Cboe submits application for “Yes/No” options as Wall Street seeks to emulate cryptocurrency prediction markets.

Cboe aims to reintroduce all-or-nothing options, a type of contract that provides a predetermined payout if a specified condition is met, and nothing if it is not.

Although this may seem like a minor product update, the timing is significant. Prediction markets have instilled a new retail behavior: converting a belief into a numerical value that resembles odds, then trading that value.

Cboe’s submission to the SEC seeks to encapsulate that same instinct within the framework of US exchange regulations, clearing, and brokerage distribution.

It is crucial to understand that Cboe is not attempting to mirror Polymarket feature-for-feature. Instead, the company is competing for the same conceptual framework, with regulators observing: the straightforward yes/no structure, the singular price point, and the rapid feedback.

If successful, probability trading could transition from being a niche interest within the crypto space to a mainstream retail offering, positioned alongside equities and traditional options, complete with the same compliance measures.

If unsuccessful, it won’t be due to the unfamiliarity of the payout structure, but rather because regulated markets have restrictions on what they can offer and how closely they can resemble sportsbook activities.

A prediction market in formal attire

Binary options are straightforward to explain and even simpler to comprehend, which contributes to their appeal.

A buyer pays a price today for a contract that pays out a fixed amount if a certain condition is met at expiration. In many configurations, the contract trades within a narrow range between “no chance” and “certain,” making the price feel like implied odds, despite fees, market frictions, and risk premiums preventing it from being a pure probability readout.

This single figure is the key attraction: there’s no need to learn the Greeks to grasp what you own.
Binary options also have a well-documented history. Cboe itself introduced binary options in 2008 but later withdrew when interest was low.

The current initiative is linked to discussions with retail brokerages and aims to provide a regulated alternative to rapidly expanding prediction platforms, focusing on financial market outcomes rather than open-ended event inquiries.

Thus, the concise explanation of binary options is that you are purchasing a condition, not a potential upside that scales with market movement. It either settles in the money, resulting in a fixed payout, or it settles out of the money, yielding nothing.

This fixed-payoff nature is why many retail traders perceive these contracts more as odds than options, fitting neatly into the mental framework popularized by prediction markets.

The key distinction between them lies in where the contract is traded.

Cboe’s version would operate within the regulated exchange framework: standard brokerage infrastructure, surveillance, margin regulations, and clearing.

Prediction markets encompass a broad spectrum of designs and regulatory contexts, ranging from US-regulated event contracts to offshore or crypto-native platforms that utilize smart contracts, oracles, and venue-specific rulebooks.

This distinction determines access, what can be listed, how disputes are resolved, and how swiftly the product can adapt.

Why binaries keep resurfacing

There is a reason binary options continue to emerge in cycles.

Retail interest consistently gravitates toward markets and assets that appear simple and defined. A fixed-loss, fixed-payout contract provides a clear and straightforward method for managing risk. You can determine your maximum loss before making a trade, and you never need to convert a one standard deviation movement into a payout curve.

What has changed in recent years is the interface that people have become accustomed to.

Prediction markets have normalized the concept of trading beliefs as prices. They have made probabilities understandable to individuals who may not be concerned with the underlying mechanics.

A contract that states “yes 62” or “no 38” exemplifies user experience by condensing uncertainty into a single tradable figure, making the act of adjusting your perspective feel like moving a slider rather than formulating a strategy.

All of this allows us to view Cboe’s initiative for what it truly is: a distribution strategy. Exchanges already possess the necessary infrastructure and brokerage connections. Cboe has explicitly stated its focus on areas related to prediction markets and crypto as part of its growth strategy, even while benefiting from a surge in options trading within its core business.

There is also a troubling historical lesson to consider. Binary options became a controversial term in the retail sector due to fraud and exploitative offshore marketing that leveraged the product’s simplicity to sell something far from fair market practices. This legacy raises the stakes for any US exchange initiative.

The proposition cannot merely be that these contracts are straightforward. It must also emphasize that they are simple within a framework that is monitored, standardized, and extremely difficult to manipulate.

The real competition is distribution and trust

When comparing the two frameworks, the competition becomes permissioned odds versus open odds.

The regulated exchange framework has three inherent advantages.

First, it is already integrated into the brokerage applications where a significant amount of retail trading occurs.

Second, it includes a clearer set of guidelines regarding custody, clearing, and standardized settlement.

Third, it can be positioned as a financial instrument rather than a social betting product.

However, this framework also comes with non-negotiable constraints. A US exchange cannot list “anything that people want to debate.” The scope of products is limited by what regulators will accept, what surveillance can support, and what does not provoke the perception that the exchange is operating a casino.

