Roundhill Investments is poised to introduce the first U.S. exchange-traded funds tied to prediction markets, with the launch of six funds that track Democratic and Republican control of the White House, Senate, and House, set to debut on May 5. The funds - Roundhill Democratic President ETF, Republican President ETF, Democratic Senate ETF, Republican Senate ETF, Democratic House ETF, and Republican House ETF - will provide exposure to election outcomes through swap agreements referencing binary event contracts traded on CFTC-regulated markets.
These contracts will settle at $1 if the predicted outcome occurs and $0 if it does not. The prospectus cautions that if the targeted party does not win, the fund will lose nearly all its value.
Notably, Roundhill's funds will not terminate after settlement; instead, they will roll into the next cycle once the market prices a winner at above $0.995 or below $0.005 for five consecutive trading days. Other asset managers, including Bitwise and GraniteShares, have also filed to list similar products, with Bitwise using a 'PredictionShares' brand. The introduction of these ETFs could expand access to prediction markets, allowing them to be held in ordinary brokerage accounts and some retirement accounts.
This development comes after the CFTC withdrew a proposal that would have banned political event contracts, although state regulators continue to challenge the underlying contracts in court. Additionally, Roundhill has filed to list non-political prediction market ETFs tied to the likelihood of a U.S.
recession.