Investors may soon be able to bet on who will win control of the Senate in their brokerage accounts.
At Bitwise, Roundhill and GraniteShares have filed applications with the SEC to offer event contracts as exchange-traded funds, which will be available within self-directed IRAs, for example.
“The job of an ETF issuer is to provide access to the investments that investors want, and we see a lot of interest in prediction markets,” said William Lind, founder and CEO of GraniteShares ETF.
The companies hope to offer either a Democratic President ETF or a Republican President ETF, which essentially invests in who wins the White House in the November 7, 2028 election. Similar ETFs have been proposed in the run-up to this year’s midterm elections, which will determine which party will control the House and Senate majorities.
ETFs roughly track changes in prediction market probabilities. Prediction markets offer dividends for winning bets, but nothing for losing bets. The ETF will issue a warning that a contrary outcome to a bet could mean “substantially all loss of the fund’s value,” according to an SEC filing.
Traders can now place these types of bets directly on Kalshi, Polymarket, Robinhood, Crypto.com, and even with big names in sports betting such as DraftKings, FanDuel, and Fanatics.
Is it something like a Bitcoin ETF?
But Matthew Hogan, chief investment officer at Bitwise Investments, points out that many investors keep most or all of their assets in brokerage accounts. He highlights how Bitcoin ETFs have given millions of investors the opportunity to invest in cryptocurrencies without the added hassle of opening an account on Binance or Coinbase.
Rhind said event contract ETFs appear to be following a similar path to the crypto, gold and options markets.
“One of the best expressions of ETFs is that they provide market access to a variety of investments in a regular brokerage account,” Lind told CNBC. “We have seen throughout history that when you add in the form of an ETF, the underlying market benefits.”
Applications for the ETF are currently limited, focusing only on the results of some of the most liquid and most likely to attract national elections outside of sports.
Prediction markets that offer sports betting are hotly contested in state and federal courts across the country, with states arguing that such transactions constitute sports betting and are subject only to state regulation. Tribes also argue that the sporting event contracts violate their sovereign rights to regulate gambling on tribal lands.
The Commodity Futures Trading Commission has jurisdiction over prediction markets and is involved in a legal battle to protect its right to decide what event contracts can be offered.
Disclosure: CNBC and Kalsi have a commercial relationship that includes a minority investment in CNBC.