Crypto-native and other open platforms thrive precisely where these constraints are weakest. They can operate more swiftly, iterate on market design rapidly, and list culturally relevant questions that attract attention beyond finance.

Their challenge lies in achieving legitimacy and trust at scale.

When a contract is based on an oracle, a dispute resolution process, or a venue rulebook, users must have confidence that settlements will be handled appropriately in edge cases. This is a difficult proposition for mainstream retail, even for those who appreciate the format.

This is where the narrative surrounding US-regulated prediction markets becomes complex. Kalshi has long argued that event contracts can fit within the federal commodities framework and has engaged in legal battles over where state gaming regulations end and federal oversight begins.

In early February, a Massachusetts judge instructed Kalshi to cease offering sports-related contracts in the state unless it obtains a state gaming license, highlighting that even a federally regulated issue can still clash with state-level gambling laws.

Replicating the interface is simpler than replicating the ecosystem

The primary limitation of a Cboe-style product is the “listable reality” issue: what a permissioned venue can offer.

Prediction markets draw their vitality from relevance. The flywheel is cultural. People trade what is pertinent, the topics they are already debating, and the prices of those contracts become part of the discourse. This will be challenging to replicate within a narrow scope of financial outcomes without sacrificing much of what made the format appealing.

Even within the regulated environment, the boundaries have been contested.

Kalshi’s effort to list political contracts led to a high-profile legal dispute with the CFTC, and an appellate ruling in 2024 became a significant reference point in discussions about whether certain political event contracts can be classified as permissible under the commodities framework.

This dispute is not what Cboe is proposing, but it illustrates the landscape: the closer you approach markets on all topics, the more you invite debates about gaming, public policy, and incentives.

Thus, a Cboe product that remains tied to financial thresholds may evade the loudest controversies, but it also risks appearing sterile compared to platforms that can address the questions dominating social discussions.

The exchange can adopt the probability-shaped user interface, but it cannot easily replicate the range of topics that fueled the cultural momentum of prediction markets.

The gambler’s interface dilemma

Probability trading presents a second tension that will persist even with regulated infrastructure.

A yes/no framework lowers the psychological barrier to entry. While this is beneficial for accessibility, it also invites criticism that the format is designed for compulsion: rapid resolution, straightforward narratives, and the impression that you are purchasing odds rather than assuming risks.

There are also market-structure risks that are significant even in a well-regulated environment. Limited liquidity can lead to volatile prices, transforming probability into a noisy signal.

Settlement incentives may attract attempts to manipulate the reference process, particularly around boundary conditions where the contract definition is more critical than the underlying economic reality.

Ambiguous language is detrimental. If a contract allows for interpretation, the first dispute becomes the focal point, and trust can dissipate rapidly.

Regulated venues can mitigate some of these risks. They can standardize definitions, publish settlement protocols, and monitor abusive practices. However, they cannot eliminate the fundamental temptation critique, as this critique pertains to design. A contract that converts uncertainty into a single tradable figure will always appear, to some observers, as a financialized version of betting, regardless of whether it is processed through a reputable clearinghouse.

What to monitor if Cboe successfully launches

If Cboe advances this product from concept to execution, success will manifest in mundane microstructure details.

One would expect to see tight spreads that endure beyond the initial novelty phase, and sustained volume following the launch, rather than just a spike. Additionally, it would be important to see brokers position it prominently rather than obscurely, as distribution is the primary objective of launching this on an exchange.

It would also be essential to observe how swiftly the contract offerings expand without inciting regulatory disputes. A limited set of equity-index thresholds would serve as an early indicator of viability. A wider array of economically significant event-style contracts would demonstrate that the format can develop within the established parameters.

Another indicator will be the political context surrounding it.

Subdued acceptance can signify a form of permission. Strong objections can hinder expansion, even if they do not eliminate the product. The Kalshi disputes illustrate how quickly the dialogue can shift from a new market format to unlicensed gambling, leading to a state-by-state struggle.

Cboe’s initiative ultimately acknowledges that prediction markets have contributed something valuable to the broader financial landscape: a concise method for trading beliefs. The open platforms cultivated the culture and educated users on the interface.

The regulated venues possess the distribution and legitimacy that large pools of retail capital still favor. The question remains whether that legitimacy can coexist with a format that initially resembles odds.

Wall Street is unlikely to transform into a prediction market in the near future. However, it appears to be making significant efforts to incorporate the aspects of prediction markets that retail found most comprehensible, then integrate them within a framework that can withstand regulatory scrutiny, political pressures, and the inevitable backlash that follows anything popular and straightforward.

Whether this evolves into a lasting new retail practice will depend on what permissioned markets can safely offer, and how much of the energy surrounding markets on all topics they can harness without crossing the threshold that turns a trading product into gambling.

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