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

The U.S. Securities and Exchange Commission (SEC) has delayed the review of 24 proposed 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 initially postponed the review of 24 ETFs tracking prediction markets such as Kalshi and Polymarket in early May, requesting issuers to supplement product mechanisms and disclosure details. According to CNBC reports: this delay affects issuers like Bitwise, Roundhill, GraniteShares, and others submitting 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 pricing algorithms convert 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 SEC’s delayed ETFs:

• Underlying: Event contracts tracking prediction market platforms like Kalshi and Polymarket
• Contract structure: Binary instruments paying $1 if a specific outcome occurs, otherwise 0
• 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 paused during the submission review phase

The core value of these ETFs is “allowing retail investors to gain exposure to event contracts without directly opening accounts 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 fluctuations 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, with the SEC simply seeking more information; ultimate approval remains likely, but the timeline has been extended beyond initial expectations.

Trump’s son is an advisor to Kalshi and Polymarket, holding positions in Polymarket

Political and economic context of this delay:

• Donald Trump Jr., son of President Trump, is an advisor to Kalshi and Polymarket
• Trump’s son also holds investments in Polymarket through a certain fund
• During review, the SEC must navigate 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 financial interests of the Trump family in crypto and prediction markets are a current focal point in U.S. financial regulatory legislation.

The delay of this ETF mirrors the years-long difficulty in approving spot Bitcoin ETFs— in 2023, spot Bitcoin ETFs also faced multiple delays before finally being approved in January 2024. The review timeline for prediction market ETFs may be similar, but the specific completion date has not been disclosed. Future points to watch include: SEC responses to issuers’ supplemental filings, the timeline for revisions and resubmissions by Bitwise, Roundhill, and GraniteShares, and whether the relationship between Trump’s son and related platforms becomes a public issue during review.

• This article is reprinted with permission from: 《Chain News》
• Original title: 《SEC Delays 24 Prediction Market ETFs: Requests for Additional Information, Trump’s Son as Advisor Raises Attention》
• Original author: Elponcrab