The U.S. Securities and Exchange Commission (SEC) has halted its review of novel prediction market Exchange-Traded Funds (ETFs) proposed by Bitwise, Roundhill Investments, and GraniteShares. SEC Chair Paul Atkins stated the agency will seek public comment, citing the need to examine the implications of binary event contracts. This pause occurs despite the prediction markets sector showing significant demand, with monthly trading volumes exceeding $15 billion.
The SEC is freezing its approval process for a new generation of prediction market ETFs, indicating stronger regulatory oversight. Chair Paul Atkins stated that before changing the applications from Bitwise, Roundhill Investments, and GraniteShares, the agency will ask for public opinions.
Bitwise submitted a plan in February for PredictionShares ETFs based on U.S. election outcomes. Atkins remarked that “new things produce questions,” and directed staff to focus on the effect of allowing binary event contracts in ETF formats.
Bloomberg ETF expert Eric Balchunas noted the SEC is “obviously struggling” with this investment type, similar to its earlier deliberation on spot Bitcoin and Ether ETFs. The regulator wants to ensure prediction market ETFs are safe before allowing investor access.
Prediction markets, which have seen monthly trading volume surpass $15 billion, are considered a promising crypto use case. An ETF would let investors access this space through regular brokerage accounts.
Bitcoin and Ether ETFs have already paved the way for institutionalization, attracting billions in inflows. However, platforms like Kalshi face ongoing legal battles in some U.S. state courts, highlighting further uncertainties.
Atkins pointed out that prediction market ETFs have doubled their assets within the last four years. The SEC has recently shown openness to innovation, introducing a new standard for generic product listing in September.
This new approach eliminates the need for case-by-case reviews of products. The Commission is also reportedly considering an “innovation exemption” for trading tokenized stocks, potentially allowing equities like Apple or Tesla to be traded on crypto platforms.
