Roundhill Investments is poised to introduce the first US-based exchange-traded funds tied to prediction markets, with the launch of six funds focused on the outcomes of US elections. According to a filing with the US Securities and Exchange Commission, these funds will be listed on May 5 and will track the potential control of the White House, Senate, and House by 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 provide exposure through swap agreements referencing binary event contracts traded on CFTC-regulated markets, which settle at $1 if the predicted outcome occurs and $0 if it does not.
A key consideration for investors is that if the targeted party does not win, the fund's value will be substantially lost. The funds will not be terminated after settlement; instead, 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 roll into the next cycle. This means the midterm funds will shift to the 2028 House and Senate exposure, and the presidential funds will move to the 2032 presidential race.
It is worth noting that if the market's prediction is later proved incorrect, there will be no recourse for shareholders. Other asset managers, such as Bitwise and GraniteShares, have also filed to launch similar products, with differences in structure, including termination and rollover strategies. The introduction of these ETFs could expand access to prediction markets, allowing them to be held in ordinary brokerage accounts and some retirement accounts, and comes after the CFTC withdrew a proposal that would have banned political event contracts.