U.S. Prediction Market ETF Review Stalls! 24 Products Face Conflict of Interest Due to "Trump's Son Advisor Identity"

The U.S. Securities and Exchange Commission (SEC) has delayed the review of 24 predictive market ETFs, with regulators focusing on pricing algorithms, probability monitoring, and information disclosure, and the involvement of Donald Trump Jr. as an advisor raising conflicts of interest discussions.

The SEC postponed the review of 24 ETFs tracking prediction market platforms such as Kalshi and Polymarket in early May, requiring issuers to supplement product mechanisms and disclosure details. A summary from CNBC reports: this delay affects issuers like Bitwise, Roundhill, and GraniteShares who submitted these 24 ETFs; analysts compare this delay to the years-long struggle to approve spot Bitcoin ETFs that year. The core questions from the SEC concern “how the pricing algorithm converts to ETF share prices” and “how probability changes are monitored in real time.”

Delayed 24 ETFs: Bitwise, Roundhill, GraniteShares as main issuers

The structure of the ETFs delayed by the SEC this time:

• Underlying: Event contracts tracking prediction market platforms like Kalshi and Polymarket
• Contract structure: Binary instruments paying $1 if a specific outcome occurs, $0 if not
• Topics: Elections, economic recessions, tech layoffs, oil prices, cryptocurrency trends
• Issuers: Bitwise Asset Management, Roundhill Investments, GraniteShares
• Scale: A total of 24 ETFs are currently under review and have been temporarily halted

The core value of these ETFs is to “allow retail investors to gain exposure to event contracts without opening accounts directly on Kalshi or Polymarket.” They also provide institutional investors and ETF structures with more familiar tax and custodial frameworks.

SEC Focus: Pricing algorithms, real-time probability monitoring, disclosure mechanisms

Specific requirements from the SEC to issuers:

• Explain how the pricing algorithm converts prediction market contracts into ETF share prices
• Clarify how probability changes are monitored in real time and reflected in NAV
• Further disclose product operation mechanisms to investors
• Clarify the relationship between product marketing and actual risks

The SEC has not rejected these ETFs, only extended the review period. ETF experts believe the delay is temporary and that the SEC simply needs more information; ultimate approval remains likely, but the timeline has been extended beyond initial expectations.

Donald Trump Jr. is an advisor to Kalshi and Polymarket, and holds positions in Polymarket

Context behind the political and economic background of this delay:

• Donald Trump Jr., son of former President Trump, is an advisor to Kalshi and Polymarket
• Trump Jr. also holds Polymarket investments through a certain fund
• During the review, the SEC must address the relationship between “Trump family interests” and “regulatory independence”

This structure aligns with the conflict of interest clauses reported this week by abmedia regarding the CLARITY Act— the White House advocates that such clauses “apply to all officials,” not targeting any individual specifically; the interests of Trump’s family in crypto and prediction markets are a concrete point of contention in current U.S. financial regulation legislation.

The delay of this ETF is similar to the years-long process of approving spot Bitcoin ETFs— in 2023, spot Bitcoin ETFs also faced multiple delays and were finally approved in January 2024. The review timeline for prediction market ETFs may be similar, but the specific completion date has not been disclosed. Follow-up events to watch include: SEC responses to issuer supplement submissions, the timeline for revisions and resubmissions by Bitwise, Roundhill, and GraniteShares, and whether the relationship between Trump Jr. and related platforms becomes a public issue during the review.

• This article is reprinted with permission from: 《Chain News》
• Original title: 《SEC Delays 24 Prediction Market ETFs: Requests Additional Information, Trump Jr. Advisor Role Under Scrutiny》
• Original author: Elponcrab