Prediction Market ETFs Reportedly Put On Hold By SEC Over Structure Concerns Amid Regulatory Battles

• People familiar with the matter told Reuters that the delay is most likely temporary.
• The SEC is reportedly requesting additional information on product mechanics and risk disclosures before allowing the funds to proceed.
• The delay comes as legal scrutiny of prediction markets is increasing, including an insider trading case and state-level regulatory actions.

The U.S. Securities and Exchange Commission has reportedly delayed the launch of more than two dozen prediction market ETFs that were set to go live this week, including Roundhill’s highly anticipated Tuesday debut.

People familiar with the matter told Reuters that the delay is most likely temporary and that the SEC is requesting additional information from issuers on product mechanics and risk disclosures before moving forward with the approvals. 

The pause lands against a backdrop of escalating legal pressure on the underlying industry. Last month, the Department of Justice unsealed an indictment against U.S. Army Master Sgt. Gannon Ken Van Dyke, in what prosecutors described as the first insider trading case on a prediction market. 

Van Dyke allegedly used classified information about Operation Absolute Resolve, the U.S. military operation to capture Venezuelan President Nicolás Maduro, to place $33,034 in bets on Polymarket, netting approximately $409,881. He has pleaded not guilty. 

Legal Pressure Builds Around Prediction Markets

The proposed ETFs, filed by Roundhill Investments, GraniteShares, and Bitwise, would use derivatives to track binary event contracts traded on CFTC-regulated exchanges such as Kalshi. The products cover elections, recession forecasts, tech layoffs, and crude oil prices. Under SEC rules, ETFs become automatically effective 75 days after filing unless regulators intervene.

However, the regulatory friction extends beyond the SEC. Nevada's Gaming Control Board filed a civil complaint against Polymarket in January 2026, and a Massachusetts court found that similar prediction market contracts functioned as illegal sports wagering under state law — a ruling Nevada cited in its own action. More than a dozen bills have been introduced in Congress this year to further regulate prediction markets, some with bipartisan support. 

It has faced push back from the Commodity Futures Trading Commission (CFTC), with Chair Michael Selig saying the agency will “no longer sit idly by” while state governments pursue litigation against federally registered exchanges, including Polymarket, Kalshi, and Coinbase (COIN).

COIN’s stock rose over 7% in midday trade, extending gains from Friday on hopes that the CLARITY Act will get a markup in the Senate soon. On Stocktwits, retail sentiment around the company improved to ‘bullish’ from ‘neutral’ territory over the past day. Chatter stayed at ‘high’ levels.

Retail sentiment around Kalshi, which is not a listed company, trended in ‘bearish’ territory alongside ‘high’ levels of chatter, and sentiment around Polymarket trended in ‘neutral’ territory alongside ‘low’ levels of chatter.  

The SEC has not issued any official comment on the issue at the time of writing.

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