Key Takeaways
Bitwise Asset Management filed to create four exchange-traded funds based on prediction markets Friday, aiming to give investors a direct way to bet on the outcome of a US recession and tech-sector layoffs in 2026.
"US retail can't onboard platforms like Deribit, so [new products] give them direct access to regulated leverage and options exposure," Sidrah Fariq, Global Head of Retail Sales and Business at Deribit, told CoinDesk in a recent interview about the growth of new regulated crypto products.
The filings with the U.S. Securities and Exchange Commission propose four binary-outcome ETFs tied to two questions: whether an officially defined US recession will occur in 2026, and whether technology sector layoffs in 2026 will be greater than in 2025. The move comes as prediction market Polymarket shows bettors assigning an 85 percent probability that tech layoffs will indeed be higher in 2026, according to data from this week.
If approved, the ETFs would represent a major step in legitimizing prediction markets within mainstream finance, offering them through traditional brokerage accounts for the first time. However, the proposal faces significant regulatory headwinds, highlighted by the Commodity Futures Trading Commission's (CFTC) recent lawsuit seeking to block state-level oversight of prediction markets, creating an uncertain path for the novel funds.
The proposed Bitwise funds—two for each question, allowing for "yes" or "no" outcomes—would simplify betting on complex economic events. Instead of navigating niche, often unregulated, online prediction platforms, investors could take a position through their existing brokerage account, much like buying a stock.
This strategy mirrors the logic that drove the massive success of spot Bitcoin ETFs earlier this year. The launch of products like BlackRock's IBIT proved there is enormous institutional and retail demand for accessing new asset classes through familiar, regulated wrappers. The options market for IBIT, for instance, grew to rival the size of the entire bitcoin options market on the crypto-native platform Deribit in just two years, a sign of rapid institutionalization when a regulated product becomes available.
Bitwise appears to be betting that the same dynamic will play out for event-based contracts. The questions its ETFs would track are already active topics of speculation. A market on Polymarket, "Tech Layoffs Up or Down in 2026?," has seen its odds move to 85% YES this week, up from 77% last week, after Meta Platforms announced plans to cut roughly 8,000 employees.
The primary obstacle for Bitwise is not market demand, but regulatory approval. The U.S. has a complex and often conflicting regulatory framework for novel financial products that blur the lines between derivatives, securities, and gaming. The CFTC has historically asserted jurisdiction over event-based contracts, often taking a restrictive stance.
This conflict was thrown into sharp relief by the CFTC's recent lawsuit against New York's financial regulator to block its oversight of prediction markets. This legal battle creates a deeply uncertain environment for any firm looking to innovate in the space. The SEC's decision on the Bitwise ETFs will be closely watched as a key test for the future of regulated prediction markets in the United States.
Approval could set a precedent for a new class of financial products, opening a new revenue stream for asset managers and providing investors with powerful new tools for hedging and speculation. Rejection, however, would reinforce the regulatory moat that has so far kept prediction markets in a niche corner of the financial world, likely stifling innovation in the area for years to come.
This article is for informational purposes only and does not constitute investment advice.
