Cboe targets prediction market with ‘all-or-nothing’ options revival: WSJ

Cboe Global Markets is reportedly making a significant push into the prediction market sector by reviving a simplified and controversial financial instrument: ‘all-or-nothing’ options, often referred to as binary options. According to reports from the Wall Street Journal (WSJ), the exchange operator is seeking regulatory approval to offer these contracts as a means of capturing public appetite for event-based betting, a market currently dominated by unregulated, decentralized platforms.

All-or-nothing options function differently from standard derivative contracts. They pay out a fixed, predetermined amount if a specific, binary condition is met by the expiration date (e.g., the S&P 500 closing above 5,500), and pay out zero if the condition is not met. This clear, fixed-risk structure is designed to appeal to retail investors seeking straightforward bets on macroeconomic outcomes or market movements.

Cboe’s move is strategic, aiming to legitimize the prediction market—where participants wager on future events—by bringing it under the purview of established financial regulation. While binary options previously faced severe scrutiny due to their association with high-risk practices and unscrupulous brokers, Cboe plans to offer the products under stringent exchange rules, likely involving oversight from the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC).

If successful, the introduction of regulated all-or-nothing options could provide Cboe with a vital new source of transaction volume, allowing traditional finance to directly compete with rapidly growing, crypto-based prediction markets that currently operate outside of US regulatory boundaries.

Source: Cboe targets prediction market with ‘all-or-nothing’ options revival: WSJ