On October 3, Interactive Brokers Group became the first major U.S. financial institution to offer customers the ability to place bets on political races through its new election forecast contracts. Customer uptake has been immediate, with 16.9 million contracts being traded through ForecastEx LLC, a subsidiary of Interactive Brokers. Traders can bet on various political outcomes such as the presidential election, control of the U.S. Senate and House, and individual Senate races in battleground states like Arizona, Michigan, and Pennsylvania.
Interactive Brokers’ founder and chairman, Thomas Peterffy, sees the introduction of ForecastEx as a way to teach people to think probabilistically in their everyday lives, rather than just a revenue stream. While the commission from these contracts may be minimal compared to the company’s overall revenue, Peterffy believes that it is a long-term play that could generate billions of dollars in annual revenues. The contracts are structured in a way that makes it simple for traders to bet on political events, with varying prices based on the perceived likelihood of each outcome.
In addition to political bets, Interactive Brokers has also introduced contracts for traders to wager on economic indicators and climate data. This move is aimed at encouraging people to think about important issues such as climate change in a rational manner. Despite facing competition from platforms like Polymarket and Kalshi, Peterffy believes that Interactive Brokers stands out by offering bets only on “serious” topics that have significant economic and social implications. All contracts are tied to official government data to prevent manipulation.
Peterffy expects ForecastEx to attract new traders to Interactive Brokers’ core stock brokerage business, with approximately half of those placing bets being new customers for the company. While Peterffy himself plans to vote for Donald Trump in the upcoming election, he emphasizes that employees of Interactive Brokers are not allowed to trade forecast contracts. This decision is based on his belief that socialism is detrimental to any nation, drawing on his experiences growing up in socialist Hungary before moving to the United States.
Overall, Interactive Brokers’ foray into election forecast contracts represents a significant development in the financial industry, opening up new possibilities for customers to engage in speculative trading on political events. The success of ForecastEx highlights the growing interest in prediction markets, with other platforms like Polymarket and Kalshi also gaining traction. While these platforms allow users to bet on a range of events beyond politics, Interactive Brokers distinguishes itself by focusing on “serious” topics with notable economic and social implications.
