Prediction market ETFs draw scrutiny as SEC reviews filings

Bitwise and GraniteShares filings aim to provide regulated election-market exposure

Bitwise and GraniteShares have filed with the U.S. Securities and Exchange Commission to launch exchange-traded funds tied to political event contracts, according to MSN. The proposals are intended to give investors regulated access to election-linked prediction markets using the ETF structure.

In practice, such funds would seek exposure to binary outcomes, such as which party controls a chamber of Congress, by referencing event contracts through instruments like swaps or structured notes. Any implementation would depend on adequate underlying market depth on venues such as Polymarket and Kalshi, with portfolio construction and disclosures subject to the SEC’s review.

Why it matters: ~$63B sector and rising liquidity signals

The sector has been estimated around $63.5 billion in value and recorded roughly $40–$44 billion of trading volume in 2025, based on data from BTCC and The Block. Liquidity and distribution expanded meaningfully versus 2024, creating conditions that issuers appear to be targeting.

Analysts anticipate interest from hedge funds and quantitative traders alongside caution about product survivorship if assets remain small, as reported by Cointelegraph. Bloomberg Intelligence’s James Seyffart has pointed to high potential demand while noting that less successful funds could be liquidated if they fail to gather scale.

At the time of this writing, the data show Augur (REP), an early on-chain prediction market token, trading near $0.8888 with measured volatility of 31.85% and 16 green days out of 30. These figures are descriptive context and are not linked to any prospective ETF performance or approval outcome.

Regulatory path and risks: SEC/CFTC oversight, manipulation concerns

As reported by Decrypt, the Commodity Futures Trading Commission is asserting jurisdiction over certain political and event contracts, while the SEC is evaluating where contracts may resemble securities or derivatives. The split underscores unresolved questions over whether election-related instruments should be treated as regulated financial products or prohibited wagering.

Decrypt also notes that several states, including Nevada and Massachusetts, have taken enforcement actions involving platforms offering election contracts, citing gambling-like activity or licensing issues. Against that backdrop, ETF approval, if any, would likely hinge on clear rules for accessing and hedging event exposure without facilitating unlawful wagering, as well as on robust disclosure of counterparty and operational risks.

Regulatory commentary has emphasized the need for clearer guardrails before mass-market access is extended. “The Commission can’t stay on the sidelines,” said Paul Atkins, then chair of the Securities and Exchange Commission, in remarks about tightening oversight of event-style contracts.

Expert commentary cited by Decrypt highlights manipulation and insider-information concerns in political markets, which could be material if nonpublic information or uneven access distorts pricing. Even if regulators permit these structures, ETF viability would still depend on underlying market liquidity, stable counterparties, and the ability to manage binary event rollovers or closures without harming shareholders.