Wall Street Rushes into Election Prediction ETFs Amid Regulatory Battle

Three major ETF issuers—Bitwise Asset Management, Roundhill Investments, and GraniteShares—are launching separate funds covering 2028 presidential and 2026 congressional outcomes through Bitwise’s new PredictionShares platform. The proposed funds offer exposure to contracts tied to specific political outcomes, including whether Democrats or Republicans win the presidency in 2028 and which party controls the Senate and House in 2026. This move represents Wall Street’s most direct push yet into political prediction markets, traditionally dominated by platforms like Polymarket and Kalshi.

The timing is strategic, landing as the U.S. approaches its midterm elections, which are widely treated as referendums on the sitting administration. Historically, the president’s party rarely gains seats across both chambers, dynamics that tend to increase hedging and speculative activity around outcome probabilities. According to Ganesh Mahidhar, Investment Professional at Further Ventures, political polarization and policy uncertainty have supercharged activity on existing platforms. “Given the level of interest in these event markets, providing liquidity would be very attractive for various hedge funds and quant trading firms,” Mahidhar told Decrypt.

Kadan Stadelmann, CTO at Komodo Platform, suggests the push also reflects broader market conditions. With U.S. crypto funds seeing weeks of outflows and spot Bitcoin ETFs delivering muted momentum, issuers are searching for new themes. “Bitwise is positioning early,” he said, “to capture opportunity ‘before regulators catch up with the technology.'” He added that despite regulatory hurdles, demand could be strong, noting, “In the U.S., gambling has become a part of life’s fabric… I suspect liquidity will be robust.”

Industry experts are divided on the implications of these new financial products. On one side, proponents see a significant liquidity opportunity. Mahidhar points to surging demand for contracts tied to U.S. election outcomes, arguing that market makers are drawn to the volatility and tight spreads these event contracts can offer. “Regulating these markets and making it accessible to the broader retail audience is the next step in the evolution of event contracts,” he said, framing the ETF filings as a natural progression toward mainstream adoption.

On the other side, critics warn of profound risks. Stadelmann cautions that “political prediction markets create opportunities for insiders to trade on classified information and can also open the elections up to manipulation.” The concern is that these markets, by monetizing political outcomes, could incentivize bad actors to influence events for financial gain, undermining electoral integrity. This tension between financial innovation and systemic risk lies at the heart of the regulatory debate now unfolding.

The activity on existing platforms underscores the market’s potential scale. On prediction market Myriad, owned by Decrypt’s parent company Dastan, former President Trump’s approval rating is edging past the midpoint at 50.1%. This data point, while specific, illustrates the granular level of political sentiment already being traded, which ETF issuers now seek to package for a wider audience.

The regulatory landscape for prediction markets is intensifying, setting the stage for a federal clash. The Commodity Futures Trading Commission (CFTC), under Chairman Michael Selig, is actively asserting federal jurisdiction. Selig stated the agency has filed an amicus brief in a federal appeals court asserting its authority over prediction markets and event contracts. In a Wall Street Journal op-ed, Selig wrote that the CFTC “will no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets,” framing event contracts as operating under CFTC rules as swaps rather than gambling.

This federal stance directly conflicts with actions by state regulators. Authorities in Nevada, Massachusetts, and other states have moved against election and sports event contracts on platforms like Kalshi and Polymarket, arguing they constitute unlicensed gambling. Court fights are now underway over whether state or federal authority prevails. The outcome of this jurisdictional battle will be critical in determining the legal viability of the proposed Bitwise, Roundhill, and GraniteShares ETFs.

This Wall Street push into political ETFs, therefore, is not merely a product launch but a high-stakes bet on a specific regulatory outcome. Issuers are navigating a fractured legal environment, banking on the CFTC’s swap-based framework winning out over state gambling prohibitions. The success of PredictionShares and similar platforms hinges on this unresolved conflict, making the coming legal decisions as consequential for the funds as the election outcomes they aim to track.