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Key Takeaways
- Schwab’s product will function as binary options tied to S&P 500 closes above or below a target price, rather than the futures-style contracts used by Polymarket and Kalshi
- A companion “Plus Zone” feature is under discussion that would offer partial payouts when predictions come close to but don’t hit the final outcome
- Schwab’s entry would bring prediction market products to traditional brokerage customers, joining Kalshi, Polymarket, Coinbase, and Robinhood in the space
Charles Schwab is working with Cboe Global Markets to launch binary options contracts allowing customers to make yes-or-no wagers on S&P 500 performance, marking the brokerage’s first entry into prediction markets, according to a Wall Street Journal report citing people familiar with the matter. The feature is expected to roll out to Schwab customers in the coming months.
Schwab’s Product Would Function as Binary Options, Not Futures-Style Contracts
Unlike platforms such as Polymarket and Kalshi, which the Journal described as typically offering futures-style contracts tied to event outcomes, Schwab’s product would function more like a binary option.
Under that structure, the contract would pay a fixed cash amount or expire worthless depending on whether the S&P 500 closes above or below a specified target price. Schwab plans to focus on events with objectively verifiable outcomes in financial markets rather than contracts tied to politics, sports, or other real-world events.
Schwab and Cboe Also Discussing Partial Payouts and Expansion to Other Indexes
Schwab and Cboe are also in talks to offer a companion product tied to a Cboe feature known as the “Plus Zone.” That structure would allow traders to receive a partial payout when their prediction is close to the final outcome, even if the index does not finish exactly at the target level. The companies have also discussed expanding the lineup beyond the S&P 500 to other market indexes or financial benchmarks, according to the Journal.
The planned Schwab launch would add a major traditional brokerage to a field that now includes Kalshi, Polymarket, Coinbase, and Robinhood. Kalshi and Polymarket allow traders to speculate on outcomes ranging from elections to economic data releases. Coinbase and Robinhood have both recently introduced prediction market offerings of their own, and Schwab’s entry would extend prediction market products to its base of traditional brokerage customers.
