According to Reuters, the first exchange-traded funds (ETFs) connected to prediction markets have had their scheduled debut delayed as the US Securities and Exchange Commission requested additional information about their structure and disclosures, causing a delay.
As per Reuters, which cites sources familiar with the situation, over 22 planned exchange-traded funds (ETFs) from Roundhill Investments, GraniteShares, and Bitwise are affected by the delay. The products were scheduled to be launched this week after a 75-day review process, which began in February when the issuers applied for them.
Holdup Likely Short-Lived
One does not have to trade directly on prediction market platforms like Kalshi to have exposure to event contracts connected to binary outcomes, such elections, economic data, and market prices, using the proposed funds.
The US approach to regulating prediction markets has been under criticism because of worries about insider trading, ethics, and market manipulation; this postponement is another step in that regard.
Reuters cites sources who indicate the holdup is short-lived and that issuers should be prepared to provide more information on the product’s structure and disclosures before the SEC evaluates their files.
Analyst Eric Balchunas of Bloomberg ETFs predicted that Thursday will be the debut day for the ETFs. According to his colleague James Seyffart, Roundhill’s filing was effective on May 5, and the first prediction market ETFs were connected to event-contract outcomes, including the control of the House or Senate by Democrats or Republicans.
To provide investors with access to binary event contracts outside of specialized prediction markets, a new kind of exchange-traded fund (ETF) has been developed.
Although over twenty of the ETFs being considered have different characteristics, they all rely on derivatives to monitor the probability of “yes” or “no” outcomes in underlying contracts that are traded on CFTC-regulated platforms like Kalshi. If the event happens, the contracts will settle for $1; otherwise, they will settle at $0.