- SEC seeks public feedback on prediction market ETFs, delays pending applications.
- The regulator delays Bitwise, Roundhill, and GraniteShares prediction market ETF applications.
- Eric Balchunas compares prediction market ETF review process to earlier spot crypto ETF approvals.
The U.S. Securities and Exchange Commission is seeking public feedback on a new category of exchange-traded funds tied to prediction markets, while also delaying decisions on several pending applications linked to event-based contracts.
SEC Chair Paul Atkins noted that novel products raise novel questions, adding that the agency must evaluate the broader implications of introducing the new investment vehicles. The SEC opened the filings for public comment as part of its evaluation process.
The delayed applications include proposals submitted earlier this year by Bitwise Asset Management, Roundhill Investments, and GraniteShares. The firms filed plans in February for prediction market ETFs designed to track the outcomes of real-world events, including U.S. elections.
SEC Reviews Expanding Prediction Market Sector
Prediction markets have recorded rising activity over the past 18 months, particularly across crypto-linked platforms. Trading volume in these markets now regularly exceeds $15 billion per month, according to industry figures cited in the filings and related discussions. The contracts allow traders to speculate on outcomes tied to elections, sports, financial events, and cultural developments.
The proposed ETFs would provide exposure to those event contracts through traditional brokerage accounts instead of requiring direct participation on prediction market platforms. The structure mirrors the path followed by spot cryptocurrency ETFs, which opened digital asset exposure to a broader group of investors through regulated financial products.
Bloomberg ETF analyst Eric Balchunas said the SEC appears to be evaluating the products before moving forward. In comments posted on X, Balchunas stated that the commission was clearly wrestling with prediction-market ETFs in a manner similar to how it handled spot crypto ETF applications before approving them in January 2024.
According to Balchunas, regulators want additional time and public input before they open the barn door to the category.
Delays Come Amid Ongoing Legal Scrutiny
The SEC’s review also comes as prediction market operators continue facing legal challenges in several U.S. states. Platforms such as Kalshi remain involved in court disputes tied to the legality and oversight of event-based contracts.
At the same time, Atkins noted that ETFs have continued to drive innovation in U.S. securities markets. He stated that total ETF assets have tripled since 2019, while the SEC has adopted more flexible listing standards in recent years. Those changes included the introduction of a generic listing framework last September, replacing parts of the earlier case-by-case review process for ETF approvals.
Related: SEC Review Delays First Wave of Prediction-Market ETFs as Demand Surges
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