ETF provider Tema recently launched a fund built around the prediction-markets sector's growth — with a structural choice that's more interesting than the fund itself. Roughly 15% of the fund's holdings are stakes in Kalshi and Polymarket, the privately held companies that operate the two largest prediction-market platforms. What the fund explicitly doesn't hold is exposure to the actual event contracts — the yes/no bets on elections, economic data, or other outcomes that Kalshi and Polymarket are best known for. Those remain tied up in an ongoing SEC review of whether, and how, such contracts should be regulated.
The regulatory question this sidesteps
Prediction-market contracts sit in a genuinely unsettled place: are they commodity derivatives regulated by the CFTC, are they something closer to securities, or are they closer to the state-regulated gaming and betting markets they resemble in function? That question hasn't been resolved, which is exactly why a fund can't simply hold event contracts directly without taking on that regulatory uncertainty itself. Owning equity in the companies is a different, better-understood legal category — regular corporate stock — even though the companies' underlying business is exactly the contested activity.
Why this is a genuinely clever structure
It's worth naming the mechanism plainly: this is regulatory arbitrage, not a loophole being exploited in bad faith. The fund gives investors exposure to prediction markets' growth — trading volume, revenue, user growth — without the fund itself having to take a position on how individual event contracts should be classified. If Kalshi and Polymarket's underlying business grows, the companies' value should reflect that, which is the exposure the fund is actually selling, whatever the SEC eventually decides about the contracts themselves.
Why prediction markets have gotten more visible generally
We referenced Polymarket and Kalshi odds directly in our own coverage of the CLARITY Act cloture vote — both platforms have become a genuine, if imperfect, gauge of how contested major policy outcomes look in real time, alongside their more traditional role in election and sports betting. That visibility is part of what's driving investor interest broadly, distinct from the specific regulatory question the SEC is weighing.
What to watch
The fund carries a 75 basis point fee, which is a meaningful cost for a thematic product and suggests real investor demand rather than a token entry into the category. Whether more issuers follow with similar company-stake structures — or whether the SEC's eventual decision on event contracts makes the whole workaround unnecessary by directly authorizing contract-level products — is the next thing worth watching in this corner of the market.