Key facts
- Charles Schwab is partnering with Cboe Global Markets to launch prediction markets.
- The new contracts will focus on the S&P 500 index's performance.
- Customers can place 'yes-or-no' wagers on the index's closing price.
- The offering includes options for partial payouts if the prediction is directionally correct but not exact.
- Cboe's framework allows for three payout outcomes: $0, a partial payout, or a full payout.
Charles Schwab is set to enter the prediction markets space through a collaboration with Cboe Global Markets, aiming to offer customers novel options contracts tied to the S&P 500 index. These contracts will allow users to wager on the index's performance, moving beyond traditional binary 'yes-or-no' outcomes.
Cboe's new framework, which is patent-pending, will introduce a third dimension to outcome-based trading, enabling defined risk and the potential for partial payouts. This means traders can earn a return even if their prediction isn't perfectly accurate, as long as it is directionally correct. The contracts will offer three potential payout scenarios: $0, a partial payout within a defined 'payout zone,' or a full $100 payout.
The first product to utilize this framework will be a Mini S&P 500 Index prediction market contract, slated for launch in the second quarter of 2026. Cboe views this as an evolution from traditional event contracts, drawing parallels to vertical spread strategies in options trading to offer greater flexibility and reward informed perspectives. This move positions Schwab to compete with other platforms like Robinhood and Interactive Brokers that have already introduced similar event contracts.