The US Securities and Exchange Commission delayed the expected launch of the first exchange-traded funds (ETFs) linked to prediction markets after it requested more information about their structure and disclosures, Reuters reported on Monday.
The delay affects more than two dozen proposed ETFs from Roundhill Investments, GraniteShares and Bitwise, according to to Reuters, citing people familiar with the matter. The issuers applied for the products in February, and the launch was expected this week after a 75-day review period.
The proposed funds would allow investors to gain exposure to contracts on binary outcome events, including elections, economic data and market prices, without having to trade directly on prediction markets such as Kalshi.
The delay marks another development in the US approach to regulating prediction markets, which have drawn attention due to concerns about insider trading, ethics and market manipulation.
“The delay is probably temporary”
According to sources cited by Reuters, the delay is likely to be temporary, suggesting that progress on the filing could resume once the SEC receives and reviews additional details from issuers about product structure and disclosures.
According to to Bloomberg ETF analyst Eric Balchunas, the ETFs were expected to launch on Thursday. His colleague James Seyffart said last week that Roundhill’s filing takes effect on May 5, with the first ETFs to market predictions linked to contract outcomes on events such as whether Democrats or Republicans control the House or Senate.
Source: James Seyffart
How Prediction Market ETFs Would Work
Prediction market ETFs are designed to give investors exposure to binary event contracts without having to trade on specialized prediction market platforms.
Specific features vary among the more than 20 ETFs offered, but the products generally use derivatives to track the likelihood of binary “yes” or “no” outcomes in underlying contracts traded on CFTC-regulated platforms such as Kalshi. These contracts are worth $1 if the event occurs and $0 if it does not.
Formerly Roundhill highlighted significant risks associated with the proposed ETFs in its February filings, stating that investments in event contracts involve “unique risks that differ from those associated with traditional futures, options or securities.”
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The company said such investments could result in significant losses, valuation uncertainty and deviations from the fund’s investment objective.
It also pointed to potential settlement issues related to how event outcomes are interpreted, including errors, ambiguities, or disputes over the definition of the underlying event, the data sources used, or the timing of the determination.
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