Robinhood Admits It's Just a Betting App.
That's exactly what the presidential betting market is all about!
Robinhood has announced that American citizens will be able to bet on the upcoming elections, describing this possibility as the opening of "a new asset class that democratizes access to events as they happen." This statement invites reflection on the nature of what it means to "democratize access." In a context where everyone can inform themselves about electoral events, it seems surprising that the existence of these events requires the legitimization of gambling.
Starting today, Robinhood users will be able to buy "event contracts" that allow them to speculate on who might win the presidency, with options including figures like Kamala Harris and Donald Trump. These contracts can be traded for real money, acting as a type of derivative contract. This new option comes after a failed litigation by the Commodity Futures Trading Commission against a competing platform, Kalshi, which also offers contracts related to political events. Although that case is under appeal, it is expected not to be resolved before the current elections.
It is important to note that while there are numerous betting markets for elections, their validity is questionable. While some advocates argue that betting can help predict odds, the reality may be that it simply broadens opportunities for speculation. For example, on Polymarket, a French bettor has significantly influenced the odds, making Trump's chances of winning the election stand at 62%, despite polls suggesting a tighter race.
Robinhood has earned a reputation as a platform geared towards "fun betting" around stocks and cryptocurrencies, as has been noted on various occasions. Over the years, Robinhood's CEO, Vlad Tenev, has defended the platform as a way to bring users closer to financial markets, although its revenue model, which is based on transaction fees, suggests that its approach goes beyond financial education.
Betting on elections is probably not a recommended path for long-term wealth accumulation, nor is it what one would expect to see in a retirement savings account. However, it is evident that this practice could be just the beginning of a series of betting contracts that Robinhood plans to offer, potentially generating more revenue than cryptocurrency trading.
