Roundhill Investments is poised to introduce the first US exchange-traded funds tied to prediction markets, with a launch date set for May 5, as reported by Bloomberg ETF analyst James Seyffart. This move is part of a broader trend, with two other asset managers preparing similar products.
The six funds, which include the Roundhill Democratic President ETF, Republican President ETF, Democratic Senate ETF, Republican Senate ETF, Democratic House ETF, and Republican House ETF, will be listed and are designed to track the outcome of the US elections. The funds will gain exposure through swap agreements referencing binary event contracts traded on CFTC-regulated markets, with these contracts settling at $1 if the predicted outcome occurs and $0 if it does not. A key consideration for investors is that if the targeted party does not win, the fund will lose substantially all of its value, as explicitly stated in the prospectus. Notably, Roundhill has chosen not to terminate the funds after settlement, instead opting to roll them into the next cycle once the market has priced a winner.
This approach differs from that of Bitwise, which plans to terminate its funds shortly after each outcome is determined. The introduction of these ETFs could significantly expand access to prediction markets, allowing them to be held in ordinary brokerage accounts and certain retirement accounts.
This development follows the CFTC's decision to withdraw a proposal that would have banned political event contracts, although state regulators continue to challenge these contracts in court. Roundhill has also filed to list non-political prediction market ETFs, further broadening the scope of this emerging market.