The U.S. Securities and Exchange Commission on Wednesday postponed approval decisions on multiple prediction market exchange-traded funds, saying it will seek public comment on how event-based contracts should fit into the existing ETF framework.
SEC Chair Paul Atkins described the filings as “novel products” that raise regulatory questions requiring deeper analysis. Among the delayed applications are a group of PredictionShares ETFs filed by Bitwise Asset Management in February, designed to track outcomes tied to U.S. elections and other event contracts. Roundhill Investments and GraniteShares also submitted similar proposals during the same month.
Prediction Market Volume Surpasses $15 Billion Monthly
Interest in prediction markets has surged across the crypto sector over the past 18 months. Industry data shows monthly trading volume across sports, elections, economic releases, and cultural events now regularly exceeds $15 billion. A prediction market ETF would let traditional investors access event-based contracts through standard brokerage accounts without directly using crypto-native platforms — a structure that echoes the path taken by spot crypto ETFs, which opened regulated Bitcoin and Ether exposure to institutional and retail investors.
Bloomberg ETF analyst Eric Balchunas told reporters that the SEC appears to be carefully evaluating how these products should operate before allowing them onto public markets. He compared the situation to the agency's lengthy review process before spot Bitcoin ETFs were approved in January 2024. Balchunas added that regulators likely want clearer guardrails in place before approving products tied to binary event outcomes.
CFTC Sues Minnesota, Kalshi and Polymarket Face Multi-State Legal Pressure
The SEC’s caution comes as prediction market firms continue to face legal challenges in multiple U.S. states. This week, the Commodity Futures Trading Commission sued Minnesota after Governor Tim Walz signed legislation banning prediction markets starting August 1. The CFTC argued the state law conflicts with federal oversight of derivatives markets and could criminalize activity tied to federally regulated event contracts, including weather-related markets. Minnesota Attorney General Keith Ellison said the state is reviewing the lawsuit and will respond in court.
Meanwhile, prediction market operators Kalshi and Polymarket remain under scrutiny from several state regulators over whether event contracts resemble unlawful gambling. Kalshi has challenged state-level restrictions in court, while Polymarket argues that federally supervised prediction markets should not fall under state wagering laws.
Atkins also noted that ETFs have become a major source of product development in U.S. capital markets. SEC data shows ETF assets have tripled since 2019, while procedural changes introduced last year have allowed some products to move through a streamlined listing process instead of undergoing lengthy individual reviews.
Separately, multiple reports indicate the SEC is exploring an “innovation exemption” framework for tokenized securities. The proposal under discussion could eventually allow blockchain-based trading versions of stocks such as Apple, Nvidia, and Tesla to operate on crypto infrastructure under adjusted regulatory conditions.