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Cboe Global Markets Inc. (Cboe: CBOE), which operates derivatives and securities exchanges, has announced plans to launch a new prediction markets framework that introduces a third payout outcome to event-based contracts, moving away from the binary yes/no structure that currently defines the market.
The new framework, described as proprietary and patent-pending, would allow traders to receive one of three potential payouts: $0, a partial payout within a defined "payout zone," or a full $100. Cboe says it plans to launch its first product under this framework as a Mini S&P 500 Index prediction market contract in the second quarter of 2026.
Traditional event contracts settle on a binary basis, offering either a full payout or nothing. Cboe's model draws on the mechanics of vertical spreads, a widely used options strategy, and packages them in a structure intended to be accessible to retail traders. Vertical spread trades in zero-days-to-expiry (0DTE) SPX options averaged nearly 580,000 contracts per day in 2025.
JJ Kinahan, Head of Retail Expansion and Alternative Investment Products, Cboe Global Markets
JJ Kinahan, Head of Retail Expansion and Alternative Investment Products, Cboe Global Markets commented:
"Our new prediction market contracts essentially take the mechanics of a traditional vertical spread, one of the most popular options strategies, and package them in an intuitive, accessible format for a broader audience. These contracts will offer greater flexibility and clearly defined risk compared to traditional event contracts, along with the opportunity to earn a partial return when traders are directionally correct. Real-world opinions aren't always binary, and investors shouldn't be confined to a yes-or-no framework. Our more nuanced model is designed to reward informed perspectives, giving retail traders credit even when they are mostly right, and introduce an entirely new way for people to engage with outcome-based trading that simply doesn't exist today."
The product will be listed on Cboe Options Exchange, use a traditional options wrapper to deliver fixed-return outcomes, settle in cash in a manner similar to standard index options, and will be centrally cleared by OCC.
Rob Hocking, Global Head of Derivatives, Cboe Global Markets
Rob Hocking, Global Head of Derivatives, Cboe Global Markets said:
“There is clear customer demand to trade around market events tied to the S&P 500 Index, and our new SPX prediction market contracts will just make it easier for even more people to participate in that activity. What sets our products apart from other SPX event contracts is that ours are built directly on top of the SPX options ecosystem, one of the deepest and most liquid options markets in the world. This means that pricing is grounded in real market activity, and customers can benefit from the transparency, liquidity and safeguards of our regulated securities exchange. As the home of SPX options, Cboe is uniquely positioned to bring this product to market in a way that reflects the strength and integrity of the broader SPX ecosystem.”
S&P Dow Jones Indices and Charles Schwab both commented on the announcement.
Cameron Drinkwater, Chief Product & Operations Officer, S&P Dow Jones Indices
Cameron Drinkwater, Chief Product & Operations Officer, S&P Dow Jones Indices said
“We are proud to support continued innovation within the S&P 500 ecosystem. Cboe's planned prediction market contracts help new investors benefit from the market leading integrity, governance, and reliability of the S&P 500, within a simple and easy-to-access contract structure.”
James Kostulias, Head of Trading Services, Charles Schwab
James Kostulias, Head of Trading Services, Charles Schwab commented:
"As the leader in retail options trading and a close partner of Cboe, we are pleased to see Cboe continue to innovate in the financial markets and look forward to continually enabling new instruments as we see the client demand."
Cboe is the company that launched the world's first listed options exchange in 1973 and is credited with introducing S&P 500 index options and the VIX Index. It says it may extend the prediction market framework to cover additional indices or stocks in the future.
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