US SEC Delays Prediction Market ETF Launch Again...Bloomberg Analyst Says "Not a Fatal Flaw"

▲ U.S. Securities and Exchange Commission (SEC), prediction market, ETF/AI generated image

The U.S. Securities and Exchange Commission (SEC) has again postponed the launch of prediction market Exchange Traded Funds (ETFs). These products were originally scheduled to hit the market this week, but the launch was delayed as the SEC determined it needed more time to review the disclosure documents.

CoinGape reported on May 11 (local time) that the SEC has once again delayed the launch of prediction market ETFs. Bloomberg analyst Eric Balchunas explained that the SEC is re-examining the disclosure contents of these products and that this delay does not appear to be fatal.

Balchunas assessed that if prediction market ETFs are launched, they would be a groundbreaking product, setting a precedent as the first of their kind. He stated that due to this characteristic, the SEC appears to be taking more time for review. These ETFs are designed to access the rapidly growing prediction market industry and will be linked to markets on platforms such as Polymarket and Kalshi.

According to CoinGape, Roundhill Investments, Bitwise, and GraniteShares have applied to launch prediction market ETFs. Roundhill applied for six funds covering presidential, Senate, and House election markets. Bitwise also applied for similar election-related funds, along with funds tracking recession, crude oil, and cryptocurrency markets. GraniteShares' proposed products also focused on election betting.

The SEC had previously delayed the launch of these products last week, demanding more detailed information on their operational methods from the issuers. This renewed delay is due to the unique structure of prediction market ETFs, which, unlike traditional ETFs, are linked to the outcomes of political and economic events, making disclosure and surveillance systems key issues.

Opposition has also been raised. Joe Saluzzi, co-founder of Themis Trading, said that the SEC's approval of prediction market ETFs would be a “big mistake.” He questioned who would monitor market manipulation in the underlying prediction markets and whether cross-market surveillance agreements exist.

However, comments from SEC Commissioner Hester Peirce suggested that the Commission is not necessarily trying to block the launch of these ETFs. Commissioner Peirce stated that if issuers adhere to rules, properly prepare disclosures, and find a listing exchange, the SEC cannot prevent the ETFs from entering the market. She added that while the SEC has the authority to respond to new market developments, it must be cautious that regulations can impose heavy and continuous costs.

This delay has once again made the launch timing of prediction market ETFs uncertain. However, CoinGape, citing Balchunas' analysis, reported that this action is less about derailing the products themselves and more about the SEC's process of further reviewing the disclosure and operational structure of the first prediction market ETFs.

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