The House Always Wins. Event Contract ETFs Gamble on Longer Odds

You’ve heard of the luck of the Irish. Want to bet on the luck of the asset manager? 

Tidal Investments and Subversive Capital have filed a prospectus with the Securities and Exchange Commission for an “event contracts” exchange-traded fund tied to the outcomes of sports games. In other words, a sports gambling ETF. The Subversive All Season Sports ETF will have exposure to 40 to 80 bets at once, attempting to generate alpha by betting on where the adviser thinks the market’s odds are wrong. The filing also included a related fund, the Subversive Prediction ETF, tied to “economic, regulatory, climate and global events themes.” With the Securities and Exchange Commission still weighing approval of novel funds like these, whether they will actually make it to the market is a toss-up.

“They’re pretty much a pro-innovation SEC,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence. Still, he theorized that the SEC wants to make sure it has a consistent framework in place to approve prediction market ETFs. “I think their issue here is that if they approve one of these, they could see 500 to 1,000 filings within a month or two. It would be raining filings.” 

May the Odds Be Ever in Your Favor

Prediction market funds might be a way to generate some serious alpha, said Balchunas. With index funds priced so cheaply and information so readily accessible, it’s harder for active portfolio managers to beat the benchmark. “Places where there’s less analyst coverage, like sports and crypto, it’s possible you could have a portfolio manager rise out of that world who just killed it,” he said. “I don’t know if that’s something that would matter to regular investors, but I certainly think there’s a lot of dispersion and a lot of room for serious outperformance if somebody is really good at betting.” 

Where’s the Fun in That? While the sports-gambling product is geared toward retail investors, Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence, questioned whether the market really wants an ETF wrapper for such bets. “Usually you go to the ETF because it makes it easier,” he said. “This doesn’t really solve that problem” since prediction market apps like Kalshi or Polymarket are already easy to access. Plus, where’s the joy in winning a bet that someone else made? “If I go to Vegas, I don’t want to give you my money to go play blackjack or roulette,” he said. “It feels like they’re outsourcing all the fun.”