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. According to SEC filings, the funds, including the Roundhill Democratic President ETF, Republican President ETF, Democratic Senate ETF, Republican Senate ETF, Democratic House ETF, and Republican House ETF, will gain exposure through swap agreements referencing binary event contracts traded on CFTC-regulated markets. These contracts will settle at $1 if the specified outcome occurs and $0 if it does not. The prospectus includes a warning that if the targeted party does not win, the fund will lose nearly all its value.
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 transition into the next cycle. Other asset managers, such as Bitwise and GraniteShares, have also filed to launch similar products, with varying structures. The introduction of these ETFs could expand access to prediction markets, allowing them to be held in ordinary brokerage accounts and certain retirement accounts, despite ongoing challenges from state regulators.