Roundhill Files for All-or-Nothing-Style ETFs for Market Indexes 

Investors generally have faith that markets go up over time, but will they care to make a wager? 

A new suite of proposed ETFs from Roundhill Investments is designed to make all-or-nothing bets on market indexes hitting targets by 2030. Late last week, the company filed an initial prospectus for the Roundhill S&P 500 10,000 Target 2030, Dow 75,000 Target 2030 and Innovation-100 50,000 Target 2030 ETFs, funds that would allocate most of their assets to Flexible Exchange Options, which are exchange-listed and customizable. It wouldn’t be surprising to many market watchers if the S&P 500 hit 10,000 in less than four years, up from its current level of 6,917, for example, but a lot can happen between now and then.

“It seems like the natural evolution of the betting marketization of all of finance,” said Dave Nadig, president and director of research at ETF.com. “This is essentially the same bet you could make on Polymarket right now.” While neither Polymarket nor Kalshi offers event contracts specific to the S&P by 2030, they do offer a variety for it over a year. Further, the timing is curious, given that CBOE is reportedly considering listing binary options for bets on financial markets, he said. “Welcome to gambling on the market.”

An Option Too Far?

The Securities and Exchange Commission could send Roundhill back to the drawing board, however, if its recent rejections of 3X, 4X and 5X leveraged ETFs are any indication. Last year, several firms sought approval for those highly leveraged funds, only to be told that anything beyond 2X runs afoul of the SEC’s Rule 18f-4. That includes Roundhill, which late last month filed for 4X SPY and QQQQ ETFs and was quickly given a no-go by the regulator. The company did not respond to requests for comment.

“The Roundhill fund’s value drops to zero if the S&P 500 is 9,999 instead of 10,000, which imbues it with an astronomical volatility metric,” said Bill Singer, a veteran Wall Street regulatory lawyer. “[I]t would seem that a fund that could lose 100% of its value while the underlying index is actually up 50% (but below the target) would trigger similar ‘investor protection’ alarms as the 4X proposal.”

Roundhill would offer a new “defined target period” when one ends, resetting the fund each time, according to the initial prospectus.

Don’t Drink the Hot Sauce: In all fairness, highly leveraged ETFs come with warnings that they shouldn’t be used by most investors and that there are risks of losing all value. There don’t appear to be any products on the market comparable to what Roundhill is seeking, but any seasoned investor would likely use it sparingly. “[T]he all-or-nothing approach is unique. It’s a risky strategy for most investors, and shouldn’t be a replacement for a core holding,” said Roxanna Islam, head of sector and industry research at TMX VettaFi. “But in small percentages, these strategies could potentially add some returns without significantly affecting overall portfolio risk.”