Prediction markets could soon be available in your retirement account
Investors will soon be able to place bets in their brokerage accounts on who will win control of the Senate.
Bitwise, Roundhill and GraniteShares have filed with the SEC to offer event contracts as exchange-traded funds that can then be used, for example, within a self-directed IRA.
“The job of an ETF issuer is to provide investors with access to the investments they want, and we are seeing significant interest in prediction markets,” said William Rhind, founder and CEO of GraniteShares ETFs.
Companies want to offer a Democratic chairman ETF or Republican chairman ETF, which is essentially an investment in who will win the White House in the November 7, 2028 election. Similar ETFs are being proposed for the outcome of which party will take control of the House and Senate in this year’s midterm elections.
ETFs will roughly track changes in the odds of prediction markets, offering payouts on a winning bet and nothing on a losing bet. The ETFs will carry a warning that an outcome against the bet means “the Fund will lose substantially all of its value,” according to SEC filings.
Investors can currently place such bets directly through Kalshi, Polymarket, Robinhood, Crypto.com or even with companies famous for sports betting such as DraftKings, FanDuel or Fanatics.
Like Bitcoin ETFs?
But Matthew Hougan, chief investment officer at Bitwise Investments, points out that many investors keep most or all of their assets in brokerage accounts. He emphasizes that Bitcoin ETFs give millions of investors the opportunity to invest in cryptocurrencies without the hassle of opening an account with Binance or Coinbase.
Rhind says event contract ETFs follow a similar path as crypto, gold and options markets.
“One of the best expressions of an ETF is providing market access to different investments in a regular brokerage account,” Rhind told CNBC. “Historically, we have seen underlying markets benefit when included in ETF form.”
ETF applications are now limited and focused solely on the outcome of a few national elections outside of sports that are likely to attract the most attention and the most liquidity.
Prediction markets that offer sports betting are hotly contested in state and federal courts across the country; states argue that such trades are merely sports gambling subject to state regulations. Tribes also argue that sporting event agreements violate their sovereign rights 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 which event contracts can be offered.
