Markets
People Use Memecoins to Bet on US Elections
On July 13, as news spread that a would-be assassin had narrowly missed killing Donald Trump at a rally in Butler, Pennsylvania, a marketing frenzy began. Within an hour shotthe price of TRUMP, a cryptocurrency inspired by the former president, was has jumped by more than a thirdfrom $6.34 to $8.69. The electronic money It was, in fact, an indicator of the upcoming US elections.
Dozens of politicians memecoins have been created in the last year; there are also coins modeled after high-profile politicians such as Joe Biden, Kamala Harris, Robert F. Kennedy Jr., and Alexandria Ocasio-Cortez. They share an iconography and naming convention: politicians are usually represented by unflattering caricatures and their names are deliberately misspelled (instead of Joe Biden, it’s “Jeo Boden”), in homage to a influential meme comic starting from the 2010s.
Beyond financial speculation, the coins serve no purpose and promise no utility, but during the US presidential election campaign, their market performance has been correlated with the political fortunes of the individuals they depict.
Just as TRUMP’s price was rising following the assassination attempt, an event that commentators had expected would strengthen his chances of re-election, the price of KAMA, the Harris-themed coin, more than tripled after Joe Biden announced his withdrawal from the race, paving the way for the vice president to become the Democratic nominee. Likewise, on June 27, the day of Biden’s disastrous CNN debate performancethe price of BODEN it fell in half.
In the United States, the Commodities and Futures Trading Commission (CFTC), a financial regulatory body, has refused to allow gambling platforms to offer bets on election outcomes. It is explicitly illegal under the laws of many states, even for residents to place such bets. But buying political memecoins has become a rough proxy, one that comes, courtesy of the wild price swings typical of cryptocurrency markets, with greater risk and potential reward. Overall, hundreds of millions of dollars in value of political memecoins change hands every day.
“An investment in a political memecoin is not an endorsement or a badge of support,” says Rennick Palley, a founding partner at investment firm Stratos, whose hedge fund holds memecoins in its portfolio. “Most people see it as a fun way to bet on what will happen. If you wanted to speculate on who will win, memecoins are clearly the way to do it with the highest risk and the highest upside.”
The Debate Over Legalizing Election Betting in the United States It dates back decadesbut is currently ongoing in the US court system. In September, the CFTC question denied by Kalshi, a New York-based company that operates a sports betting market, to allow customers to wager on which party would control both houses of Congress, which the regulator described as “contrary to the public interest.”