What Are Political Futures?

Political futures are much like commodity futures, except they're used to speculate on the outcome of political events, particularly elections, and their legality is in question.

The Commodity Futures Trading Commission (CFTC), which regulates U.S. derivatives markets, tried to ban speculation on U.S. elections in 2024, but in September that year it lost a court case challenging its right to implement such a ban. As of February 2025, the CFTC was appealing, though Donald Trump's election victory may lead the CFTC to change its position.

Key Takeaways

Political futures contracts are used to speculate on elections and other political events.
They are traded on prediction markets, such as those operated by the University of Iowa or Victoria University of Wellington in New Zealand.
In 2024, Robinhood and Interactive Brokers offered betting on the U.S. presidential election via event contracts.

Understanding Political Futures

Political futures markets are a type of prediction market in which people bet on elections and other political events. They are similar to binary options in that the outcomes must be unambiguous and mutually exclusive—and the loser walks away with nothing. For example, prior to the 2024 election the question “Will Kamala Harris win the presidential election?” was an appropriate subject for a political futures contract.

To account for different odds of events happening, the contracts are priced differently based on the prediction. For example, if Harris was given a 45% chance of winning, a person who thought Harris would win would put up $0.45 for each $1 contract, while the person betting on Donald Trump would put up $0.55. The person who bet on Trump ended up winning the $1. The person who bet on Harris lost $0.45.

Political futures markets offering contracts on other political events that aren't election outcomes, such as "Will Donald Trump be impeached before his term ends?"

In addition to betting for profit, political futures can be used to hedge against election-related risk to a portfolio or business, as well potentially monetizing political knowledge.

The Legal Battle Over Political Futures

With a few exceptions, betting on elections has been considered illegal in the U.S. for many years. But it wasn't quite explicitly illegal, so in 2024 the CFTC proposed changing regulation 40.11 to make it explicitly illegal. The CFTC said the move was in response to growing interest among exchanges in offering political futures contracts and what the CFTC said were concerns about the integrity of U.S. elections if betting were widespread.

However, prediction market Kalshi Inc. challenged the ban, questioning whether Congress gave the CFTC the authority to regulate election betting. The U.S. District Court for D.C. ruled in Kalshi's favor, and the CFTC quickly appealed to the U.S. Appeals Court. The appeals court declined to grant the CFTC's request that it enact the ban pending the outcome of the appeal, opening the door for Kalshi and other markets to offer futures contracts on the 2024 election.

Real-World Examples of Political Futures Markets

One of the exceptions to the longstanding prohibition on political betting in the U.S. has been the Iowa Electronic Markets (IEM) platform, which is operated by the University of Iowa for research purposes. After starting as a teaching aid in 1988, it received an exemption from the CFTC in 1993. Under the terms of this exemption, the IEM must operate for strictly academic purposes, meaning its administrators must not profit from the platform. Also, the IEM is prohibited from purchasing ads.

The IEM is typical of political futures markets, in that traders can buy and sell real-money contracts based on their beliefs about election outcomes. Until the 2020 presidential election, participants were limited to contracts of $500 and could speculate on the outcome.

For the 2024 presidential election, the political futures landscape expanded with event contracts, which allowed people to speculate on the binary outcome of a specific event, such as a political race. Robinhood (HOOD) and Interactive Brokers (IBKR) allowed speculators to bet on the election.

Robinhood and Interactive Brokers offered their event contracts after the U.S. Court of Appeals for the D.C. Circuit cleared the way in October 2024 for betting on the outcome of U.S. elections. The court denied the CFTC’s motion for an emergency stay pending its appeal of a lower court decision, which greenlit elections event contract trading.

Political futures may face a more favorable CFTC environment in Donald Trump’s second presidential administration, which began in January 2025.

Prediction markets have been growing in popularity throughout the world, so much so that they could potentially compete with existing regulated exchanges. Nevertheless, due to the dubious legal standing of political futures in the U.S., those wishing to speculate on political events may need to make use of markets in other countries.

One popular example is PredictIt, a prediction market operated by Victoria University of Wellington in New Zealand, which operates under similar terms as the IEM.

Another example is the open-source prediction market Augur. Founded in 2014, this market uses blockchain technology based on the Ethereum platform. It allows participants to create, predict, and speculate on derivative contracts linked to the outcome of specific events—cutting out third parties entirely.

In addition to political forecasting, Augur can be used to hedge against events such as market crashes and geopolitical upheaval. Questions about the legality of such markets, and how they should be regulated, still have to be resolved in the U.S. and elsewhere.

What Is a Futures Contract?

A futures contract is a legal agreement to buy or sell a particular commodity asset or security at a predetermined price at a specified time in the future. Futures contracts are standardized financial derivatives for quality and quantity to facilitate trading on a futures exchange.

What Is an Event Contract?

An event contract is a futures contract that allows people to speculate on the outcome of a specific event, such as the result of a political election, the winner of a sports championship, or the closing point value of a benchmark average like the S&P 500. Most event contracts are formatted for putting money on “yes” or “no” outcomes before expiring.

What Is a Prediction Market?

A prediction market is a market where people can trade contracts that pay based on the outcomes of unknown future events. The market prices generated from these contracts can be understood as a kind of collective prediction among market participants.

The Bottom Line

Political futures are a futures contract that speculates on the outcome of political events. They are currently illegal in the United States, but a federal appeals court temporarily cleared the way for betting on the outcome of the 2024 presidential election.

The Iowa Electronic Markets (IEM) platform receives cash bets and is operated by the University of Iowa for research purposes. Two other political futures markets are PredictIt, operated by Victoria University of Wellington in New Zealand, and Augur, an open-source prediction market that lets participants create, predict, and speculate on derivative contracts linked to the outcome of specific events without third-party intermediaries.