A federal agency has argued that permitting election betting goes against state laws prohibiting gambling on elections and has the potential to undermine public trust in democratic processes.
Robinhood recently launched U.S. presidential election event contracts, giving retail investors the option to wager on the outcome of the 2024 White House race between Vice President Kamala Harris and Republican candidate Donald Trump.
The announcement was made on Oct. 28 and marks Robinhood’s entry into the event contracts market, regulated by the Commodity Futures Trading Commission (CFTC) as a type of swap. The CFTC is currently in a legal battle to prevent trading platform Kalshi from offering similar contracts, which could impact Robinhood’s new offering if the CFTC succeeds with its appeal.
Robinhood’s presidential election event contract platform was launched on Monday through Robinhood Derivatives LLC (RDH), offering the opportunity to bet on the presidential contest outcome between Harris and Trump to a select group of eligible U.S. citizens. Eligibility criteria include U.S. residency verification and confirmation of non-affiliation with political campaigns or major polling organizations.
Investors can choose from two contracts based on a “yes” or “no” response to the event question of whether Harris or Trump will win the 2024 presidential election. The contract’s payout is either $1 or zero depending on which candidate is certified president by Jan. 7, 2025.
The RDH website explains, “Will Kamala Harris or Donald Trump win the 2024 presidential election? Get $1 for every contract you own if your candidate is certified in January—and nothing if they aren’t. Or close your position before Jan. 6, 2025.” This is considered a market, not actual voting.
Robinhood’s introduction of election contracts follows various regulatory and legal developments in the election betting industry.
In September, a federal judge ruled in favor of allowing Americans to bet on election outcomes in a regulated marketplace, opposing the CFTC’s attempt to block such trading. An appeals court upheld the decision in early October, rejecting the CFTC’s emergency motion for a stay pending appeal against Kalshi. This has temporarily allowed platforms like Kalshi and Robinhood to offer election results-based derivatives contracts, but the situation may change as the CFTC’s appeal continues.
In a filing on Oct. 16 seeking to overturn the lower court’s decision, the CFTC argued that election event contracts violate state laws against election gambling and could harm public trust in democratic processes. The CFTC believes such contracts constitute “gaming” under the Commodity Exchange Act (CEA) and are not in the public’s best interest.
Better Markets, a financial markets public interest nonprofit, filed an amicus brief in support of the CFTC on Oct. 23. The brief backs the CFTC’s effort to prevent Kalshi from offering election results contracts, potentially impacting platforms like Robinhood seeking to offer similar derivatives.
Stephen Hall, legal director at Better Markets, stated in an Oct. 24 statement, “It’s crucial that the D.C. Circuit upholds the CFTC’s decision to prohibit election gambling. Kalshi’s contracts are enabling significant bets on numerous election contests, which could compromise election integrity, facilitate widespread market manipulation, and exploit investors through AI and digital engagement tools.”
“We’ll be monitoring the situation and hoping that the appellate court reverses the lower court’s decision and puts an end to this problematic trend,” Hall added.
The outcome of the appeals court decision remains uncertain. In its Oct. 2 ruling denying the CFTC’s emergency request to block the contracts, the court acknowledged the regulator’s concerns about the impact on election integrity, described as crucial for democracy. However, the court found the CFTC’s authority to bar such event contracts debatable and the agency failed to demonstrate actual risks to election integrity if platforms like Kalshi continue to offer election bets during the appeal process.
