SEC Delays Prediction-Market ETFs, Requests More Disclosures

The Securities and Exchange Commission has delayed the expected launch of more than two dozen prediction-market exchange-traded funds proposed by Roundhill Investments, GraniteShares and Bitwise after requesting more information on product structure and disclosures. The issuers filed for the funds in February and were operating under a 75-day review timeline ahead of an anticipated early-May effective date.

The agency asked for more detail on how the funds would be constructed, how holdings would be valued and how the sponsors would disclose risks to investors. The additional questions slowed the timeline for launches that some analysts had flagged for early May. People involved in the filings expect the delay to be temporary and said sponsors are preparing responses for the SEC’s follow-up review.

The proposed ETFs would give investors exposure to binary event contracts without requiring direct trading on prediction-market exchanges. Most proposals rely on derivatives that track the market odds of “yes” or “no” outcomes in contracts traded on Commodity Futures Trading Commission–regulated platforms such as Kalshi. Those underlying contracts typically settle at $1 if the event occurs and $0 if it does not, so fund values would move with the probability priced into the contracts.

Issuers have filed more than 20 separate funds that would cover outcomes including election results, key economic data releases and market price thresholds. The proposals package event-contract exposure in ETF form so investors can access the market without opening accounts on specialized prediction platforms.

Filers outlined risks specific to event contracts. Roundhill’s filing said event contracts carry risks different from traditional futures, options or securities and warned of the potential for significant losses and valuation uncertainty. Filings noted possible settlement problems tied to how event outcomes are defined and determined, including errors, ambiguous definitions, disputes over data sources or disagreements about the timing of determinations.

Regulators and market participants have raised additional concerns about prediction markets, including the risk of insider trading, ethical issues and the potential for market manipulation. Because fund outcomes depend on specific real-world events, disputes over whether an event occurred can create legal and operational complications for an ETF that uses derivatives to track those contracts.

The underlying event contracts fall under CFTC jurisdiction, while the ETF wrappers are regulated by the SEC, creating a need for coordination between the two agencies on valuation, liquidity management and dispute resolution. People involved in the filings said the SEC’s request for more information should not be read as a rejection; if the agency’s follow-up review is satisfied, sponsors could proceed with launches later this month.