The Underappreciated, New Legal Restrictions on Challenging Elections

Editors’ Note: MarketMinder prefers no politician nor any party. We assess developments for their potential economic and market impact only.

Roughly two months from Election Day and, presuming timely counting, we will soon know whether Vice President Kamala Harris or former President Donald Trump will take the oath of office next January. We have said for a while that, while the winner is unknowable now given tight swing state polling, simply having a winner should be bullish—regardless of who takes the cake. Markets like falling uncertainty, and sentiment tends to rally around the winner regardless of party, creed or personality.

Yet there is a creeping worry: What if uncertainty escalates after Election Day because whoever loses challenges the results? This scenario isn’t impossible, but the probability has dialed down significantly since 2020, due to some underappreciated legal changes occurring over the past four years. This doesn’t preclude volatility if challenge chatter heats up, but knowing the backdrop can help calm some of these lingering fears.

Before we go on, while much of this discussion surrounds only one of the candidates, challenges are a bipartisan ritual. For every Florida in 2000 there is an Ohio in 2004. Both candidates jawboned about not accepting the results if they lost in 2016. Last we checked, there are years-old gubernatorial races where the loser still hasn’t conceded. So understand that, in taking on this topic, we are coming straight down the middle, no preferences and no fingers pointed right or left.

With that in mind, for those fearing a 2020-style post-election mess—regardless of which candidate might feel compelled to challenge—the likelihood looks low. Turns out that stretch was a bipartisan bummer, and states have started patching many of the inefficiencies that got us there.

Several set certification deadlines well in advance of January 6, which should prevent politically motivated foot-dragging. Some harbor concerns that if a state with a Republican legislature votes for Harris—or vice versa—the state’s election officials or even a rogue county could delay certification to force the election to the House (Congress has also addressed this, which we are coming to). Early, statutory certification deadlines drastically reduce this risk. As a detailed Wall Street Journal piece noted last month, even if state election boards supported the delays, “State courts and federal courts would likely intervene to make election officials do their jobs and prevent disenfranchising a state’s voters from participating in the presidential election.”^[i]

Congress has also made some tweaks, courtesy of 2022’s Electoral Count Reform Act. To further guard against administrative stalling, lawmakers changed the rules so that if a state doesn’t submit a certified tally on time, it gets booted from the Electoral College entirely. That is, it isn’t just that the state’s votes won’t count and a candidate will need another path to 270. Rather, the Electoral College’s total will drop by that state’s votes. So for example, if California failed to certify, the Electoral College would drop from 538 to 484, with 243 necessary to win. This adds further teeth to the courts’ likely intervention to prevent disenfranchisement.

Worried about so-called “fake electors” being a potential factor? Congress also has this covered, ruling them out in 2022’s law—and putting statutory might behind criminal charges against fake electors in Arizona, Georgia, Michigan and Nevada. The Electoral Reform Act also bars the vice president from tossing votes willy nilly during Congress’s electoral vote count, negating an obvious conflict of interest for this year’s election and a common concern people had back in 2020 and early 2021.

Lastly, several court cases have tightened things up since 2020. Lawsuits have already challenged electoral rules in Wisconsin, Michigan, Mississippi, New York, North Carolina, Florida and Nevada, and courts have ruled, clearing uncertainty—and likely helping prevent a blitz of post-hoc legal action. A legal challenge against expanded vote-by-mail in Nevada was dismissed in July. And putting the final nail in the “fake electors” coffin, the Supreme Court rejected the theory that state legislators can overrule state constitutions and state court rulings.

However you feel politically about all of these challenges and things like vote-by-mail and early voting, we encourage you to set it aside when assessing the election from a market standpoint. These items are sociology—important to society at large, but outside markets’ purview. The simple point for markets is this: The more guardrails are in place, the more the potential holes in the system have been patched, the lower the likelihood of some radical uncertainty spike after November 5.

Whatever your political leanings, for stocks, the higher likelihood of clarity should be a plus.