Robinhood, a well-known US brokerage firm, has announced the launch of contracts allowing customers to bet on the outcome of the US presidential election. With the election approaching, significant market volatility is anticipated across various asset classes.
The contracts will initially be available to a limited number of customers who meet specific criteria, such as being US citizens and not being affiliated with election campaigns or holding government positions. These event-driven contracts allow traders to speculate on the results of specific events, like elections, economic data releases, or policy decisions, without needing to own the underlying assets associated with these events.
Compared to traditional financial instruments, these types of derivatives are relatively new and often considered high-risk, gaining widespread attention in recent years. This marks Robinhood's first foray into the prediction market, following a recent federal court ruling effectively legalizing election betting.
With approximately 24 million funded accounts, Robinhood aims to broaden the reach of election betting compared to other platforms like Interactive Brokers or Kalshi, which also offer similar betting services to US users.
Customers can purchase contracts for either Harris or Trump. Contract prices range from 2 cents to 99 cents, fluctuating based on the amount users are willing to pay for each outcome. Users who make correct predictions will earn $1 per contract, while those with incorrect predictions will receive no return.
Robinhood believes these election contracts provide a tool for real-time decision-making, unlocking a new asset class and allowing broader participation in the ongoing elections. It is important to note that the predictive methods used by betting and gambling platforms, such as event contract trading, differ from those used in traditional political polling and should not be considered a substitute for polls.
Last week, election betting site Polymarket reported that four accounts had placed substantial bets on a Trump victory, with potential payouts totaling approximately $46 million. However, investigations have found no evidence of market manipulation or attempts to manipulate the market. Recently, Trump's odds on Polymarket surged to 62%, while Harris's stood at 38%.
