Sep. 2, 2026
From: Robert Rutkowski
Subject: Request for Comment on Novel ETFs, File No. S7-2026-24, 91 Fed. Reg. 40647
September 2, 2026
Securities and Exchange Commission
Washington, D.C. 20549
Subject: Request That the Securities and Exchange Commission Reject Exchange-Traded Funds Designed Primarily for Gambling
Dear Commissioners:
I am writing to urge the Securities and Exchange Commission ("SEC" or "Commission") to reject proposed "Novel ETFs" whose principal purpose is to provide investors with exposure to event contracts involving sporting events, elections, or other outcomes that function principally as wagers rather than as investments in productive economic assets.
The distinction between investing and gambling is important to the integrity of the American securities markets. Exchange-traded funds have become trusted and widely used investment vehicles through which millions of Americans save for retirement, education, and other long-term financial objectives. That public confidence should not be diminished by placing essentially wagering products within the familiar ETF structure.
I recognize that financial markets should continue to evolve and that innovation can provide legitimate benefits to investors. Innovation, however, should not come at the expense of investor protection, market integrity, or clear regulatory boundaries. The SEC's statutory responsibility requires careful consideration of whether a proposed product serves the public interest-not simply whether it can technically be packaged and traded through an existing financial structure.
The Commission's own recent consideration of "Novel ETFs" appropriately recognizes that these products raise questions requiring careful examination. In particular, the SEC should distinguish between ETFs that provide investors with exposure to securities or other assets having genuine economic value and products whose principal economic purpose is to speculate on the outcome of an event.
Funds centered on sporting-event contracts present an especially clear example. A contract paying according to whether a particular team wins or loses a game does not represent an ownership interest in the team, an investment in its productive activities, or a conventional hedge against an identifiable economic risk. Its value depends principally upon the outcome of an event. Similarly, election-related contracts can provide a means of wagering on political outcomes without representing an investment in the underlying economy or productive enterprise.
This raises a fundamental question: why should a wager become an investment product merely because it is placed inside an ETF wrapper and traded on a securities exchange?
The ETF designation carries considerable public recognition and credibility. Ordinary investors reasonably associate ETFs with diversified portfolios, transparent investment strategies, and regulated vehicles for accumulating wealth over time. Using that established investment framework to package products whose principal function is wagering could blur the distinction between legitimate investment and gambling and potentially cause investors to misunderstand the nature and risks of the product.
There are also important concerns regarding investor protection. Products based upon binary or otherwise event-dependent outcomes can involve substantial volatility, uncertain valuation, limited economic utility, and significant potential for speculative behavior. Where the underlying event has no meaningful relationship to an investor's ownership of productive assets or exposure to an economic risk, the rationale for offering such exposure through a securities-market investment vehicle becomes particularly weak.
The issue is even more consequential for retail investors. The accessibility, liquidity, and familiarity of the ETF structure could make gambling-oriented products substantially easier for ordinary investors to purchase than comparable wagers placed through traditional gaming channels. The resulting normalization of wagering as a form of securities-market investment would be inconsistent with the SEC's longstanding emphasis on protecting investors and maintaining confidence in the securities markets.
There is also a serious regulatory-boundary concern. The legal and regulatory status of prediction-market and event contracts remains contested, including disputes concerning the respective authority of federal and state regulators over sports-related contracts. Recent litigation has demonstrated that the characterization of these contracts as financial derivatives does not eliminate the underlying questions concerning gambling, state gaming laws, and the appropriate regulatory framework.
The SEC should therefore avoid resolving these unsettled questions indirectly by permitting such products to obtain the imprimatur of the ETF structure. If the underlying contracts are controversial, legally unsettled, or principally gambling instruments, placing them in an SEC-regulated investment vehicle should not be used as a means of creating an appearance of conventional investment legitimacy.
The Commission should also consider whether approving such products would create a precedent that is difficult to contain. Once securities exchanges and ETF structures become accepted vehicles for wagering on sporting events or political outcomes, it could become increasingly difficult to establish a principled boundary concerning which forms of gambling or event speculation may be transformed into ostensibly legitimate investment products.
The SEC should instead preserve a clear distinction between financial innovation that facilitates capital formation and risk management and products whose principal purpose is speculation on discrete events. This distinction is not hostile to innovation. On the contrary, it promotes a healthier financial system by ensuring that innovation occurs within a framework that investors can understand and trust.
I therefore respectfully urge the Commission to:
Reject proposed ETFs whose principal investment strategy is to obtain exposure to sporting-event or election-related event contracts that function primarily as wagers; Decline to treat the ETF structure as an appropriate vehicle for products that do not represent investment in securities, productive enterprises, or assets having a legitimate investment or hedging function; Carefully evaluate whether any proposed Novel ETF satisfies the statutory public-interest requirements applicable to the listing and trading of exchange-traded products; Give particular weight to the potential for investor confusion, manipulation, excessive speculation, diminished market confidence, and harm to retail investors; and Maintain a clear regulatory distinction between legitimate investment products and gambling products, rather than allowing the ETF structure to blur that distinction. The SEC has an important responsibility to ensure that the innovation of America's capital markets does not undermine the public confidence upon which those markets ultimately depend. ETFs have earned that confidence because investors generally understand them as investment vehicles-not as instruments for wagering on the outcome of a hockey game, an election, or another discrete event.
The Commission should not permit the familiarity and credibility of the ETF structure to be used to transform gambling into something that appears to be conventional investing. Protecting investors requires drawing that line clearly and maintaining it.
I respectfully ask the Commission to reject Novel ETFs designed principally for gambling and to preserve the integrity of the ETF structure as an important component of America's investment and retirement system.
Respectfully,
Robert E. Rutkowski