If you're itching to get in on the action with Kalshi and Polymarket, you can get a piece of these red-hot-but privately held-prediction markets.

A growing crop of exchange-traded funds hold private shares of Kalshi and Polymarket through so-called special purpose vehicles (SPVs), which pool investor money to buy pre-IPO stock of a private company. The Tema Trading & Prediction Markets ETF-which launched Sept. 9 and sports the ticker symbol of DICE-has Kalshi and Polymarket as its top two holdings.

The question, however, is whether investors should, ahem, roll the dice on these funds.

Tema ETFs also owns Kalshi as the top holding in its Tema Durable Quality ETF. According to Morningstar data, the ERShares Private-Public Crossover ETF has a position in Kalshi worth $30 million, while another fund, the KraneShares Public-Private AI & Technology ETF, owns a small stake in Polymarket.

The record-shattering debut of SpaceX and hopes for an initial public offering from Claude owner Anthropic later this fall have investors trying to get a jump on high-profile stock listings. That makes pre-IPO access to these mega-unicorns a big selling point for fund companies.

Kalshi and Polymarket hold obvious appeal for such vehicles: Monthly trading volume totaled more than $10 billion on each platform this summer, thanks to global sporting events like the World Cup.

Maurits Pot, CEO of Tema ETFs, told Barron's that owning top private companies is an increasingly important part of the company's strategy-especially since getting access to IPO shares can be tough for retail traders.

The fund provider also owned pre-IPO shares in SpaceX in its Tema Space Innovators ETF. Its Tema Photonics & Optical ETF and Tema International Defense ETF have stakes in Anthropic and defense technology company Anduril, respectively-two companies whose IPOs are highly anticipated for later this year or early 2027.

But these ETFs aren't a sure bet. For starters, the SPVs they hold aren't the same thing as common stock in the company once they go public. So it isn't always clear how much these funds actually own of a private company, or what those stakes will be worth after an IPO.

Tema's Pot told Barron's the firm's investments in Polymarket and Kalshi are valued at around a 10% to 13% discount to the companies' latest valuations. If the prediction markets eventually go public at a premium to their current valuations, that should give a boost to ETFs with pre-IPO exposure.

Both prediction markets were valued at more than $20 billion each in recent financing rounds, and there are reports that Kalshi is looking to raise even more money at a potential valuation of $40 billion.

Still, these funds are far from pure-play bets on Kalshi and Polymarket. Tema's DICE ETF, for example, also owns sizable stakes in brokerage and crypto firms such as Interactive Brokers, Robinhood, NYSE owner Intercontinental Exchange, and Coinbase. Though Kalshi and Polymarket are the top two holdings, they make up only about 15% of the portfolio.

The ERShares ETF, meanwhile, has big positions in Magnificent Seven companies Nvidia, Alphabet, and Meta Platforms. That means exposure to a range of other industries and their respective risks-including the volatile artificial-intelligence trade.

Neither company has indicated any IPO plans as of yet. Kalshi declined to comment when asked about possible plans to go public, and Polymarket, which has a data partnership with Barron's owner Dow Jones, didn't respond to requests for comment.

There are also looming legal challenges that could have a significant impact on their revenue going forward.

Several states are disputing the notion that Kalshi and Polymarket offer investment contracts, which are currently regulated as federally legal swaps. If the U.S. Supreme Court decides to weigh in, there is the possibility Polymarket and Kalshi could be deemed sportsbooks like DraftKings and Flutter Entertainment's FanDuel, which would make them subject to state regulations. Sports betting is currently legal in a majority of U.S. states, but there are notable holdouts, such as California, Georgia, and Texas.

The two companies have routinely maintained that the sports contracts offered on their prediction markets are financial instruments, and should not be considered gambling. As such, Polymarket and Kalshi say they should continue to be regulated at the federal level by the Commodity Futures Trading Commission.

Joel Shulman, founder and chief investment officer of ERShares, isn't too concerned about the legal threat. He says both companies are looking to diversify beyond sports, and that's why they deserve valuations worth more than $20 billion.

"Valuations are not simply pricing sports businesses. They reflect expectations that prediction markets could become a permanent financial-market category extending into economics, commodities, corporate events and eventually institutional hedging," Shulman said in an email to Barron's. "Sports got these platforms to scale. Economics is what makes them financial infrastructure."

But with so many factors at play, a wager on ETFs that have pre-IPO positions in Kalshi and Polymarket might be too much of a gamble.