(Reuters) - Robinhood said on Monday it will allow trading in U.S. presidential election event contracts, as it seeks to capitalize on growing retail demand for betting products.
This will offer investors on its platform a chance to profit from speculating the results of the tightly contested race between Vice President Kamala Harris and former President Donald Trump.
The trading platform's shares rose 3% before the bell after the company said it will start rolling out the contracts to a limited number of users on Monday who must be citizens of the United States.
Event derivatives trading involves buying and selling contracts that allow traders to speculate on the outcome of specific events such as elections, economic data releases, or policy decisions.
These types of derivatives, which are relatively new and generally considered high risk compared to traditional financial instruments, have gained traction in recent years.
PredictIt, a real-money prediction market platform where users can buy and sell shares on the outcomes of future events, has also gained significant popularity this year in the lead-up to the election.
A federal judge in September ruled to allow Americans to use derivatives for event betting, marking a setback for the U.S. Commodity Futures Trading Commission, which had sought to block them. An appeals court upheld the order in October.
Robinhood introduced futures and index options trading features to its mobile app, for a fee, earlier this month, marking a shift from its traditional commission-free trading model.
The company, which became synonymous with mom-and-pop investors in 2021, is now aiming to evolve into a comprehensive financial services provider and compete with established brokerages catering to institutional clients.
It committed earlier this year to expanding margins and prioritizing "profitable growth" in 2024. Investor enthusiasm has fueled a year-to-date jump of more than 100% in the company's stock.
By Manya Saini
Editing by Pooja Desai and Shinjini Ganguli
