The NHL ETF Power Play

The NHL ETF Power Play

Dave Nadig

Thu, August 27, 2026 at 12:04 AM GMT+3 10 min read

There are times when I cannot sigh hard enough, and the recent raft of NHL-based ETF filings is giving me lung-spasms.

The current state of affairs is this:

• August 14, Volatility Shares files for ETFs tracking the September-trading CME futures on the CME FSPI NHL Indexes. Sumit covered it here.

• August 21, Roundhill files for, essentially, the same suite of products.

• August 25 (last night), LeagueShares files for vanilla and daily-reset 2X levered versions.

They're all very preliminary filings, with no fees disclosed and a lot of details still to come, but fundamentally, this is a pretty well trod road: we have tons of ETFs tracking futures contracts. Some early giants, like the US Oil Fund, are structured as commodities pools and have tricky tax treatment. These will all be filed through Cayman subsidiaries to hold their futures exposure (an extremely common mechanical change that makes the funds 1099 reportable, simplifying investors tax returns).

I have no concerns about this structure, really. It's extremely well tested at this point. But what exactly should an investor in these things expect? Here's where it gets hairy:

Oh Brave New World!

When commodities-futures based ETFs have launched in the past, they bolted on to large, existing markets. When USO launched in 2006, it was entering a contract that already had $70 billion in open interest. It took 15 years for USO to become big enough to run into any issues sourcing it's exposure from natural oil-market hedging activity.

That's definitely not going to be the case here. The CME futures contracts targeted by these ETFs don't exist, and won't until the end of September. The ETFs were filed under rule 485(a)(2) which means, barring any shenanigans, the first ones could go effective around October 28th.

So what exactly will they be buying? Index futures. In this case, futures on the FutureSports NHL Team Index for each team. Which means you really, really need to understand the index before you even consider playing in this game.

The FSPI Indexes

As indexes, I think these things are actually clever and well designed for measuring the relative performance of sports teams objectively.

• Every season, every team starts at a made up value of 7,500 index points.

• During every game, teams gain or lose index points based on a big table of what matters in hockey. So: regular season power play goal? That's 10 index points. Post-season short-handed goal allowed? -22.5 index points. Shutout? 50 points. Ejection? -10.

• Every month, another chunk of points is awarded or subtracted based on things like blocks, goals and takeaways.

• 30 days after the end of the season, everyone resets back to 7,500.

This is clever and elegant, because it means at any given point in the season you can look at the Bruins and say "OK, they're at 8,300, which is 400 points a head of the Oilers" and you're making a legitimate comparison of the actual performance of these two teams, regardless of what official standings or raw win/loss history might suggest.

But there are a few problems. First, most of the scoring is zero sum: 100 points for one team is probably 100 points off of another team, but there are exceptions to this. The Stanley cup winner gets 1,125 points but the loser doesn't lose those points. Penalties are pure negative drag. So there's some asymmetric and non-obvious drift that can creep in.

Second, it's entirely possible for this index to drift into negative numbers. For the 2026 season, for example, the Hurricanes finished at 11,925, with the Canucks were at 3,714 (according to the LeagueShares filings). But if the 'Nux had had an even worse season, it could have gone below zero.

Third, from a "fan" perspective, this is not measuring your playoff chances.

Last year 3 of the 16 playoff teams finished below their 7,500 baseline. Washington missed the playoffs, but finished above it. So there's an intuition problem fans will need to understand.

But the bigger issues are not with the index itself (which again, I think is clever and useful), but with putting this index in a futures contract.

Why Futures Exist

The point of futures (at least how Japan invented them) is to hedge time and delivery risk. It's July and I want a bushel of rice in January but I don't want to store it for 6 months. Instead, I find someone willing to deliver the bushel in January at a price we agree on today. It's that simple.

In agriculture (and many other commodities) there are natural market participants who need futures markets (or insurance companies) to manage risk. A farmer wants to know he's got buyers when harvest comes due. A bakery wants to know it can source wheat next year at a known price. Same with drillers and refineries in oil.

Financial players, for the most part, are tolerated because they provide liquidity.

It's very difficult for me to apply that logic to these NHL contracts. Consider how the actual index values and potential curves might look:

None of this has traded yet, but it's easy to imagine. When the Hurricane contract starts trading, one would assume that the end-of-season futures contract is going to be trading well above it's 7,500 baseline, and we'd assume the 'Nux will be priced well below. Each forward point on the curve will be the markets break-even expectation of the index value on that date.

So, if you could buy the SPOT index for the Hurricanes, you might expect to just slowly accrete performance, but you can't. If I buy the 1-month out contract at 10% higher than today's value, then the only way I make money is if the Hurricanes out-perform that expectation.

