Robinhood is letting users put their money where their mouth is on who will win the upcoming U.S. presidential election. Starting Monday, Oct. 28, the online brokerage house allows people to trade financial contracts to bet on Vice President Kamala Harris or former President Donald Trump.
According to Robinhood, an event contract is a “financial derivative that allows traders to speculate on the outcome of a specific event. These contracts are generally structured around ‘Yes’ or ‘No’ outcomes, and fluctuate in price based on the projected outcome of the event.”
Users can buy contracts worth up to $1 each for the candidate they believe will win. Contracts will fluctuate in price and can be traded until the election is certified.
At that time, anyone holding a contract for the candidate who won the election will get paid $1 for every contract they own. If a user has a contract for the candidate that lost the election, those become worthless.
To be eligible for event contracts, users must meet the criteria to hold a Robinhood derivatives account. That includes having U.S. citizenship.
Robinhood is the latest company to enter the world of event contracts based on U.S. elections. Polymarket has been in the news for the major recent swing in odds toward Trump’s favor. But U.S. users are banned from this crypto-based predictions market after a 2022 settlement with the Commodity Futures Trading Commission.
Since Oct. 4, contracts for the presidential election on Polymarket were about even between Trump and Harris. However, on Monday, Oct. 28, more than 66% bet on a Trump victory just eight days before Election Day.
But polling is telling a very different story. The latest 538 average has Harris leading 48% to 46.6%. However, U.S. elections are not decided by popular vote. It is better to look at swing states, where Wisconsin, Nevada, Pennsylvania and Michigan are neck and neck. Trump has a slight edge in North Carolina, Georgia and Arizona.
In the case of Polymarket, four accounts spent more than $28 million in October, moving the predictions market in the former president’s favor. Online sleuths and journalists began deducing that all four accounts were backed by a single person.
Polymarket confirmed a single French whale is behind the bets. The platform says outside experts have “not identified any information to suggest that this user manipulated, or attempted to manipulate, the market.” Polymarket told CNBC the individual “has agreed not to open further accounts without notice.”
When the former president started to take the lead on Polymarket, one of his biggest backers, Elon Musk, claimed it was more accurate than polls because “actual money is on the line.“
Trump now leading Kamala by 3% in betting markets. More accurate than polls, as actual money is on the line. https://t.co/WrsqZ2z8pp
— Elon Musk (@elonmusk) October 7, 2024
While election bettors are putting cash behind their beliefs, polling firms generally look at a lot more than how much money one is willing to part with. Firms like Quinnipiac use huge sample sizes and random dialing to get a more accurate look at the American electorate.
Others will look at specific voting history and the likelihood of voting this time around. That said, polls have “blown it” in recent election cycles. This makes the predictions market an interesting element in this year’s election.
In September 2024, a federal judge ruled that Americans could use financial contracts for event betting, a blow to the CFTC, which tried to block it. An appeals court upheld the decision in October.
“Ensuring the integrity of elections and avoiding improper interference and misinformation are undoubtedly paramount public interests, and a substantiated risk of distorting the electoral process would amount to irreparable harm,” the ruling read. “The problem is that the Commission has given this court no concrete basis to conclude that event contracts would likely be a vehicle for such harms.”
