Roundhill Investments is poised to introduce the first US exchange-traded funds linked to prediction markets, with the launch of six funds that will be tied to the outcome of the US elections, specifically focusing on which party will control the White House, Senate, and House. The funds, set to launch on May 5, 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 election outcomes 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 cautions that if the targeted party fails to win, the fund will likely lose nearly all its value. Notably, Roundhill will not terminate these funds after the 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. Two other asset managers, 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, similar to Roundhill's approach.
The introduction of these ETFs could potentially expand access to election trading by allowing them to be held in ordinary brokerage accounts and some retirement accounts, building on the existing political event contracts traded on prediction markets such as Polymarket and Kalshi.