Robinhood Investing App Enters Election Betting Arena
With Election Day just a week away, Robinhood revealed it's the newest investment platform to enter the political betting arena.
Robinhood, the firm behind a mobile investing app favored by millennials and Gen Z, announced today that it has begun providing contracts on former President Donald Trump (R) and Vice President Kamala Harris (D) to a limited group of clients.
"Customers must apply and meet certain criteria to be approved for an RHD account, including being a U.S. citizen and more. Once approved, customers will be able to trade based on their prediction for ‘who will win the 2024 presidential election,’” according to a statement issued by the brokerage firm.
Besides having US citizenship, Robinhood users who wish to buy event contracts on Harris or Trump need to be approved for margin trading and for Level 2 or 3 options trading. The financial services company did not provide any comments regarding this matter, but the citizenship requirement might have been triggered by numerous foreign market players overwhelming alternative election betting sites, which could distort the accuracy of conventional political surveys.
Robinhood Employing Well-Known Election Wagering Strategy
Like the established companies in the political betting field, Robinhood isn't accepting bets in a conventional manner.
Instead, the trading firm is providing clients with futures contracts tied to an event, classifying those instruments as derivatives. That’s quite distinct from a sportsbook accepting wagers on a political competition at -110 odds or any other odds available. Such bets are not allowed in the US.
On Robinhood and rival political betting sites, traders buy what are known as event contracts that have binary results.
“An event contract is a type of 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,” added the company. “Event contracts then pay out if the position held matches the correct outcome of the event (for example, which candidate will win the 2024 presidential election); otherwise, they expire worthless.”
Betting on Elections Gaining Popularity with Brokerage Companies
The announcement of Robinhood entering the election betting market came six weeks after competitor Interactive Brokers revealed comparable intentions. That trading platform and Kalshi are presently working to fend off a legal challenge from the Commodities Futures Trading Commission (CFTC) regarding the provision of political bets.
If permitted to move forward with providing event contracts for the 2024 presidential election and to enhance related offerings in the future, Robinhood could gain advantages while the political wagering sector might gain significant traction, given that the brokerage has 24.2 million funded customers, with 11.8 million regarded as active each month.
Robinhood's Harris/Trump contracts will be valued between two cents and 99 cents each, with $1 being the maximum price for which the derivatives can be traded. Clients are allowed to purchase as many as 5,000 election contracts.
