Roundhill Investments is poised to introduce the first US exchange-traded funds linked to prediction markets, with the launch of six funds focused on the control of the White House, Senate, and House by Democrats or Republicans. According to SEC filings, the funds will be listed on May 5, as reported by Bloomberg ETF analyst James Seyffart, and will include the Roundhill 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 outcomes of the US 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.
The prospectus highlights the potential risks, stating in capitalized text that if the targeted party does not win, the fund will lose nearly all its value. Roundhill has chosen not to terminate the funds after settlement; instead, once the market prices a winner at above $0.995 or below $0.005 for five consecutive trading days, the fund will treat the outcome as decided and move on to the next cycle. Other asset managers, such as Bitwise and GraniteShares, have also filed for similar products, with differing structures, including the use of a 'PredictionShares' brand and varying termination policies.
The introduction of these ETFs could expand access to prediction markets, allowing them to be held in ordinary brokerage accounts and certain retirement accounts, and comes after the CFTC withdrew a proposal that would have banned political event contracts. Additionally, Roundhill has filed to list non-political prediction market ETFs, including one focused on the likelihood of the US entering a recession.