The securities provider and wealth management firm Charles Schwab is reportedly set to debut prediction market offerings that will let users trade contracts tied to the performance of the top listed US companies.
An unnamed source close to the firm told the Wall Street Journal that Schwab has teamed up with the financial exchange operator Cboe Global Markets to create all-or-nothing options contracts that will track the performance of the S&P 500.
Schwab is one of the biggest wealth management providers in the United States. Per its own figures, it holds $13.14 trillion in client assets, providing brokerage accounts to almost 40 million people and companies.
The S&P 500 is the index of leading New York Stock Exchange-listed shares. As many stock prices continued to surge on the NYSE last week, traders bought and sold over 9 billion S&P 500 shares on June 18, worth over $1 trillion.
The source said that Schwab’s new products would involve contracts on simple binary outcomes in the stock market.
This will reportedly allow traders to take positions on whether the index will close at a specified price on a specified date.
The WSJ source did not put an exact timeline on the rollout, but said traders could expect the contracts to debut in the next few months.
Charles Schwab: Pivoting to Predictions
When pressed on whether Schwab was looking to enter the prediction market sector in April, the securities giant gave a lukewarm answer.
Richard Wurster, the Schwab CEO, said: “When we ask clients what they’re looking for, prediction markets is very low on the list.”
Wurster did, however, say that “at some point,” Schwab could move into the market.
He mentioned Cboe’s plans for “binary options on different financial events.”
“That’s something certainly we will take a hard look at and then will be quite straightforward for us to offer,” Wurster said.
The CEO added that if his firm moved into prediction markets, it would be sure to “stay away from gambling.”
Cboe, by contrast, has expressed a strong willingness to enter the prediction markets sector in recent months. In March, the firm teased a forthcoming “innovative prediction markets framework.”
The firm said its offerings would be inspired by “concepts in the traditional options markets.” However, Cboe added at the time that its offerings would go beyond the binary model and reward near-miss trades.
The firm spoke of a new “middle ground” outcome that would let traders “earn a partial payout when they are directionally correct, even if the result is not precisely on their target.”
“There is clear customer demand to trade around market events tied to the S&P 500 Index,” said Rob Hocking, Cboe’s Global Head of Derivatives.
A Collision Course with Kalshi, Polymarket
The Charles Schwab-Cboe move puts the traditional financial world on a collision course with conventional prediction markets players like Kalshi and Polymarket.
Scores of S&P 500-related contracts already trade on these platforms, attracting millions of dollars in trading volume.
Trading volumes on leading platforms continue to rise, reaching around $24 billion per month earlier this year.
Experts predict that figure could grow by 80% a year to reach the $1 trillion mark by 2030.
Sports-related trades continue to gather pace as the World Cup continues, with one trader losing an $8.6 million trade on the outcome of Belgium’s match against Egypt.
