Volatility Shares, an issuer known for futures-based products, has filed with the Securities and Exchange Commission (SEC) to create 32 new exchange-traded funds (ETFs), one for each team in the National Hockey League (NHL). These proposed ETFs, such as the Anaheim Ducks ETF or the Toronto Maple Leafs ETF, would aim to provide investment results corresponding to the performance of futures contracts on a CME FSPI NHL Index for each respective team. Each team's index, developed in partnership with CME Group and FutureSports, starts at 7,500 at the beginning of the season and fluctuates based on real-time game performance using 55 statistical measures, resetting after the postseason.
The proposed funds would not directly invest in prediction markets or event contracts, nor would they confer any ownership stake in the NHL teams. Instead, they would gain exposure by holding cash-settled futures contracts tied to the team's performance index. Critics, like Morningstar Managing Director Jeffrey Ptak, view these as a form of "financialized betting," with funds moving money between those wagering on opposite outcomes rather than productive economic use. However, Ptak also notes that unlike binary prediction market products, the hockey funds sound more akin to traditional futures whose values can fluctuate, allowing investors to capitalize on potential team improvements.
The SEC's response to these proposals is uncertain, especially as the regulator has asked issuers to pause on launching prediction-market-style ETFs while it reviews public comments. Sports betting as a basis for such products is a new angle, and similar products in the past have focused on election outcomes or market-related events. The prospectuses indicate that these funds would be highly concentrated and susceptible to significant losses due to factors like player injuries, trades, or league sanctions, without the ability to diversify exposure to other teams or sports.
While the tickers, listing exchange, launch date, and expense ratios are currently blank in the filings, the initiative highlights a trend of issuers pushing the boundaries of what ETFs can invest in. Securities lawyer Adam Gana suggests these products are more about packaging sports speculation as a security rather than traditional investing. The underlying contracts and indices are products of a partnership between derivatives giant CME Group and index administrator FutureSports, the latter being partnered with the NHL, suggesting a growing interest in financial instruments tied to sports performance from various market participants.
