Original article | Odaily Odaily( @OdailyChina )
Author | Dingdang ( @XiaMiPP )
Recently, ETF issuers Bitwise Asset Management and GraniteShares filed applications for prediction market ETFs with the U.S. Securities and Exchange Commission (SEC). Bitwise submitted six products under the "PredictionShares" brand, while GraniteShares followed suit with a similarly structured proposal. Earlier, Roundhill Investments also filed a similar document on February 13th.
These ETFs are essentially tracking the outcomes of US political elections , attempting to package the "probability of election results" into a financial product that can be directly traded in a traditional securities account. Specifically, they focus on the 2028 presidential election (whether the Democratic or Republican party wins) and the outcome of the 2026 midterm elections, specifically the control of the Senate and the House of Representatives.
In other words, investors may no longer need to go to Polymarket in the crypto world or register with Kalshi, which is regulated by the CFTC. They can simply open a Robinhood or Fidelity account and bet on "who will win the White House," just like buying a stock.
Screenshot from @jason_chen998
What does this leap mean?
Why can we always be "one step ahead" in predicting the market?
Predicting the market's "foresight" regarding political events is nothing new.
Prediction markets are essentially groups of people using real money to express their judgments. Participants express their confidence in an event by buying and selling "yes/no" contracts. These contracts fluctuate between $0 and $1, representing the market's consensus on the probability. For example, if you believe a candidate has a 70% chance of winning, you might buy a "yes" contract for $0.70. If the event actually occurs, the contract value rises to $1; otherwise, it goes to zero.
This is a collective judgment weighted by monetary value. Unlike mere verbal expression, participants must bear the consequences of their judgments, as exemplified by the 2024 US presidential election. At that time, trading volumes at Polymarket and Kalshi surged, with political contracts becoming the dominant force. Before the election, Polymarket's cumulative trading volume in the "2024 Presidential Election Winner" single market reached approximately $3.7 billion . Kalshi, a rising star, gained legal authorization to offer election-related contracts after winning a crucial lawsuit against the CFTC in September 2024. By November, its monthly trading volume reached $127 million , with approximately 89% coming from the political and election markets.
More noteworthy is the signal conveyed by the data itself. In the weeks leading up to the 2024 election, Trump's probability of winning on Polymarket remained consistently above 60%, while mainstream polls at the time showed a close race, with Harris even holding a slight advantage. And what happened? The prediction market seemed to have "read" the election picture in advance.
This doesn't mean prediction markets are "infallible," but they have indeed demonstrated a strong ability to aggregate information across multiple election cycles. Research has found that, given ample liquidity and broad participation, prediction markets often outperform traditional polling samples. Established platform PredictIt has also been repeatedly cited as an effective information aggregator. In contrast, traditional polls are susceptible to factors such as sampling bias and expression bias.
The root of the difference lies in the incentive mechanism: public opinion polls express attitudes, while market predictions involve bearing the consequences. The former has no cost, while the latter has a clear profit and loss ratio. This structural difference determines the different ways of information processing.
Although the prediction market cooled down after the election—Polymarket's daily trading volume plummeted by about 84% after the election results were announced—the number of prediction market projects grew rapidly after 2025. As of now in 2026, according to predictionindex.xyz data, there are as many as 137 prediction market projects, with leading player Polymarket boasting a total trading volume exceeding $50 billion and a monthly trading volume of $8 billion.
From fringe experiments to mainstream adoption, the prediction market has evolved significantly. Now, imagine if participation were easily accessible through ETFs; this collective wisdom could potentially have a broader impact on public opinion regarding political events.
How ETFs package market predictions
So how do these ETFs bring the predictive market approach to Wall Street?
What these issuers are essentially doing is translating market prediction contract prices into product structures that the securities market can understand. They disguise it as an ETF, allowing you to buy through a legitimate brokerage account, but you're still gambling on a life-or-death political event.
Taking the six ETFs submitted by Bitwise as an example, four directly target the 2028 presidential election (who wins, the Democratic or Republican party), while the remaining two correspond to control of the House and Senate in the 2026 midterm elections. GraniteShares and Roundhill have similar structures. Simply put, these ETFs directly map the price performance of binary event contracts on Kalshi or Polymarket into tradable ETF shares.
Mechanistically, the share prices of these ETFs will fluctuate between $0 and $1, reflecting the market's real-time consensus on the probability of events, much like contracts. At least 80% of the fund's assets will be invested in derivatives linked to these political events, such as contracts obtained from CFTC-approved exchanges like Kalshi, or through synthetic swaps to replicate the performance. The purchase process is similar to buying stocks: through brokerage accounts like Robinhood or Fidelity, with fees expected to be between 0.5% and 1%, and the trading venue may be NYSE Arca.
At settlement, if the event occurs (such as a Democratic victory in the presidential election), the corresponding "Yes" ETF will be worth close to $1; otherwise, close to $0. Bitwise plans to liquidate and terminate the fund soon after the outcome is determined, distributing the remaining assets proportionally to the holders; some GraniteShares and Roundhill products are more "flexible" and may allow "rollover" to the next election cycle.
There's a clear difference compared to the Bitcoin ETFs we're familiar with. Bitcoin ETFs, like BlackRock's IBIT, track Bitcoin's price with unlimited upside or downside potential, making them suitable as part of an asset allocation . Prediction market ETFs, on the other hand, lean more towards binary probability betting , with a fixed cap of $1, similar to buying insurance or options—winner takes all, loser loses everything.
The question is, when probability becomes a tradable asset, is it still a simple information aggregation mechanism?
Mainstream or gambling?
If these ETFs are approved, the forecasting market will truly enter the mainstream financial field of vision.
Currently, the political prediction market remains concentrated among crypto users and professional traders. Once ETFs are launched, the entry barrier for institutional funds and traditional investors will be significantly lowered. Companies may use them to hedge against policy change risks, and portfolio managers may view them as a macro risk management tool. Liquidity will be amplified, and price signals may become more sensitive.
However, the other side of the issue is equally obvious. The 2024 election proved that market price predictions are cited by the media, amplified on social media, and can even influence public sentiment. When probability is packaged as "market consensus," it is easily interpreted as some kind of objective trend. If the scale of funds further expands, is it possible for deliberate price manipulation to influence public opinion? PredictIt was embroiled in legal disputes due to compliance controversies in its early years, so these concerns are not unfounded.
Regulation remains the biggest uncertainty. The SEC may be concerned that this is essentially “gambling” finance, increasing manipulation or moral hazard. The approval process may be subject to conditions such as trading limits or additional disclosures. Currently, the CFTC has allowed Kalshi to trade election futures, which is a positive sign, but the SEC's stance remains unclear.
Conclusion
From the crypto-native market to Wall Street ETFs, the prediction market is undergoing a transformation. However, before the regulatory framework is clear, issuers' actions are more like a trial balloon—testing the boundaries of regulation and also assessing the market's acceptance of "probabilistic assetization."
