S. elections through swap agreements referencing binary event contracts traded on CFTC-regulated markets, which settle at $1 if the predicted outcome occurs and $0 if it does not. A key consideration for investors is the warning in the prospectus that if the targeted party does not win, the fund will lose nearly all its value.
Notably, Roundhill's funds will not terminate after the settlement but instead will roll into the next election cycle once the market has priced a winner. This approach differs from Bitwise's funds, which will terminate shortly after each outcome is determined. The introduction of these ETFs has the potential to expand access to election trading by allowing them to be held in standard brokerage accounts and certain retirement accounts, building on the existing trade of political event contracts on prediction markets like Polymarket and Kalshi.
This development follows the CFTC's withdrawal of a proposal that would have banned political event contracts, although challenges from state regulators in several states continue. Additionally, Roundhill has filed to list non-political prediction market ETFs focused on the likelihood of the U.S. entering a recession.