This is nearly the antithesis of the dopamine hit prediction market contract. Any individual game might move a team 100 points in either direction, but a 100 point move on a 7500 base is tiny. It's also going to be disconnected from the actual trading by most of the day:

What this means is that, as a degenerate gambling tool, these things are awful: you can't really trade the events themselves, you simply accept the gap the next morning. (Jack Bowman at Seeking Alpha has a great piece with even more statistical analysis on the index surprises, if you're curious).

Put in the simplest terms: you're not putting your money "in the index" - you're betting on whether the other bettors are too optimistic, or too pessimistic. You can't bet on "Hurricanes Win" here, all you can do is bet "Hurricanes Underrated by the Market."

The Structural Gotchas

Look, I've been wrong about plenty of ETF launches, and my skepticism of these is probably causing celebration at the issuers because I'll be wrong, and they'll be rich, but I just can't get over a few issues:

Who's taking the other side? Several of the filings make a specific point that there is no natural market here. Volatility Shares' filing, for example, notes:

The market for Ducks Index Futures Contracts is expected to have few, if any, natural commercial hedgers, and may be dominated by retail speculators, algorithmic traders, or a small number of institutional participants. This concentrated participation could result in prices that do not accurately reflect fair value, wider bid-ask spreads, and elevated intraday price volatility. In thin markets, even modest order flow from the Fund could move prices against the Fund, increasing transaction costs and reducing returns.

Usually this kind of language is forgettable boilerplate but here it's pretty fundamental: I see NO REASON for anyone to participate in these contracts except through (or to trade against) the ETF complex. This opens up the window for all kinds of trading-related and flow-related shenanigans which have nothing to do with some kind of natural market structure finding clearing prices.

Unfortunately, I see one primary way for a—I guess we'll call them 'market makers' not bookies—to offset their taking the other side of a one-way market for exposure: they can trade the individual prediction market contracts on things like game wins, scores and penalties. Oh goodie. A direct line from the market making desk to the bookie. What could possibly go wrong?

Insiders. In all four filings, there are big gotchas about insider trading. From the LeagueShares filings:

... specific rules and judicial precedent addressing what constitutes improper trading on non-public information in the context of sports-linked futures remain nascent. Certain individuals may possess material, non-public information… Such individuals may include, without limitation, team coaches, players, trainers, team medical staff, front office personnel, referees, officials, league personnel, or sports data providers ...

Emphasis mine, of course, but again, this seems like a major issue. We already have significant untested insider trading problems with prediction markets. Now we're giving a referee an avenue to trade whether he ejects someone from a game?

Leverage. Daily reset ETFs already suffer from a signficant problem when their underlying moves up and down across a stable trend line: they lose money like crazy in the rebalance. The leverage works FOR you when you get a strong up-trend. In this case that means you need to set daily outperformance of a team to its expectations. I have not fully modeled the vol-decay of an imaginary 2X fund for the last season, but I feel pretty confident it didn't work out for the average long-term holder. So why 2X lever something you don't expect to move much, or favorably? I don't have a clue.

Governance. This is more the kind of thing only rules-obsessed nerds like me bother to pay attention to, but I feel like it's worth noting that there's not even any feigned independence in the index design. The committees are just appointed by FutureSports and the Chair gets all the deciding votes. FutureSports itself seems to have CME affiliates as owners according to disclosures, but we really don't know who all is set to profit when these index contracts are successful.

But, to be glass-half-full, the whole structure is massively more in line with traditional IOSCO principles and other standards for indexes, so it's all way better than, say, Kalshi's Review Committee deciding things however they feel like.

So Why Bother?

Look, I'm not against sports. I spent last weekend at Fenway Park hand-scoring Giants @ Red Sox. And I'm not even against gambling: I lost $400 playing poker three weeks ago at Camp Kotok. If rational adults want to bet on sports, I don't think the government should make it illegal. But, there's a huge difference between that sentiment and bringing sports-betting into U.S. market structure.

Our market structure is, I would argue, the envy of the world. Our tireless defense of the rule of law, fundamental market fairness, investor protection and warehousing risk with the profits is part of why our markets are so attractive to capital from around the world.

So what I'm against is the perversion of our extraordinarily good system with clearly under-thought out products. There is absolutely no reason—other than issuer profit—to force fit these ETFs into a market that does not exist and will only exist to serve the ETFs. This is beyond deregulation, it's un-regulation, and anyone in the business of handling serious money should be more than cautious, you should be annoyed.

And I'm against taking retail investors for rubes. Because let's be honest, do you think the raging Ducks fan who sees the cute "QUAK" ticker is really doing a thoughtful analysis of futures market expectations? Or does she just think she's "buying the ducks."

P.S. - While this is all just my opinion, I have to write it, because we used to have this exact kind of discussion at, say, CFTC meetings. We can't have those anymore, because we currently have no CFTC commissioners, so there is no actual regulatory process, just screaming at the Chair and hoping someone listens.

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