Robinhood Introduces US Election Contracts as Prediction Markets Surge

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A New Asset Class in Political Betting

Robinhood is stepping into the political prediction market with contracts tied to the outcome of the 2024 U.S. presidential election. The financial platform announced on Oct. 28 that it will introduce event-based derivatives, a move aimed at attracting new users by allowing them to wager on specific occurrences without purchasing underlying assets. 

These election contracts, with prices ranging between $0.02 and $0.99, reflect market sentiment and will fluctuate until Election Day on Nov. 8, giving traders a chance to capitalize on real-time developments. Contracts for the winning candidate will pay out close to $1, with final disbursements scheduled for Jan. 8, 2025, following official certification of results by the U.S. Congress.

This new offering from Robinhood will initially be available only to a select group of U.S. citizens who meet specific trading qualifications, including having active Robinhood accounts and approval for advanced trading levels, such as margin or Level 2/3 options trading. 

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By making election-linked contracts available to these users, Robinhood aims to add a fresh layer to retail trading, aligning with the platform’s goal to democratize access to investment opportunities. Event-driven trading is rapidly gaining traction as more investors seek engagement with assets that capture unfolding global events and their impact on markets.

Robinhood’s entry into the political prediction space follows a recent wave of activity in similar markets, particularly as prediction platform Kalshi scored a legal win against the Commodity Futures Trading Commission (CFTC) earlier this month. The ruling, upheld by a U.S. federal appeals court, allows New York-based KalshiEX LLC to list election outcome contracts, marking a significant regulatory moment for the sector. 

While the CFTC continues to appeal, the decision has opened doors for other platforms like Interactive Brokers to launch similar offerings, fueling the demand for political event-driven trading products.

Kalshi, now ranking as the top finance app on the App Store and even surpassing platforms like Facebook and Uber, is pushing to capture the number one spot across all categories by Election Day. CEO Tarek Mansour shared in an interview with CNBC that average bets range between $300 to $400, with higher stakes on Kamala Harris than on Donald Trump, though Trump sees a larger number of individual bets. Some users are even wagering millions on outcomes, illustrating the rising enthusiasm for political predictions.

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Contrasting Robinhood’s new product, which limits user bets to $10,000 to maintain stable market prices, Kalshi supports much larger positions with high liquidity, allowing bets in the millions without significant impact on contract pricing. Mansour highlighted that Kalshi offers around a hundred contracts, offering traders broader options across multiple scenarios, from elections to economic reports, with no immediate regulatory restrictions.

The appeal of prediction markets lies in their ability to engage traders with real-time events, giving them a way to hedge against traditional assets while interacting with high-risk, high-reward instruments. Polymarket and PredictIt, two other established platforms in the U.S. prediction market scene, allow users to buy and sell contracts priced between $0.00 and $1.00 USDC. These prices indicate the probability of outcomes across a range of events, with Polymarket focusing on broader political and economic forecasts, while PredictIt provides a focused political betting interface. 

As Election Day nears, all eyes are on Robinhood, Kalshi, and other major players, each aiming to capture a growing share of the political prediction market, a sector that has yet to reach its full potential but holds promise for reshaping the boundaries of retail trading.

This article has been refined and enhanced by ChatGPT.