ETF issuers often push the envelope with innovative products, and Volatility Shares is taking it a step further with a recent SEC filing for funds tied to the performance of NHL teams.
On Aug. 14, Volatility Shares filed with the SEC to launch funds that will track the performances of NHL teams through CME Group-listed futures based on FutureSports Performance Indexes (FSPI).
If approved, these ETFs will give investors exposure to derivatives tied to the performance of college and professional athletes and teams. The NHL futures will be available on Sept. 28, providing participants with trading opportunities on a regulated exchange with transparent pricing and equal market access.
“CME Group Hockey futures will be available in standard-sized contracts, valued at 10x the value of the underlying CME FSPI NHL indexes, and micro-sized contracts that are 1/10 the value of those indexes,” according to CME. “Participants can trade live around the clock, allowing for immediate positions on a regulated exchange with central clearing safeguards, transparent pricing and equal market access.”
Regulatory Hurdles for Volatility Shares ETFs
The proposed Volatility Shares ETFs could be seen as a bridge between traditional sports betting and prediction market event contracts.
However, the SEC’s approach to these unique products is uncertain. The lack of expense ratios and tickers in the filing indicates that the ETFs are not yet close to reaching the market. Regulators are scrutinizing “novel” ETFs more closely, including those that may resemble betting through an ETF structure.
Similar ETF proposals offering access to political event contracts faced regulatory challenges earlier this year. While the fate of the Volatility Shares NHL funds remains to be seen, they may be considered unconventional by regulatory bodies.
Operation of the Volatility Shares ETFs
Volatility Shares clarifies that its NHL ETFs will not invest in prediction market instruments, but rather hold derivatives linked to the FutureSports indexes.
The indexes will start at a value of 7,500, fluctuating based on the performance of NHL teams. These funds are speculative in nature, with performance dependent on various factors such as player health, competitive dynamics, coaching decisions, and athletic performance variability.
Investing in Hurricanes Index Futures Contracts requires strong performance from the team over a season, with no guarantees of success indicated by the prices at the time of exposure.