With Election Day in the US only about a week away, online broker Robinhood has announced that users can now trade US presidential election contracts.
Those who meet the eligibility criteria, namely being a US citizen, can bet on whether they think Kamala Harris or Donald Trump will win the presidential election.
Key Highlights
- Robinhood’s only presidential election markets are on Kamala Harris or Donald Trump to win.
- Users must be US citizens and have a valid derivatives account to trade election contracts.
- Kalshi’s legal victory over the Commodity Futures Trading Commission opened the door for Robinhood.
Markets Limited to the Two Us Presidential Candidates
Political contracts trading has increased in popularity over the last couple of election cycles and now Robinhood, one of the most popular financial trading platforms in the US, has gotten into the game.
On Monday, October 28, the company announced that it has launched presidential election event contracts. The only contracts available for trading on Robinhood are Democrat Kamala Harris or Republican Donald Trump for president.
To be eligible to trade election contracts, Robinhood users must be US citizens and must have an approved derivatives account.
“We believe event contracts give people a tool to engage in real-time decision-making, unlocking a new asset class that democratizes access to events as they unfold,” the company said in its Monday press release.
Election Day is officially Tuesday, November 5, but early voting is currently open around the country.
Stock Market-Like Betting
Led primarily by Polymarket and PredictIt, election trading has been on the rise in recent years.
It has been in a legal gray area in the US, but that murkiness was cleared up earlier this month when Kalshi won its federal appeal against the Commodity Futures Trading Commission (CFTC), which had banned it from offering political contract trading.
the more people think one candidate will win, the higher that candidate’s price goes
Kalshi now has its election markets up and running, which led to Robinhood’s move.
Election contracts trading is betting, but not in the traditional sense. Rather than placing a bet with odds, contracts trading is akin to playing the stock market.
Users can buy contracts, effectively shares, in a candidate to win or lose. Prices per contract generally range from $0.01 to $0.99, though some platforms offer fractional cents.
Those prices are set by the market – the more people think one candidate will win, the higher that candidate’s price goes.
Those who hold contracts of the winning candidate will have them paid off at $1 per contract. Contracts on the losing candidate bottom out to zero.
As it is a trading market, users can continually buy and sell as prices change. They do not have to hold contracts until the election is decided.
Are the Markets Accurate?
These types of markets have tended to do a good job predicting the outcomes of public events, though this election cycle, they have been more controversial.
Most public polls show a tight race and most national polls have Vice President Harris ahead. Because of the US’s oddball electoral college system, national polls don’t necessarily mean anything, but regardless, Harris does lead in most.
On Polymarket, PredictIt, and Kalshi, however, former President Donald Trump has a substantial lead.
Polymarket has Trump at $0.66 to Harris’ $0.34, on PredictIt it’s $0.60 to $0.46, and Kalshi’s market is currently $0.62 to $0.38 in favor of Trump.
Polymarket has confirmed that a single user in France has spent millions upon millions of dollars spread across four accounts betting on Trump, which could have skewed the market.
There are also those who believe that the demographics skew more Republican on these sites and thus tilt the market towards Donald Trump.
Sources
https://newsroom.aboutrobinhood.com/introducing-the-presidential-election-market/
https://www.cnbc.com/2024/10/28/robinhood-jumps-into-election-trading-giving-users-chance-to-buy-harris-or-trump-contracts.html
https://www.cocosapps.com/news/kalshi-wins-appeal-ban-political-contracts-409567/
https://projects.fivethirtyeight.com/polls/president-general/2024/national/
https://www.predictit.org/markets/detail/7456/Who-will-win-the-2024-US-presidential-election
https://polymarket.com/event/presidential-election-winner-2024?tid=1730147674643
https://kalshi.com/markets/pres/presidential-elections
