Let’s pause — I would like to reflect on this incredible phrase, about an asset class that democratizes access to events as they unfold. See, I thought we all had access to the events of the election because we all exist in reality and can find out about them. But apparently, if we can’t gamble on an event, it isn’t happening. This is a fascinating vision of metaphysics, and I would like to hear more about it. No one bet on my birth, for instance, and thus there is no asset class relating to my existence. So am I real?
“Democratizes access” is one way you can describe “opening a betting market”
I’m kidding. Obviously whoever wrote that is just not very good at sentences. No, I want to get down to the heart of the matter here, which is signaled by the phrase “democratizes access.” This phrase sits right next to “financial inclusion” in the lexicon of people who are trying to take your money. “Democratizes access” is one way you can describe “opening a betting market,” but I don’t think it’s the most accurate one!
Here’s what Robinhood will let users do, starting today. If you believe Kamala Harris or Donald Trump will win the presidential election, you can purchase an “event contract.” You can trade these contracts for real money; they are a kind of derivatives contract. Robinhood’s exciting new investment opportunity comes after the Commodities Future Trading Commission lost a lawsuit against a platform, Kalshi, that offers political event contracts. That case is being appealed, but won’t be decided before the current election.
Anyway what’s really fun about election markets is that they can skew easily. For instance, Polymarket has admitted that a single French bettor is responsible for enormous bets that Donald Trump will win the presidential race. So while the polls show the candidates in a close race, Polymarket placed Trump’s odds of winning at 62 percent. Are betting markets accurate? Well, no, not always.
But let’s be real about Robinhood for a minute. “Robinhood is the brokerage for fun gambling on meme stocks and meme cryptocurrencies,” Bloomberg’s Matt Levine noted back in 2021. A quick tour of Robinhood’s most recent quarterly earnings reports shows that an awful lot of its revenue growth is attributable to crypto trading.
I am old enough to remember a period when Robinhood CEO Vlad Tenev went around with a straight face insisting that Robinhood was just a good way of introducing people to financial markets, as though eTrade (and before that, investing clubs) didn’t already exist. This was an obvious lie if you looked at the revenue model — Robinhood makes money every time a user trades, and the more frequently a user trades, the more likely they are to lose money.
I don’t think anyone imagines an investor building up long-term wealth by gambling on the presidential election. Certainly it is not the kind of thing that goes into a prudent retirement account. I do think, though, that this is just the beginning of the contracts you’ll be able to gamble on with Robinhood, and those may prove to be even more effective at generating revenue than crypto.
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