Roundhill Investments is poised to introduce the first US exchange-traded funds tied to prediction markets, with a launch scheduled for May 5, as reported by Bloomberg ETF analyst James Seyffart. This move will see six funds listed, each tied to the potential control of the White House, Senate, and House by either Democrats or Republicans.

The funds in question are the Roundhill Democratic President ETF, Republican President ETF, Democratic Senate ETF, Republican Senate ETF, Democratic House ETF, and Republican House ETF. These funds will gain exposure through swap agreements referencing binary event contracts traded on CFTC-regulated markets, which settle at $1 if the specified outcome occurs and $0 if it does not. A key warning in the prospectus highlights that if the targeted party fails to win, the fund will lose nearly all its value.

Notably, Roundhill will not terminate these 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 transition into the next cycle. This means the midterm funds will roll into the 2028 House and Senate exposure, while the presidential funds, BLUP and REDP, will move towards the 2032 presidential race. The prospectus also notes that if the market's prediction is later proven incorrect, shareholders will have no recourse.

Other asset managers, such as Bitwise and GraniteShares, have filed for similar products, with Bitwise's funds set to terminate shortly after each outcome is determined, whereas GraniteShares, like Roundhill, will roll into the next election. The introduction of these ETFs could significantly expand access to political event contracts, which are already traded on prediction markets like Polymarket and Kalshi, by allowing them to be held in standard brokerage accounts and certain retirement accounts.

This development follows the CFTC's withdrawal of a proposal that would have banned political event contracts, although challenges from state regulators in several states continue. Additionally, Roundhill has filed to list non-political prediction market ETFs focused on the likelihood of the US entering a recession, as flagged by Bloomberg ETF analyst Eric Balchunas.