You Can Trade the 2028 Election Outcome: Why These ETFs Matter

• Six brand‑new ETFs will let you wager on the winner of the 2028 presidential, Senate and House races.
• One fund targets the eventual winner, promising capital appreciation; the other five could evaporate if the bet loses.
• Regulators are still debating how to classify “event contracts,” creating a layer of legal uncertainty.
• Recent CFTC signals suggest a softer stance on prediction markets, potentially clearing the path for these products.
• Historical analogues—such as past political betting contracts—offer clues on volatility and survivability.

You can now put your money on the 2028 election outcome with a brand‑new ETF class. Roundhill Investments has filed a formal request with the U.S. Securities and Exchange Commission to launch six exchange‑traded funds that track the political fortunes of the Democratic and Republican parties across the President, Senate and House chambers. If approved, investors will gain a regulated, liquid vehicle to express political views—something previously limited to niche prediction‑market platforms.

Roundhill’s Election‑Linked ETFs: What They Are and How They Work

The filing describes each fund as investing in “event contracts,” a derivative that pays out based on a specific real‑world occurrence—in this case, the party that wins a given election. The lineup includes:

• Roundhill Democratic President ETF
• Roundhill Republican President ETF
• Roundhill Democratic Senate ETF
• Roundhill Republican Senate ETF
• Roundhill Democratic House ETF
• Roundhill Republican House ETF

Only the fund that backs the eventual winner is designed to deliver “capital appreciation.” The other five are structured to lose almost all of their net asset value (NAV) if their targeted party does not prevail. In essence, they behave like binary options: a 100 % payout if the event occurs, zero otherwise. This binary payoff model can cause sudden, extreme swings in NAV—a characteristic that sets these ETFs apart from traditional equity or sector funds.

Regulatory Landscape: Event Contracts, the SEC, and CFTC Shifts

Event contracts sit in a regulatory gray zone. The SEC’s filing notes that rules governing such instruments are “evolving,” meaning a future rule change could re‑classify or even prohibit them. The Commodity Futures Trading Commission (CFTC) recently withdrew a Biden‑era proposal to ban political prediction markets, signaling a more permissive approach. That move aligns with a broader industry push to bring prediction‑type bets under the umbrella of regulated exchanges, which could reduce counterparty risk and improve price discovery.

Investors should monitor two regulatory levers:

• SEC Classification: If the agency decides that election contracts are securities rather than commodities, the compliance burden could rise dramatically.
• CFTC Oversight: A shift toward treating these contracts as futures would bring them under the CFTC’s jurisdiction, potentially imposing margin requirements and position limits.

Both bodies have hinted that transparency and consumer protection will be key drivers of any future rulemaking.

Sector Ripple Effects: How Traditional ETFs and Prediction Markets May Respond

The introduction of regulated political ETFs could trigger a cascade of strategic moves across the asset‑management landscape. First, traditional thematic ETFs—such as those tracking “government policy” or “infrastructure spending”—may see increased demand as investors look for correlated exposure without the binary risk. Second, existing prediction‑market platforms (e.g., Polymarket, Augur) might pivot toward offering “hedge” products that mirror the ETF structure, thereby attracting institutional capital.

From a portfolio‑construction perspective, the new funds provide a low‑cost, exchange‑traded shortcut to what was previously a bespoke over‑the‑counter (OTC) transaction. This could compress spreads, improve liquidity, and ultimately make political speculation a mainstream asset class.

Historical Parallels: Past Political Betting Vehicles and Their Fates

Political betting is not new. In the 1990s, a handful of U.S. brokers offered “election futures” tied to the outcome of presidential races. Those contracts were eventually delisted after regulatory scrutiny intensified, leaving traders with steep losses when the underlying bets failed.

Another reference point is the 2012 “US Election Futures” product launched in Europe. It survived for a few years but suffered from low volume and high tracking error, leading most managers to abandon the format.

The common thread in these cases: extreme price volatility, regulatory pushback, and a reliance on a single binary outcome. Roundhill’s approach attempts to mitigate some of those risks by packaging the bets inside an ETF structure, which brings mandatory disclosure, custodial safeguards, and a transparent pricing mechanism.

Investor Playbook: Bull and Bear Scenarios for the 2028 Election ETFs

Bull Case: If the SEC grants approval and the CFTC maintains a hands‑off stance, the ETFs could attract a blend of retail sentiment traders and institutional hedgers. Liquidity would rise, bid‑ask spreads would shrink, and the winner‑focused fund could deliver outsized returns—especially if market sentiment shifts dramatically close to election day.

Bear Case: Regulatory headwinds materialize, forcing a re‑classification that either bans the products or imposes onerous margin requirements. In that scenario, the five loser funds could become near‑worthless, and even the winner fund might see NAV erosion from forced liquidation. Additionally, the binary nature of the contracts means a single unexpected political event (e.g., a scandal, third‑party candidate surge) could wipe out positions overnight.

Strategic Takeaways:

• Allocate a modest, speculative slice of your portfolio—no more than 2‑3 % of total equity exposure—to the winner‑focused ETF if you have a strong conviction about the 2028 outcome.
• Use the loser‑funds as a hedge only if you are comfortable with near‑total loss; they can serve as a “digital short” on the opposing party.
• Stay vigilant on SEC and CFTC releases; a regulatory change 30 days before the election could trigger massive price swings.
• Consider pairing the ETFs with traditional political‑risk assets (e.g., defense stocks, renewable‑energy ETFs) to diversify binary exposure.

In short, Roundhill’s election‑linked ETFs could open a new frontier for political speculation, but the path is littered with regulatory potholes and binary‑risk cliffs. Understanding the mechanics, watching the policy‑making arena, and sizing your position prudently will be the keys to turning this novelty into a net‑positive addition to your investment toolbox.