Original | Odaily Planet Daily (@OdailyChina)

Author | Ding Dang (@XiaMiPP)

Recently, ETF issuers Bitwise Asset Management and GraniteShares submitted applications for prediction market ETFs to the U.S. Securities and Exchange Commission (SEC). Among them, Bitwise submitted six products under the "PredictionShares" brand, followed closely by GraniteShares with similar structured plans. Earlier, Roundhill Investments also filed similar documents on February 13.

The core of these ETFs is to track the outcomes of U.S. political elections. They attempt to package the "probability of the outcomes" of U.S. political elections into a financial product that can be traded directly in traditional securities accounts. Specifically, the targets focus on the 2028 presidential election (Democrat or Republican winning), as well as who controls the Senate and House in the 2026 midterm elections.

In other words, investors may no longer need to rush to Polymarket in the crypto world or register with CFTC-regulated Kalshi; 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 step across mean?

Why do prediction markets always have a "step ahead"?

The "proactiveness" of prediction markets regarding political events has long been no surprise.

Prediction markets are where a group of people expresses judgments using real money. Participants express confidence in the occurrence of an event by buying and selling "yes/no" contracts, with the prices of these contracts fluctuating between $0 and $1, representing the market's consensus on the probability. For example, if you believe a certain candidate has a 70% chance of winning, you might buy a "yes" contract for $0.70. If the event occurs, the contract's value rises to $1; otherwise, it goes to zero.

This is a form of crowd judgment weighted by funds. Unlike purely verbal expressions, participants must bear the profit and loss consequences of their judgments, as was the case in the 2024 U.S. election. At that time, the trading volumes on Polymarket and Kalshi surged rapidly, with political contracts becoming the absolute mainstay. By the day before the election, Polymarket had a cumulative trading volume of about $3.7 billion in the "2024 Presidential Election Winner" single market. Kalshi, a rising star, was allowed to legally offer election-related contracts after winning a key lawsuit against the CFTC in September 2024, and by November, its monthly trading volume reached $127 million, with about 89% coming from political and election markets.

Even more noteworthy is the signal conveyed by the data itself. In the weeks leading up to the 2024 election, Trump's winning probability on Polymarket stabilized above 60%, while mainstream polls at the time showed a tight race, with Harris slightly ahead. The result? The prediction market seemed to have "read" the election situation ahead of time.

This does not mean that prediction markets are "exact," but they have shown strong information aggregation capabilities over multiple election cycles. Studies have found that when liquidity is sufficient and participation is broad, the statistical performance of prediction markets often exceeds that of traditional poll samples. The established platform PredictIt has also frequently been seen as an effective information aggregator. In contrast, traditional polls can be easily influenced by sampling bias, expression bias, and other factors.

The root of the difference between the two lies in their incentive mechanisms: polls express attitudes, while prediction markets bear results. The former carries no cost, while the latter has clear profits and losses. This structural difference determines the different ways information is processed.

Although prediction markets cooled down after the election, with Polymarket's daily trading volume dropping by about 84% once the results were announced, the number of prediction market projects has rapidly increased entering 2025. As of now in 2026, according to predictionindex.xyz data, there are already 137 prediction market projects, with the leading player Polymarket's total trading volume exceeding $50 billion and monthly trading volume reaching $8 billion.

From a marginal experiment to a mainstream track, prediction markets have changed significantly. Now, imagine if participation could be easily achieved through ETFs, how much more broadly this collective wisdom might influence public perceptions of political events.

How ETFs package prediction markets

So, how do these ETFs transfer the prediction market model to Wall Street?

What these issuers need to do is essentially translate the contract prices from prediction markets into product structures that can be understood in the securities market. Dressed in the ETF guise, allowing you to buy through a regular brokerage account, but still betting on the life and death of a political event.

Taking the six ETFs submitted by Bitwise as an example, four focus directly on the 2028 presidential election (who wins between Democrats/Republicans), while the remaining two correspond to the control of the Senate and House in the 2026 midterm elections. GraniteShares and Roundhill's structures are quite similar. Simply put, these ETFs directly map the price performance of binary event contracts from Kalshi or Polymarket into tradable ETF shares.

Mechanically, the prices of these ETFs will fluctuate like contracts within the $0 to $1 range, reflecting the market's real-time consensus on event probabilities. At least 80% of the fund's assets will be invested in derivative instruments linked to these political events, such as contracts obtained from CFTC-approved exchanges like Kalshi, or replicating performance through synthetic swaps. The buying process is akin to buying stocks: through brokerage accounts like Robinhood or Fidelity, with fee rates expected to be between 0.5% and 1%, with trading venues possibly being NYSE Arca.

Upon settlement, if the event occurs (such as a Democratic victory in the presidential election), the corresponding "yes" ETF value will approach $1; otherwise, it approaches $0. Bitwise's plan is to quickly liquidate and terminate the fund once the event results are determined and distribute the remaining assets proportionally to the holders; some GraniteShares and Roundhill products may be more "flexible," allowing for "rolling" into the next election cycle.

In comparison to the Bitcoin ETFs we are familiar with, there are clear distinctions. Bitcoin ETFs, like BlackRock's IBIT, track Bitcoin's price, with unlimited upside or downside potential, suitable as part of an asset allocation. Prediction market ETFs lean more towards binary probability betting, with a fixed ceiling of $1, similar to buying insurance or options—winners take all, and losers bear full losses.

The question is, when probabilities become tradable assets, is it still merely an information aggregation mechanism?

Mainstreaming or gambling?

If these ETFs are approved, prediction markets will truly enter mainstream financial视野.

Currently, political prediction markets are still concentrated among crypto users or professional traders. Once the ETFs launch, the participation threshold for institutional funds and traditional investors will significantly lower. Companies may use them to hedge against policy change risks, and portfolio managers may also see them as macro risk management tools. Liquidity will be amplified, and price signals may become sharper.

But the other side of the problem is equally obvious. The 2024 election has already proven that prediction market prices can be referenced by the media, amplified by social platforms, and even influence public sentiment. When probabilities are packaged as "market consensus," they can easily be interpreted as a certain objective trend. If the scale of funds expands further, could there be deliberate price manipulation to influence public opinion? PredictIt faced legal disputes due to compliance controversies in its early years; these issues are not unfounded.

Regulation remains the greatest uncertainty. The SEC may worry that this is essentially "gamblization" of finance, increasing manipulation or moral hazard. The approval process may impose 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, prediction markets are undergoing an identity transformation. However, until the regulatory framework is clarified, the actions of the issuers resemble a probe—a probe into the regulatory boundaries and into the market's acceptance of "probability assetization".

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