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Charles Schwab is building a binary options product with Cboe Global Markets that lets retail traders place yes-or-no wagers on where the S&P 500 will close, the Wall Street Journal reported Friday, citing people familiar. The contracts pay a fixed cash settlement if the index closes above or below a set strike, and zero if the prediction misses. The brokerage plans to roll the product out in the coming months, and a version using Cboe's "plus zone" feature will hand traders a partial payout for landing close to the strike, per the WSJ.
Schwab's structure sets it apart from Kalshi and Polymarket, which list event contracts on sports, elections and pop culture. Schwab and Cboe have discussed expanding the lineup to other indexes, but the brokerage intends to keep the contracts limited to events with financial outcomes — explicitly ruling out bets on the World Cup or next year's Oscars. CEO Rick Wurster told the Journal in December that prediction markets were "not high on our list," though he conceded the firm would revisit if customer demand made it a competitive necessity.
Why it matters
By tying the product to a stock index rather than a ballgame or an election, Schwab steps around the legal fight now closing in on Kalshi and Polymarket. Both are defending a wave of state lawsuits — including a set filed by Kentucky this week — that accuse them of running unlicensed sportsbooks behind an "event contract" label. The CFTC has argued the opposite, that federally licensed prediction markets fall under its exclusive jurisdiction and has sued multiple states to press the point. A contract that settles on the closing print of the S&P 500 fits cleanly inside existing securities and derivatives rules, which should keep Schwab clear of the sports-betting collision now pitting more than a dozen states against Washington. Cboe executives have pitched binary options as an on-ramp for traders who tried prediction markets but have not yet graduated to more complex options strategies.
Frequently asked questions
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What exactly is Schwab launching with Cboe?
Binary options contracts on the S&P 500 that pay a fixed cash settlement if the index closes above or below a set strike, and zero if the prediction misses. A version using Cboe's 'plus zone' feature will pay a partial amount for landing near the strike.
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How is this different from Kalshi or Polymarket?
Kalshi and Polymarket list event contracts tied to sports, elections and pop culture. Schwab's contracts settle on the closing price of the S&P 500, and the brokerage has said it will limit the lineup to events with financial outcomes — explicitly ruling out World Cup or Oscars bets.
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Why does the legal structure matter?
Kalshi and Polymarket are defending state lawsuits accusing them of running unlicensed sportsbooks under the event-contract label, while the CFTC claims exclusive federal jurisdiction over licensed venues. A product that settles on an index closing price fits inside existing securities and derivatives rules, which…
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How much customer footprint does Schwab bring to this market?
Roughly $13 trillion in client assets and tens of millions of brokerage accounts, according to the WSJ. Robinhood, Interactive Brokers and Coinbase have all expanded event-contract businesses over the past year, with Kalshi handling $16.81 billion in May volume.
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When will the product be available?
Schwab plans to roll out the binary options product in the coming months, per the WSJ. The brokerage and Cboe have also discussed extending the lineup to other indexes and benchmarks but have not named a timeline.
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