ETF Bets on an AI ‘Doomsday’

In the event of an AI doomsday, some (human) ETF investors could win big.

That is, of course, if people aren’t extinct and money continues to have any meaning or value. For those willing to brave the odds, Direxion is planning to offer its AI Doomsday Prediction Markets ETF. The company recently filed with the Securities and Exchange Commission for that fund, along with one that plays the other side of the odds, the Direxion AI Prosperity Prediction Markets ETF. And, it’s prepping two others: the Direxion El Niño and La Niña ETFs. Because, why not bet on the weather?

“This is kind of Direxion’s thing … They’re not afraid to launch different types of strategies,” said Craig Kilgallen, relationship manager at Fuse Research Network. “Their followers and audience know them for it.”

A Doomsday by Any Other Name

For seemingly obvious reasons, the doomsday fund would not make bets on societal collapse or a hostile robot takeover. Rather, it aims to take positions via event contracts on the development and outcomes of AI on the economy, including job reductions and high unemployment rates. But it, along with the other three prediction-market funds Direxion is hoping to launch, falls into the novel ETFs category that the SEC is evaluating. The regulator collected public comments on them through Aug. 31 and may soon decide whether such products can list on exchanges, and if so, how they are treated compared with more traditional funds.

It also appears to be Direxion’s first attempt at betting-style ETFs. Most of the company’s footprint is in leveraged funds, though it also offers a line of defined-income ETFs, an equal-weight fund and a handful of others. The company did not respond to a request for comment about the proposed funds, and it does not appear to be among the firms that submitted comments to the SEC about novel ETFs. But others, like ProShares, urged the regulator to avoid treating a range of new or proposed categories, ranging from crypto to event contracts, as “novel.”

“Rather than create a new category of ETFs, we believe a more effective approach would be to address the particular features and risks of new asset classes and strategies through tailored, principles-based disclosure,” ProShares general counsel Richard Morris wrote in his comments.

In addition to the AI and weather funds, Direxion separately filed for another line of ETFs:

• It proposed four key performance indicator funds focused on SpaceX, Tesla, Anthropic and OpenAI.
• Those funds would hold binary-option event contracts that take positions on outcomes of company-specific KPIs. 

Never Tell Me the Odds: The popularity of prediction markets like Kalshi and Polymarket seems to make a case for betting within the ETF wrapper, Kilgallen said. And, like with crypto, it could lower the barrier to entry, he noted. “It makes it easier for people who might have an interest but don’t want to go through the hassle of figuring it all out.”