SEC Opens Public Review on Prediction Market ETFs as Approval Delays Continue

The SEC is taking a slower approach toward approving prediction market ETFs, asking for public feedback before moving ahead with a decision. The regulator recently paused several applications linked to event-based contracts, saying the products raise new questions for financial markets.

SEC Chair Paul Atkins said on May 21 that regulators want to better understand how these investment products could affect investors and market stability. He explained that “novel products raise novel questions,” signaling that the agency is not rushing to approve a completely new ETF category.

Bitwise, Roundhill and GraniteShares ETF Plans Face Delay

Earlier this year, Bitwise, Roundhill Investments and GraniteShares filed separate applications for prediction market ETFs. Bitwise proposed a group of products under its PredictionShares brand in February, including funds designed to track outcomes such as US elections.

These ETFs would allow investors to gain exposure to binary event contracts through traditional brokerage accounts, instead of using dedicated prediction market platforms.

Prediction Markets Continue Rapid Growth

Prediction markets have become one of crypto’s fastest-growing sectors over the last 18 months, regularly recording more than $15 billion in monthly trading volume across sports, elections, financial earnings and cultural events.

Bloomberg ETF analyst Eric Balchunas said the SEC appears to be “clearly wrestling” with how to regulate the sector, comparing the process to the agency’s long review of spot Bitcoin ETFs before their approval in January 2024.

The delay also comes as prediction market platform Kalshi continues to face legal challenges in several US states, adding further uncertainty to the industry’s future.