US financial analysts have poured scorn on plans to launch prediction market and sports contract-themed exchange-traded fund (ETF) products, likening them to stock picking.
Earlier this month, the financial firms Tidal Investments and Subversive Capital asked the Securities and Exchange Commission to approve two first-of-their-kind sports-event contract ETFs, which would be tied to the outcome of sports games.
One is named the Subversive All-Season Sports ETF. This product proposes making over-the-counter swaps that allow investors to take positions in some 80 active sports-related contracts. The ETF managers would trade on platforms like Kalshi and Polymarket.
“The first-order objections are as you would expect,” wrote the Bloomberg reporter Katie Greifeld. “It’s hard to argue that this is anything other than putting gambling into an ETF.”
The comments come as prediction market players continue to face off against states, tribes, and sportsbook operators.
States claim prediction markets offer unlicensed sports betting services. But federal regulators say they offer financial products.
Prediction Market ETF Proposals Await Green Light
Greifeld also equated novel ETFs of the sort Tidal and Subversive have proposed to “stock picking.”
In the financial sphere, this term refers to an investment strategy that requires traders to actively trade undervalued, potentially high-growth assets. They aim to generate higher returns than broad market indices such as the S&P 500.
Other experts from the same publication agreed. But they argued that sports-event ETFs may fail to pique the interest of casual prediction-market punters and impulse-driven stock traders, often called “degens.”
“[This kind of ETF] outsources the very thing that likely draws degens to prediction market gambling: the adrenaline hit of winning a bet,” wrote Bloomberg’s senior ETF analyst Eric Balchunas on X. “Why let someone else have the fun?”
No Adrenaline in Proposed ETFs, Says Analyst
“Adrenaline hits” could be lacking if ETF investors let other people outsource their “sports bets,” Greifeld added.
At the end of last month, the SEC issued a call for public comment on plans to approve a range of novel ETFs covering crypto, commodities, single stocks, leveraged offerings, and event contracts.
Some financial firms have also asked the SEC to approve highly leveraged ETFs.
The SEC has given the public until the end of August to submit comments. This will likely result in another potential delay for investors hoping to access prediction market ETFs.
Financial firms initially hoped to get their ETFs onto the market in early May, but have since faced setbacks.
In mid-May, CNBC wrote that the prediction markets ETF delay “evokes memories of the years it took for spot Bitcoin ETFs to be approved by the SEC.”
However, the same media outlet also quoted ETF experts who claimed the delay was temporary, with the SEC seeking assurances from issuers about technical matters.
Tidal and Subversive have previously launched a range of novel ETFs, including two politically aligned and cannabis-related products.
SEC Looking at Financial Frameworks
Balchunas this week suggested that the SEC is inclined to approve the filing requests. The analyst called the commission “pro-innovation.”
But he said the regulator still wants to make sure the products are financially sound.
“I think their issue here is that if they approve one of these, they could see 500 to 1,000 filings within a month or two. It would be raining filings,” Balchunas said.
Athanasios Psarofagis, another Bloomberg analyst, suggested sports contract-related ETFs may be an answer to a non-existent problem.
“Usually you go to the ETF because it makes it easier,” said Psarofagis. “This doesn’t really solve that problem.”
In South Korea, meanwhile, the opposition leader has accused the President of turning the domestic stock market into a “gambling den.”
People Power Party leader Jang Dong-hyuk said the decision to approve single-stock, leveraged ETFs had created a “casino” for South Korean investors amid a boom in semiconductor shares.
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