Cboe Global Markets announced it will roll out prediction market contracts that allow for partial payouts tied to how accurately participants predict outcomes, marking a move away from the standard all-or-nothing settlement model.
The exchange said the new contract format incorporates features familiar to betting applications, including the ability for users to exit positions before an event resolves. Cboe indicated the mechanics are informed by market conventions such as vertical spreads from the options market.
JJ Kinahan, Head of retail expansion and alternative investment products at Cboe, emphasized the rationale for the change: "Real-world opinions are not always binary, and investors should not be limited to a yes-or-no framework." That perspective underpins the decision to offer graded payouts rather than only absolute winners and losers.
Cboe plans to debut the framework with a Mini S&P 500 Index prediction market contract. The launch follows the exchange's earlier work on a regulated product structured with options to deliver all-or-none payouts.
Competitive and regulatory backdrop
Large U.S. exchange operators have been exploring event prediction market opportunities as investor interest in such instruments rose during the 2024 U.S. presidential race. The move by Cboe comes as Nasdaq pursues regulatory approval for prediction market-style options tied to major stock indexes and as Intercontinental Exchange has allocated up to $2 billion in Polymarket.
The activity among established exchanges signals a broader push to create regulated market structures around event-driven trading ideas.
Implications for market participants
The partial-payout design aims to capture a spectrum of market views rather than forcing participants into binary outcomes. The format may appeal to retail participants familiar with betting-style interfaces and to traders who use option spreads to manage risk and extract value across outcomes.
At the same time, the announcement sits alongside other industry efforts to formalize prediction markets within a regulated framework, which may shape product design and the timeline for broader adoption.