Roundhill Investments is preparing to introduce the first US-based exchange-traded funds linked to prediction markets, with the launch of six funds focusing on the control of the White House, Senate, and House by Democrats or Republicans. As per the filing with the US Securities and Exchange Commission, these funds will be listed on May 5, as stated by Bloomberg ETF analyst James Seyffart.
The funds in question include the Roundhill Democratic President ETF, Republican President ETF, Democratic Senate ETF, Republican Senate ETF, Democratic House ETF, and Republican House ETF, all set to gain exposure through swap agreements tied to binary event contracts traded on CFTC-regulated markets. These contracts are designed to settle at $1 if the specified outcome occurs and $0 if it does not, with the prospectus warning that if the targeted party fails to win, the fund will lose nearly all its value. Roundhill has decided against terminating the funds post-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 transition into the next cycle.
Other companies, such as Bitwise and GraniteShares, have also filed for similar ETFs, with varying structures; Bitwise's funds will terminate shortly after each outcome is determined, while GraniteShares will follow a similar rolling structure to Roundhill. The introduction of these ETFs could potentially expand access to prediction markets by allowing them to be held in standard brokerage accounts and certain retirement accounts, following the CFTC's withdrawal of a proposal to ban political event contracts in February.