The US-based trading platform Robinhood is launching a new product – a political wager covering the country’s upcoming presidential election.

This new contract will give US citizens the chance to bet on the candidate that they think will win this crucial event.

The announcement was made on October 28, just eight days before the election takes place, and represents a significant pivot for a company that has primarily offered trading services for the stock and crypto market.

Two contracts are available at the time, one for Kamala Harris and the other for the Republican candidate – Donald J. Trump. These contracts will be priced between $0.02 and $0.99 depending on the odds that the market assigns to each contestant.

If a user correctly predicts who win the election, the person will receive a $1 payout for every contract they purchased. A spokesperson for Robinhood commented that users are allowed to purchase up to 5,0000 of these contracts, which limits the maximum payout to $5,000 per bettor.

The trading window for these contracts will begin at 8 a.m. EDT and end at 8 p.m. EDT during the first two days after they are rolled out. After that, users will be able to buy and sell these contracts at any given point throughout the day until November 8 – the day of the election.

Also read: Robinhood Is Set to Acquire Bitstamp for $200M – Here’s Why

Meanwhile, the settlement will take place sometime between January 7-8, 2025 after the United States Congress certifies the results of the event and declares a winner.

To be eligible to buy contracts, the user must be a US citizen and receive formal approval from the platform to open an RHD account. Moreover, certain groups are banned from dealing with this product including campaign staff members, paid employees of political action committees (PACs), and White House staff.

Prediction Markets Favor Trump With Odds Exceeding 60%

Robinhood’s move into prediction markets puts the firm in direct competition with well-established platforms in this space like Polymarket and Kalshi. However, these typically accept customers from anywhere in the world.

According to the official presidential wager from Polymarket, Donald J. Trump currently has a 66% chance of winning the election. This number is notably higher than some polls and prediction models like the ones published by FiveThirtyEight and the Silver Bulletin, which currently give a 54% and 53% probability for Trump respectively. Some election experts criticize both the FiveThirtyEight and the Silver Bulletin (which is run by a former employee of FiveThirtyEight) for including obviously partisan polls in their models and give Harris the edge instead.

polymarket bettors give trump the lead

This specific wager has attracted a trading volume of $2.6 billion, making it one of the most active contracts in the Polymarket platform. For this platform, the contract will be resolved and a winner will be defined once three media outlets – Associated Press, Fox News, and NBC – come together to announce the same outcome. We don’t know what would happen if they announce different outcomes as analysts argue that Trump will not concede the election for the second time if he loses again.

Despite the apparent transparency of blockchain-based contracts like those powered by the Polymarket platform, there have been instances of suspected market manipulation. For example, a French trader reportedly poured $46 million to bet on Trump.

Despite this huge bid, the platform concluded that this was not manipulation as it did not result in a significant shift in the wager’s odds. If this is true, it’s still odd that Trump is given such a high chance of winning, especially because the polls tell nothing more than a pure tossup or maybe even a Harris edge. Perhaps bettors are assuming that pollsters are yet again underestimating Trump.

CFTC Tries to Block Political Wagers in the US

Regulators have been attempting to block wagers linked to high-profile political events like the upcoming presidential election in the US.

The Commodity Futures Trading Commission (CFTC) lost a key case on this matter as a federal court ruled against its intentions to block the US election wager promoted by Kalshi.

However, the regulator quickly filed an appeal on this verdict and the case has been fast-tracked by the US Court of Appeals for the District of Columbia Circuit to hear the two parties as soon as November 15 – ten days after the election.

The CFTC argues that prediction markets are susceptible to manipulation and can be used by bad actors to create false perceptions and influence the outcome of the election.

 

However, the head of Kalshi, Tarek Mansour, emphasizes that these allegations are unfounded. He released some interesting data about the bets that the platform has been receiving and claims that the median wager was approximately $85 per bet for Trump and $58 for Harris.

“There are simply more traders betting on Trump than Kamala,” Mansour stressed in an X post.

Meanwhile, the market seems to be happy about Robinhood’s new offering as shares of the trading platform rose by more than 3% yesterday following the announcement and are moving 1.3% higher this morning during pre-market stock trading action.

Robinhood Has Been Busy Lately with Multiple Product Launches

There seems to be a growing interest in retail betting platforms as Americans wagered $119.84 billion on sports in 2023, representing a 27.5% increase from 2022 according to the American Gaming Association. Legal sports betting has now expanded to 38 states and the District of Columbia.

Robinhood framed this launch as part of its broader strategy to democratize finance, stating: “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 platform emphasizes its neutral stance in the political arena and notes that “results and real-time market fluctuation do not indicate an endorsement of either candidate from Robinhood.”

The election betting platform launch aligns with the company’s recent service expansions, including the introduction of 24/5 trading, the planned launch of futures trading, the announcement of Robinhood Legend, and the addition of index options.

This development represents a significant shift in how Americans can engage with electoral predictions and may be introducing a new asset class for retail investors. Kalshi’s founder claims that, even though predictions are not polls, they may be a more transparent alternative to estimate the odds of each candidate.

With the general election scheduled for November 5, 2024, and vote counting expected to take several days before the final results are certified by Congress in January, the performance and impact of this new trading product on the public’s perception of the election’s outcome will be closely followed.

Current polls show that Harris and Trump are going head-to-head in battleground states. Meanwhile, millions of dollars are being poured into this election by the crypto industry and high-profile characters like Elon Musk, who has publicly endorsed Trump and has committed more than $100 million to bolster the Republican’s bid.

It appears that this will be an election like no other as technology is being used to an extent not seen previously to influence the outcome.