Episode summary
Will the SEC Approve Prediction Market ETFs This Year? | Trillions
Trillions
· · 45 min · Hosts: Eric Balchunas, Joel Weber · Guests: Brian Daly, Lydia Beyoud
Summary
The guest says the SEC is trying to be more pro-innovation while still protecting retail investors, and that the agency’s recent focus on “novel” ETFs is really about process rather than picking winners and losers. He argues that the SEC’s current ETF review framework, built around a 75-day presumptive effectiveness period and iterative staff review, works well for most filings, but becomes strained when sponsors push into new structures like prediction market funds or highly leveraged products.
A major theme is that prediction market ETFs became a catalyst for the SEC to pause and reassess how it handles unconventional products. The guest says the agency “did a bad job” with crypto ETFs, wants to rebuild trust, and is now seeking comments on how to make review orderly, predictable, and asset-neutral. He also says the SEC does not want to decide which underlying markets are “good” or “bad,” especially where the CFTC has jurisdiction over event contracts.
The conversation also turns to private assets inside ETFs, the pressure of copycat filings, and how the ETF wrapper may evolve further. The guest says retail investors increasingly just want a ticker, and that future disclosure could be paired with AI tools and e-delivery so investors can better understand risks without reading long prospectuses.
Key takeaways
- The guest says the SEC wants an “orderly and predictable” ETF review process that is asset-neutral and exposure-neutral.
- He says prediction market ETFs were a catalyst for the SEC’s pause because they combine a new structure with event contracts overseen by the CFTC.
- The guest says the SEC “did a bad job” with crypto ETFs and is trying to rebuild trust with issuers.
- He warns that if sponsors flood the agency with thousands of filings, the quality of review could drop unless staffing and process scale.
- The guest says retail investors mainly care about getting a ticker, and future disclosure may be improved by e-delivery and AI tools.
Notable quotes
“The prediction market ETFs coming in were in a sense a catalyst because they're a different structure. They're focused or they're tied to an underlying that we have a sister regulator that's looking at very closely at the moment”
“We as a commission, we did not do a good job with the crypto ETFs. We didn't. We did a bad job. We got sued. We broke trust with the industry”
“we want to focus on having an orderly and predictable review process that is asset neutral, exposure neutral, but that still works”
“The minute something doesn't have a ticker, you've shrunk the universe dramatically and you've changed a lot of the rules of the game”
How the episode opens
Bloomberg Audio Studios podcasts, radio, news. — Welcome to Trillions. I'm Joel Weber. — And I'm Eric Valis. — Eric, you've been on vacation, but while you were off, you did a little leg work, including organizing today's interview. And I'm really excited to say we have another person from the Security and Exchange Commission this time. Brian Daly is going to be joining us. He's the director of the Division of Investment Management.
Yeah. No, this is a big interview. It's tough to get people from the SEC to talk at all, let alone come on a podcast. And so, yeah, I was off and I I was the call came in. And I was on one of those bikes and there's a thing called a co-pilot which is the bike on the on the back of the bike which your little kid can ride.
Yeah.
And we had stopped at the Circle K. That's like a Waw Wa 7-Eleven in the south. And got some water.
It's hot there. I was in Florida in the panhandle anyway. And but this was important enough to take a break because this is a big issue.
The SEC is looking at and really maybe concerned about novel ETFs. The prediction market ETFs are really I think what got this going and as you know we had Matt Hogan on from Bitwise who uh they had one of the prediction market ETFs filed. We had a great podcast with him.
It kind of turned me a little bit into how they are could be useful for the market but they are complicated and it is a Pandora's box you could open. So the SEC kind of like told them don't launch yet. Let us look at them.
And so they're looking at not just those but others.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- sec approval
- prediction market etfs
- novel etfs
- crypto etf review
- investor protection vs innovation
Watch the episode
Watch “Will the SEC Approve Prediction Market ETFs This Year? | Trillions” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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