Wall Street just found a way to copy Kalshi without the lawsuits

@Cboe Global Markets has revived a type of S&P 500 contract after a hiatus of more than a decade, bringing Wall Street squarely into a business that prediction market platforms Kalshi and Polymarket have been quietly building for years.

The Chicago-based derivatives exchange is listing binary options on the Mini S&P 500 Index, products that allow customers to place a yes-or-no bet on whether the index will hit a certain threshold. Contracts pay exactly $100 or nothing, depending on where the S&P 500 closes relative to a set level, and will be accessible through the same brokerage screen where clients already hold stocks, ETFs, and standard options.

A Major Distribution Advantage

Partner Charles Schwab confirmed it will make the contracts available to customers in the coming months, adding one of the world's largest retail brokerages, with roughly 47.2 million accounts and $11.8 trillion in client assets as of Q1 2026, to the prediction market space. Schwab follows Robinhood and Interactive Brokers, which had previously rolled out event contracts.

Schwab also plans to offer a version using a Cboe feature called the "plus zone," which hands traders a partial payout when they are close but not exactly on target. Cboe executives have described binary options as an on-ramp for traders who have tried prediction markets but not yet graduated to more complex options strategies.

Sidestepping the Legal Fight

The structure of the product is what sets it apart from the crypto-native competition. These are SEC-regulated listed options, not CFTC event contracts. Every major brokerage in the United States already has the compliance infrastructure to offer SEC-regulated options, meaning the product can be made available within existing customer accounts with no new licensing category, no new regulatory application, and no exposure to state gambling laws aimed at futures-style prediction contracts.

That distinction matters right now. Kentucky Attorney General Russell Coleman has filed lawsuits against Kalshi and Polymarket, alleging that sports-related event contracts amount to unlicensed sports wagering under state law. As of this month, at least 17 states have filed suits against prediction market operators over alleged gambling violations. The lawsuit involving Kalshi alleges that Coinbase shared in transaction fees generated through trades on the platform, while Robinhood and Webull were identified as affiliated entities connected to Polymarket's offerings.

Schwab and Cboe have discussed extending their lineup to other indexes and benchmarks, but the brokerage intends to limit contracts to events with financial outcomes, which currently rules out bets on events like the World Cup or the Oscars. That restriction is precisely what keeps the product outside the regulatory crossfire bearing down on its rivals.

Sources:
Bloomberg: Cboe Revives Binary Options to Compete with Kalshi, Polymarket
The Block: Kentucky files lawsuits against Kalshi and Polymarket
The Block: Charles Schwab is working with Cboe to launch S&P 500 binary options contracts