Roundhill Investments is poised to introduce the first US exchange-traded funds tied to prediction markets, with the launch of six funds that track the potential control of the White House, Senate, and House by Democrats or Republicans. According to SEC filings, these funds will be listed on May 5, as confirmed 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. These funds will gain exposure through swap agreements referencing binary event contracts traded on CFTC-regulated markets, with contract settlements of $1 if the predicted outcome occurs and $0 if it does not.
The prospectus cautions investors that if the targeted party fails to win, the fund will likely lose nearly all its value. Rather than terminating the funds after settlement, Roundhill will roll them into the next cycle, with the midterm funds focusing on the 2028 House and Senate elections, and the presidential funds focusing on the 2032 election. However, the prospectus notes that if the market's prediction is later proved incorrect, shareholders will have no recourse. Bitwise and GraniteShares have also filed for similar ETFs, with structures differing in terms of fund termination and rollover policies.
While political event contracts are already traded on prediction markets like Polymarket and Kalshi, the introduction of ETFs could expand access to these markets by allowing them to be held in ordinary brokerage accounts and certain retirement accounts. This development comes after the CFTC withdrew a proposal that would have banned political event contracts, although state regulators in several states continue to challenge these contracts in court. Roundhill has also filed to list non-political prediction market ETFs focused on the likelihood of a US recession, as reported by Bloomberg ETF analyst Eric Balchunas.