Memecoins
People are using memecoins to bet on the US elections
On July 13, as news spread that a would-be assassin had nearly killed Donald Trump at a rally in Butler, Pennsylvania, a trading frenzy began. Within an hour, filmingThe price of TRUMP, a cryptocurrency inspired by the former president, had jumped by more than a thirdfrom $6.34 to $8.69. Memecoin was, in fact, a leading indicator of the upcoming American elections.
Dozens of politicians coins have been created in the past year; there are also pieces inspired by prominent political figures 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 intentionally misspelled (instead of Joe Biden, it’s “Jeo Boden”), in homage to a influential meme from the 2010s.
Beyond financial speculation, the coins serve no purpose and promise no utility, but during the US presidential campaign their market performance was correlated with the political fortunes of the individuals they represent.
Just as TRUMP’s price rose following the assassination attempt, an event that commentators had predicted would strengthen his chances of re-election, the price of the KAMA coin, bearing Harris’ image, more than tripled after Joe Biden announced his withdrawal from the race, paving the way for the vice president to become the Democratic nominee. Similarly, on June 27, the day of Biden’s disastrous CNN debate performancethe price of BODEN fell by half.
In the United States, the Commodities and Futures Trading Commission (CFTC), a financial regulator, has refused to allow Gambling platforms offer bets on election outcomes. It is explicitly illegal for residents to place such bets under the laws of many states. But buying political memecoins has become a loose substitute — one that, due to the wild price swings typical of crypto markets, comes with both increased risk and potential reward. Overall, hundreds of millions of dollars Political memecoins are currently changing hands every day.
“Investing in a political memecoin is not an endorsement or a sign 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’s going to happen. If I wanted to speculate on who’s going to win, memecoins are clearly the way to do it for maximum risk and maximum reward.”
The debate over the legalization of election betting in the United States goes back decadesbut is currently playing out in the U.S. court system. In September, the CFTC a request was denied by Kalshi, a New York-based company that operates an election betting market to allow customers to bet on which party would control both houses of Congress, which the regulator described as “contrary to the public interest.”