US-based ETF provider Roundhill Investments has submitted a proposal to the US securities regulator to establish six new ETFs linked to event contracts that forecast the outcome of the 2028 US presidential election.

ETF analyst Eric Balchunas highlighted on X that these funds could be “potentially groundbreaking” if they receive approval. He mentioned, “This opens up a huge door to all kinds of stuff,” emphasizing that while prediction markets are straightforward to navigate, ETFs offer an even simpler alternative.

The proposed ETFs consist of the Roundhill Democratic President ETF, the Roundhill Republican President ETF, alongside others targeting Senate and House races for both parties.

Risks Associated with Roundhill’s ETFs

Despite the ambitious nature of these funds, the filing underscored substantial risks, warning that investors who bet on the wrong outcome could see near-total loss of their investment. The aim of the winning outcome ETF is a capital growth strategy, but it cautioned that the remaining products could diminish significantly in value.

The document mentioned that sudden changes in the fund’s net asset value (NAV) could occur, making it a unique product compared to standard investments. Furthermore, due to shifting regulations on event contracts in the United States, there may be potential changes in how these funds are classified, which could impact investor participation.

Balchunas voiced concerns expressed by Vitalik Buterin, who cautioned on the risks of prediction markets leaning toward unhealthy speculative behaviors. Buterin remarked on X, stating that these markets need to evolve towards more stable and responsible practices.