New ETF Filings Tout Ways to Play Prediction Markets with Your Retirement Savings. A Lot Could Go Wrong.

Soon, investors may be able to wager on who wins control of the Senate, the outcomes of major geopolitical conflicts, and who will win the 2026 FIFA World Cup, all in their brokerage accounts. 

Investing, gambling, what’s the difference? Isn’t the stock market just a casino with better lighting? 

The traditional boundaries of what we used to call investing are being systematically dismantled. Bitwise, Roundhill, and GraniteShares have filed applications with the SEC to offer event contracts as exchange-traded funds (ETFs). If approved, these vehicles would allow a retail investor to place a bet on the 2028 presidential election or the 2026 midterms directly inside a self-directed IRA.

This is blurring the lines between different types of investment vehicles. And I’m OK with it, because I know my way around risk and return. My concern is for those who are sold these vehicles, don’t fully understand them, and make irresponsible decisions. That’s no different than this:

Remember all the hype surrounding the debut of Bitcoin ETFs? They popped initially, as the first 12 all launched in sync. IBIT (IBIT) from iShares became the dominant product, as expected. 

But since then? Until a little rally last week, two years of zilch in return. Lots of excitement, lots of risk, lots of trading profits for the nimble (my own  trading was a highlight for me last year). 

Now, prediction markets are different in that they “resolve” one way or another. In that sense, maybe they will be more like buffer ETFs, which often have a finite end date. 

But my point is this: the age of the DIY investor is alive and well, and I’m grateful for that. What I am looking to see is whether this is another cycle we’ve seen before: where investors celebrate their ability to be the “Y” in DIY, product makers do what they should – provide products to meet needs – and it all goes well… until it doesn’t. Then, the DIYs cry foul.

I say that because I hope anyone who “missed out” on mortgage-backed securities before 2008’s reckoning, Bitcoin ETFs, private credit funds, or any of the other heroes-to-zeros in recent memory, will treat prediction market securities or any other newfangled vehicles with care. 

One way to think of it is this: “take big shots… with small amounts of money.” If you don’t completely understand it, or what the risks are, treat it like a paper-trading position (i.e. not with real money). I have bought one share of stock in some cases, just to watch it move.

Prediction: Gamification 

The pitch from ETF issuers is centered on the concept of “market access.” Just as Bitcoin ETFs allowed millions to bypass crypto exchanges, these event ETFs are designed to remove the friction of opening accounts on specialized platforms like Kalshi or Polymarket. The goal is to bring the mechanics of the prediction market — where payouts are binary (win or lose) — into the same brokerage window where you buy your index funds and blue-chip stocks.

From the public reporting to date, these funds would offer “Democrat President” or “Republican President” options. Because they track the shifting probabilities of a specific outcome, they carry a stark mathematical reality: if the bet is wrong, the fund loses substantially all its value.

Issuers like GraniteShares and Bitwise argue that this is simply the natural evolution of the ETF wrapper, following the path of gold, crypto, and options. They view prediction markets as a legitimate asset class that provides transparency into the wisdom of the crowd. We’ll see if that turns out to be an oxymoron.

While the financial industry moves toward the point where “everything is an investable asset,” the regulatory world is in an uproar. The Commodity Futures Trading Commission (CFTC) is currently locked in a legal battle over its right to decide which event contracts can be offered to the public. 

And, several states and tribal authorities argue that these contracts are not investments at all, but rather sports gambling by another name. Because states and tribes have exclusive rights to regulate gambling within their jurisdictions, the federal push to commoditize these bets is being met with fierce resistance in the courts.

For now, the filings are limited to high-profile national elections, which offer the most liquidity outside of the sports world. However, the precedent is the real story. If an election is an ETF, what follows? The outcome of a Supreme Court case? The success of a movie’s opening weekend? No chance of insider trading there, right? 

The offsetting argument, which I do agree with, is that since many investors keep most or all of their assets in a brokerage account, having more types of return/risk tradeoffs available to them where their money already lives is a good thing, in theory. It creates less friction, reducing the burden of having to open accounts on secondary platforms for crypto trading or prediction markets. 

The ETF applications now are limited, focused only on the outcome of a few national elections, which are likely to garner the most attention outside sports, and the most liquidity. Let’s see how they do, and what it leads to.

Or, to coin a phrase, “what will they think of next?” Stay tuned for that. We’ll do our best to cover it here.

Rob Isbitts created the ROAR Score, based on his 40+ years of technical analysis experience. ROAR helps DIY investors manage risk and create their own portfolios. For Rob’s written research, check out ETFYourself.com.