Bitwise, Roundhill, GraniteShares Propose Election Outcome ETFs

Three ETF issuers want to bring election betting to mainstream investors through their brokerage accounts. Bitwise, Roundhill and GraniteShares have filed applications with the SEC to offer event contracts as exchange-traded funds, which would then be available within self-directed IRAs and regular brokerage accounts.

"An ETF issuer's job is to give investors access to investments they want and we see a lot of interest in prediction markets," said William Rhind, founder and CEO of GraniteShares ETFs.

The companies want to offer a Democrat President ETF or Republican President ETF, essentially an investment in who wins the White House in the election November 7, 2028. Similar ETFs are proposed for the outcome of which party takes control of the House of Representatives and the Senate in this year's midterm elections.

The ETFs would roughly track the changes in probability of the prediction markets, which offer a payout on a winning bet and nothing on a losing bet. The ETFs will carry a warning that an outcome contrary to the bet means "The fund will lose substantially all its value," according to the SEC filings.

Traders can currently make these kinds of bets directly on Kalshi, Polymarket, Robinhood, Crypto.com or even with companies famous for sports betting like DraftKings, FanDuel or Fanatics. But many investors keep most or all of their assets in a brokerage account, Bitwise Investments chief investment officer Matthew Hougan points out. He highlights the way bitcoin ETFs gave millions of investors an opportunity to invest in cryptocurrencies without the added friction of opening an account on Binance or Coinbase.

Rhind says the event contract ETFs appear to be taking a similar path as crypto, gold and options markets. "One of the best expressions of the ETF is providing market access to different investments in an ordinary brokerage account," Rhind told CNBC. "We've seen throughout history that, when added in ETF form, the underlying markets have benefitted."

The ETF applications now are limited, focused only on the outcome of a few national elections, which are likely to garner the most attention, outside sports, and the most liquidity. Prediction markets offering sports wagers are being hotly contested in state and federal court across the nation, as states argue such trades are sports gambling, which fall exclusively under state regulation. Tribes too argue the sports event contracts violate their sovereign right to regulate gambling on tribal lands.

The Commodity Futures Trading Commission has jurisdiction over prediction markets and has joined the legal fight to defend its right to decide what event contracts can be offered.