You can now bet on Trump or Harris winning the election on Robinhood

Simone Del Rosario:

Bet you know who will win next week’s presidential election? Robinhood will literally let you put your money where your mouth is.

Starting Monday, people using the online brokerage app can trade contracts for Vice President Kamala Harris or former President Donald Trump.

Event contracts let users speculate on the outcome of a specific future event. Robinhood says the “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.”

For those hoping to make a quick buck on the election – keep in mind Robinhood won’t be paying out contracts until January 8, 2025, after results are certified on January 6.

Users can buy contracts worth up to $1 on the candidate they think will win. So, let’s set up a hypothetical presidential election matchup between Ryan Reynolds and Ryan Gosling.

Say you purchase a Yes contract for Ryan Reynolds for 50 cents. The contract fluctuates in real time based on the open market. So if the Deadpool star’s Yes value increases from 50 cents to 52 cents, your position does the same, increasing 2 cents per contract. You can sell that contract at any time or hold it until the election is certified.

If you hold until certification and Ryan Reynolds wins, your position increases to 1 buck per contract, double the money. But if Gosling got an October surprise and wins the election, your Reynolds contracts are worth zilch.

Robinhood’s event contracts are available through derivative accounts and to have one, you must meet certain criteria, including being a U.S. citizen.

Robinhood is the latest to make waves in election betting, I mean, trading.

Polymarket has been in the news for the major swing in odds toward Donald Trump’s favor. But U.S. users are banned from this crypto-based predictions market after a 2022 settlement with the Commodities and Futures Trading Commission.

Since Oct. 4, contracts for the presidential election on Polymarket went from about even between Trump and Harris to today, where more than 66% are betting on a Trump victory.

If we contrast that with opinion polling, the latest 538 average has Harris leading 48 to 46.6 percent. But of course, U.S. elections are not decided by popular vote. It’s better to look at swing states, where Wisconsin, Nevada, Pennsylvania and Michigan are neck and neck, while Trump has a slight edge in North Carolina, Georgia, and Arizona.

So what made bettors swing dramatically toward Trump?

Four accounts spent over $28 million this month, moving the market in the former president’s favor. It started to look like all four accounts were backed by a single person.

Polymarket confirmed that was the case as 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 Trump first started to take the lead on Polymarket, one of his biggest backers, Elon Musk, claimed it’s more accurate than polls because “actual money is on the line.”

It’s true, election bettors do have skin in the game.

But polling firms generally look at a lot more than how much money you’re willing to part with. Firms like Quinnipiac make sure to 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. Which makes the prediction market an interesting and new element for the U.S. this year.

In September, 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.

The ruling read, “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 problem is that the CFTC has given this court no concrete basis to conclude that event contracts would likely be a vehicle for such harms.”