In a groundbreaking move, Roundhill Investments is poised to introduce the first U.S. exchange-traded funds (ETFs) connected 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.
As disclosed in a filing with the U.S. Securities and Exchange Commission (SEC), Roundhill's offerings will include the Democratic President ETF (BLUP), Republican President ETF (REDP), Democratic Senate ETF (BLUS), Republican Senate ETF (REDS), Democratic House ETF (BLUH), and Republican House ETF (REDH), with the launch scheduled for May 5, according to James Seyffart, a Bloomberg ETF analyst.
These funds will provide exposure to binary event contracts traded on CFTC-regulated markets through swap agreements, with the contracts settling at $1 if the predicted outcome occurs and $0 if it does not. A warning in the prospectus cautions that if the targeted party fails to win, the fund's value will decline substantially. Rather than terminating the funds after settlement, Roundhill will allow them to continue, with the funds rolling into the next cycle once the market has priced a winner at above $0.995 or below $0.005 for five consecutive trading days. 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 similar ETF offerings, with distinct structures: Bitwise's funds will terminate shortly after each outcome is determined, while GraniteShares, like Roundhill, will roll into the next election. While political event contracts are already traded on prediction markets like Polymarket and Kalshi, the introduction of ETFs could expand access by enabling 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 U.S. recession, as reported by Bloomberg ETF analyst Eric Balchunas.