Key facts
- The SEC is seeking public comment on regulating novel ETFs tied to prediction markets.
- The agency previously delayed approval for dozens of these funds.
- The ETFs in question depend on outcomes of real-world events like elections.
- The SEC aims to ensure a transparent and thoughtful approach to regulation.
- A 2018 proposal aimed to codify relief and conditions for ETFs, providing regulatory certainty.
The U.S. Securities and Exchange Commission (SEC) has requested public feedback on the regulation of 'novel' exchange-traded funds (ETFs) that are linked to prediction markets. This move comes two months after the agency postponed decisions on approving numerous such funds, which are based on the outcomes of real-world events, including elections.
In a statement from May 20, 2026, an SEC official noted that ETFs have been a significant driver of innovation in securities markets, contributing to capital formation and investor choice, with assets tripling since 2019. The official acknowledged that novel products present new questions and appreciated the willingness of fund sponsors to delay effectiveness for certain ETFs, such as event contract ETFs, while the implications are considered. To facilitate a transparent and thoughtful process, SEC staff were directed to solicit public input.
Historically, the SEC has worked to provide regulatory certainty for ETFs. A proposed rule in June 2018 aimed to establish a uniform framework for ETF regulation, largely codifying existing exemptive orders and conditions. This proposal sought to offer consistency and allow for product innovation by adopting a principles-based approach. The SEC noted at the time that the exemptive process was time-consuming and resource-intensive, and a standardized rule could free up resources for both the industry and the Commission to focus on other innovative financial products.