US Elections to See First Prediction Market ETFs on Wall Street

Roundhill Investments is poised to introduce the first US exchange-traded funds tied to prediction markets, with the launch of six funds that will be listed, focusing on the control of the White House, Senate, and House by either Democrats or Republicans. As per the filing with the US Securities and Exchange Commission, the funds will be listed on May 5, according to James Seyffart, a Bloomberg ETF analyst. The funds include the Roundhill Democratic President ETF, Republican President ETF, Democratic Senate ETF, Republican Senate ETF, Democratic House ETF, and Republican House ETF, with the House and Senate products tied to the outcome of the November 3, 2026 elections, and the presidential products linked to the November 7, 2028 election. These funds will gain exposure through swap agreements that reference binary event contracts traded on CFTC-regulated markets, which settle at $1 if the outcome occurs and $0 if it does not.

The prospectus highlights the risk that if the targeted party does not win, the fund will lose nearly all its value. Roundhill has decided not to terminate the funds after settlement; instead, once the market prices a winner above $0.995 or below $0.005 for five consecutive trading days, the fund will treat the outcome as decided and roll into the next cycle. The prospectus also notes that if the market is later proved incorrect, there will be no recourse for shareholders.

Other companies, such as Bitwise and GraniteShares, have filed similar proposals, with Bitwise using a 'PredictionShares' brand, and their structures differ in that Bitwise's funds will terminate shortly after each outcome is determined. Political event contracts are already traded on prediction markets, but wrapping them in ETFs could increase accessibility by allowing them to be held in ordinary brokerage accounts and some retirement accounts. This development comes after the CFTC withdrew a proposal that would have banned political event contracts, although state regulators continue to challenge the underlying contracts in court. Roundhill has also filed to list non-political prediction market ETFs tied to the possibility of the US entering a recession.