Next week, Roundhill Investments plans to introduce the first U.S.-based exchange-traded funds (ETFs) linked to prediction markets, with two other asset managers following suit with similar offerings.
Per a filing with the U.S. Securities and Exchange Commission (SEC), Roundhill will debut six funds focused on whether Democrats or Republicans will control key political offices: the White House, Senate, and House of Representatives. Bloomberg ETF analyst James Seyffart notes that the launch is scheduled for May 5.
The lineup includes the Roundhill 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). The Senate and House funds are linked to outcomes following the November 3, 2026 elections, while those for the presidency are set around the November 7, 2028 election.
These funds leverage swap agreements that reference binary event contracts on CFTC-regulated markets, which settle at $1 if an outcome occurs or $0 otherwise. A prospectus emphasizes in bold letters that if a predicted party fails to secure victory, “the fund will lose substantially all of its value.”
Roundhill’s strategy involves not terminating the funds post-settlement. When market prices decisively favor one side (above $0.995 or below $0.005) for five consecutive days, the outcome is deemed final. The funds then transition to the subsequent election cycle: 2028 House and Senate elections for midterm funds, and the 2032 presidential race for BLUP and REDP.
The prospectus also states that if market predictions are incorrect, shareholders will have “no recourse.” Similar six-fund packages were filed by Bitwise and GraniteShares in February. While Bitwise’s PredictionShares terminate after an outcome is determined, GraniteShares and Roundhill roll into the next electoral cycle.
Political event contracts already circulate on platforms like Polymarket and Kalshi. However, packaging these as ETFs could broaden access, permitting them to be held within standard brokerage and some retirement accounts.
This development follows the Commodity Futures Trading Commission’s (CFTC) withdrawal in February of a proposal from the Biden administration that aimed to ban political event contracts. Meanwhile, state regulators in Massachusetts, New York, Nevada, among others, continue legal challenges against these contracts.
Additionally, Roundhill has sought approval for non-political prediction market ETFs focused on U.S. recessions, as highlighted by Bloomberg ETF analyst Eric Balchunas.