I’ve been watching the prediction market space for years, and Interactive Brokers just dropped something that caught my attention immediately. They’re now offering Forecast Contracts on over 100 state governor primary races across 22 states – and this isn’t some sketchy offshore betting site. This is a legitimate, CFTC-regulated way to put your political insights to work.
Let me break down what this means and why it might be worth your attention, especially if you follow politics closely.
>> LEARN MORE ABOUT INTERACTIVE BROKERS HERE
What Are Interactive Brokers Forecast Contracts?
Think of Forecast Contracts as a sophisticated way to bet on political outcomes, but with the backing of a major brokerage and regulatory oversight. Here’s how they work:
Simple yes/no predictions on political outcomes (like “Will Candidate X win the Republican primary for Governor of State Y?”)
Fixed risk and reward: You can lose a maximum of what you pay for the contract, and win up to $1.00 per contract if you’re right
Regulated and transparent: This isn’t some crypto prediction market – it’s regulated by the CFTC through ForecastEx
24/6 trading: You can trade around the clock, six days a week
What makes this particularly interesting is that you’re not just gambling – you’re trading contracts that reflect real market sentiment about political outcomes.
>> LEARN MORE ABOUT FORECAST CONTRACTS HERE
Why Governor Races Are Perfect for This
Governor races are ideal for prediction markets for several reasons:
1. Local Knowledge Advantage
Unlike presidential races that get wall-to-wall coverage, governor primaries often fly under the national radar. If you live in one of these states or follow local politics closely, you might have insights that the broader market doesn’t.
2. Less Efficient Markets
With over 100 races available, the markets for individual governor primaries are likely less efficient than major national races. This creates opportunities for informed traders to find value.
3. Clearer Fundamentals
State-level races often have clearer fundamentals – incumbent advantages, local issues, candidate quality – that you can analyze without getting lost in national political noise.
READ MORE: Check out Kalshi if you want to see another platform that is in the prediction trading space.
How the Economics Work (And Why They’re Actually Attractive)
Here’s what makes these Forecast Contracts more interesting than typical political betting:
The Pricing Structure
- Contracts are priced between $0.02 and $0.99
- If your prediction is correct, you receive $1.00 per contract
- Your maximum profit is $1.00 minus what you paid
Example: If you buy a “YES” contract for $0.30 that a specific candidate will win their primary, and they do win, you receive $1.00 – a profit of $0.70 per contract.
The Interest-Like Bonus
This is where it gets really interesting. Interactive Brokers pays an “incentive coupon” of 3.83% APY based on your position’s closing market value. This means you’re earning interest-like payments while holding your positions.
Zero Commission Trading
Unlike stock trades, there are no commissions on Forecast Contracts, which means more of your profits stay in your pocket.
$3 Free to Start
New users get $3 to try out Forecast Contracts, which is enough to make several small trades and get a feel for how they work.
To dive deeper into all things IBKR, click here to explore more articles!
How to Actually Trade These (Step-by-Step)
If you’re interested in trying this out, here’s exactly how to get started:
Step 1: Get Access
- Open an Interactive Brokers account if you don’t have one
- Request trading permissions for Forecast/Event Contracts (usually approved immediately)
- You’ll automatically receive $3 to start trading
Step 2: Find Your Opportunities
- Log into IBKR ForecastTrader
- Search for governor races in states you know well
- Look for contracts where you think the market has mispriced the odds
Step 3: Make Your Trades
- Click “YES” if you think an outcome will happen, “NO” if you don’t
- Decide how many contracts to buy based on your conviction level
- Monitor your positions through any IBKR platform
Step 4: Manage Your Risk
- Remember: your maximum loss is what you pay for the contract
- Consider taking profits if the market moves in your favor before the election
- Don’t bet more than you can afford to lose
Trending Cash Bonus
Bluevine is offering a $300 cash bonus just for signing up. It’s a quick and easy way to score some extra cash. Click the link below to get all the details.
My Strategy for Trading Governor Races
Based on my experience with prediction markets, here’s how I’d approach these contracts:
Focus on What You Know
Don’t try to trade every race. Pick 2-3 states where you have genuine knowledge or insights about local politics.
Look for Obvious Mispricing
Sometimes markets get caught up in national narratives and miss local realities. A candidate with strong local support might be undervalued if they don’t fit the national media narrative.
Use Small Position Sizes
Start with small amounts ($10-50 per position) until you get a feel for how these markets behave.
Consider the Timeline
Primary elections happen at different times throughout the year. Factor in how long you’ll need to hold positions when calculating your expected returns.
The Risks You Need to Understand
Like any investment, Forecast Contracts come with risks:
Political Risk
Politics is inherently unpredictable. Even the most likely outcomes can be upset by scandals, late-breaking news, or voter turnout surprises.
Liquidity Risk
Some contracts might have limited trading volume, making it harder to exit positions before expiration.
Regulatory Risk
While currently legal and regulated, the regulatory landscape around prediction markets could change.
Concentration Risk
If you focus too heavily on one state or type of race, you’re not diversified against specific risks.
Trending Savings Account Deal:
Who Should Consider This?
Forecast Contracts on governor races might be interesting for:
Political Junkies
If you already follow state politics closely, you might have insights worth monetizing.
Local Residents
Living in a state gives you access to local news, sentiment, and information that national markets might miss.
Diversification Seekers
These contracts have little correlation with traditional investments, potentially offering portfolio diversification benefits.
Small-Scale Speculators
If you enjoy making small, informed bets on outcomes you understand, this provides a regulated way to do so.
My Take: Interesting, But Keep It Small
I find Interactive Brokers’ Forecast Contracts genuinely interesting from both a market efficiency and diversification perspective. The ability to trade political outcomes on a regulated platform with transparent pricing is pretty cool.
That said, this should be treated more like entertainment with upside potential than a core investment strategy. The 3.83% APY incentive coupon is nice, but you’re still essentially betting on political outcomes.
My recommendation: If you follow politics closely and find this interesting, try it out with small amounts. Use the free $3 to get a feel for how it works, then consider small positions ($10-50) on races where you have genuine insights.
Just remember that even the most “sure thing” in politics can surprise you. Keep position sizes small and treat this as a way to potentially profit from your political knowledge, not as a path to wealth.
Getting Started
If you want to try trading governor race Forecast Contracts:
- Open an Interactive Brokers account (if you don’t have one)
- Request Forecast Contract trading permissions
- Start with the free $3 to get familiar with the platform
- Focus on races in states you know well
- Keep position sizes small until you understand how these markets behave
The intersection of politics and investing has always fascinated me, and Interactive Brokers has created a legitimate, regulated way to put your political insights to work. Whether it’s worth your time depends on how much you enjoy following politics and your comfort level with speculative investments.
Disclaimer: Forecast Contracts involve substantial risk and are not suitable for all investors. This article is for informational purposes only and does not constitute investment advice. Always do your own research and never invest more than you can afford to lose.
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