SEC delays prediction-market ETFs, seeks public comment

The Securities and Exchange Commission has delayed decisions on a group of prediction-market exchange-traded fund applications and directed staff to solicit public comment, citing the need for more feedback before moving forward. The statement was issued on Wednesday and identified filings from Bitwise, Roundhill Investments and GraniteShares.

Bitwise filed in February for a PredictionShares series intended to track U.S. election outcomes. Roundhill and GraniteShares submitted similar applications that month. The proposed ETFs would give retail investors exposure to binary event contracts-bets on outcomes such as elections, sports results or company earnings-through ordinary brokerage accounts instead of crypto-native platforms.

Prediction markets have expanded within the crypto sector over the past 18 months, regularly recording more than $15 billion in trading volume each month across markets for sports, elections, corporate results and cultural events. Supporters say an ETF wrapper would broaden access and attract more capital. Regulators and other observers have raised questions about how such products would fit existing market and regulatory frameworks. In March, lawmakers introduced the PREDICT Act to ban officials from betting on prediction markets, with a 10% fine and disgorgement.

SEC Chair Paul Atkins wrote that “novel products raise novel questions” and asked staff to gather public feedback as part of the review. Atkins added that ETFs have been a “major driver” of innovation in securities markets and noted that ETF assets have roughly tripled since 2019.

ETF analyst Eric Balchunas commented that the agency is “clearly wrestling” with how to treat the new asset class and wants to feel comfortable before it “open[s] the barn door.” His remarks reflect broader uncertainty among regulators about how to oversee prediction-market products.

The commission’s staff will take public comment on the applications during the review period. The review occurs while prediction-market platforms such as Kalshi face legal challenges in several state courts, an additional factor for regulators to consider.

In recent years the SEC has updated rules to accommodate market innovation. The agency adopted a generic listing standard for ETFs in September 2023 and approved spot Bitcoin and Ether ETFs in January 2024 after extended review. The SEC has also been reported to be considering an innovation exemption that could permit tokenized stock trading, though no formal proposal has been announced.