TL;DR:
- Cboe aims to revive binary options under a regulated framework to attract retail investors interested in event betting.
- Prediction markets like Kalshi and Polymarket reached a record volume of $17 billion in January.
- The Chicago exchange’s proposal will focus on legal compliance with the SEC and CFTC to avoid past frauds.
Cboe Global Markets is exploring the return of Cboe all-or-nothing contracts, a strategic move to capture the renewed interest of retail investors. According to reports from the Wall Street Journal, this initiative seeks to compete directly with fast-growing prediction platforms.
These contracts function with a fixed payout profile. In other words, if the investor meets a specific condition, they receive a predetermined amount; if the contract expires worthless, the investment is lost. In this way, the “yes or no” structure simulates the mechanics of decentralized platforms that have recently gained significant traction.
It is worth noting that Cboe listed similar products in 2008, but a lack of institutional adoption and regulatory scrutiny forced their exit from the market. However, the current landscape has changed drastically due to the massive visibility that event markets have gained over the past year.
The Rise of Event Markets and the Regulatory Challenge
Cboe’s decision comes at a time when event-based trading has reached unprecedented figures, with volumes exceeding $17 billion. Kalshi and Polymarket lead this sector, allowing users to wager on everything from sports results to key political decisions.
For this reason, JJ Kinahan, a Cboe executive, emphasized that the new Cboe all-or-nothing contracts will undergo a rigorous legal compliance process. By being under the radar of the SEC or the CFTC, the exchange seeks to offer a safe alternative to unregulated binary options sites.
Furthermore, major players in the financial ecosystem, such as Coinbase and Goldman Sachs, are also exploring this segment, consolidating a new phase of capital formation. This institutional movement suggests that liquidity and participation in prediction markets will continue to expand steadily.
In summary, the relaunch of these contracts represents a simplified entry point for new traders in the options space. Cboe’s success will depend on its ability to balance the agility of prediction markets with the security of a traditionally regulated financial environment.
