Cboe wants to reinstate the all-or-nothing option (a contract that pays a certain amount if a condition is met and zero if a condition is not met).
This may sound like a small product refresh, but the timing is hard to ignore. Prediction markets have trained new retail reflexes. In other words, we convert beliefs into numbers, like probabilities, and buy and sell those numbers.
Cboe’s proposal to the SEC is an attempt to package the same instincts within U.S. exchange rules, clearing, and intermediary distribution.
However, it’s important to note that Cboe isn’t trying to replicate all of Polymarket’s features. The company is, in fact, trying to compete under the same mental model — a simple yes/no frame, a single price, and quick feedback — under regulatory scrutiny.
If it works, stochastic trading will cease to be a crypto-specific curiosity and become a mainstream retail format next to stocks and standard options, with the same compliance wrapper.
If it fails, it’s not because the form of profit is unfamiliar, but because there are limits to what can be put on the licensed market and how close it can get to activities like sportsbooks.
Prediction market in suit
Binary options are easy to explain and even easier to understand.
The buyer pays the price today for a contract that is settled in a fixed payment if certain conditions are maintained at expiration. In many designs, contracts trade within a narrow band between “no chance” and “certainty,” so that prices feel like implicit odds, even though commissions, market frictions, and risk premiums prevent a clean probability reading.
This one number is key. You don’t need to learn Greek to understand what you own.
Binary options also require a long paper trail. Cboe itself launched binary options in 2008, but later withdrew it when fewer people took it.
The current initiative, coupled with discussions with retail brokerages, has the aim of providing a regulated alternative to the rapidly growing forecasting venues, while sticking to financial market outcomes rather than open-ended event questions.
In other words, the 60 second explanation for binary options is that you are buying conditions, not upside, which fluctuates as the market moves. It is either settled in money and receives a fixed payment, or it is settled in money and receives nothing.
This sense of fixed reward is why many retail traders describe these contracts as more like odds than options, and why they fit neatly into the mental category popularized by prediction markets.
The crucial difference between the two is where the contract exists.
Cboe’s version will sit within a regulated exchange stack that includes standard broker rails, monitoring, margin rules, and clearing.
Prediction markets span a wide range of designs and regulatory environments, from US-regulated event contracts to offshore or crypto-native venues that rely on smart contracts, oracles, and venue-level rulebooks.
This distinction determines who has access, what can be listed, how disputes are handled, and how quickly products can evolve.
Why does binary keep being returned?
There’s a reason why binary options keep coming back in waves.
Retail demand repeatedly clusters around markets and assets that feel simple and marginal. Fixed-loss, fixed-pay contracts provide a good and clear way to size risk. You can decide what you’re willing to lose before you press the button, and you don’t have to convert a 1 standard deviation move into a gain curve.
What has changed over the years is the interface that people have learned.
Prediction markets have normalized the idea that beliefs can be exchanged as prices. They made probabilities easier to read even for people who don’t care what’s inside.
The “Yes 62” or “No 38” contract is a user experience win because it compresses uncertainty into a single tradable number and makes the act of updating a view feel like moving a slider rather than building a strategy.
All of this means you can see Cboe’s bet for what it really is: a distributed play. Exchanges already have the infrastructure and broker pipes in place. Cboe itself has made it clear that it is focusing on areas related to prediction markets and cryptocurrencies as part of its growth agenda, even as it benefits from the options boom in its core business.
There’s also an unpleasant and unavoidable history lesson here. Binary options has become a dirty word in the retail industry due to scams and deceptive offshore marketing that take advantage of the product’s simplicity to sell a less-than-fair market. This legacy raises the bar for all exchange efforts in the United States.
The simplicity of these contracts is not enough to sell them. It needs to be simple inside a structure that is monitored, standardized and very difficult to manipulate.
The real battle is distribution and trust.
If you place the two stacks side by side, the competition is the allowed odds and the open odds.
A regulated exchange stack incorporates three benefits.
First, it is already integrated within brokerage apps where a significant amount of retail trading takes place.
Second, it comes with clearer guardrails around custody, clearing, and standardized payments.
Third, it can be framed as a financial product rather than a social betting product.
But that stack also comes with non-negotiable constraints. U.S. exchanges cannot list “things people want to discuss.” The range of products will be limited by what regulators will tolerate, what oversight can support, and what will not give rise to the view that the exchange is operating a casino.
CryptoNative and other open spaces thrive precisely where those constraints are weakest. They can move faster, iterate market designs quickly, and list culturally relevant questions that capture attention beyond finance.
Their problem is legitimacy and trust at scale.
If contracts are built around oracles, dispute processes, or venue rulebooks, users must trust that settlements will be handled cleanly in edge cases. This is difficult for both users who prefer this format and mainstream retailers.
Here, the story of U.S.-regulated prediction markets complicates matters. Mr. Carsi has long argued that event contracts fall within the framework of federal goods and has waged legal battles over where state gaming regulations end and federal oversight begins.
In early February, a Massachusetts judge ordered Carsi to stop offering sports-related contracts in the state unless he obtained a state gaming license, reminding Carsi that even federally regulated matters can conflict with state-level gambling regimes.
Copying an interface is easier than copying a universe
The biggest limitation of Cboe-style products is the issue of “listable reality,” or what licensed venues can put on their shelves.
Prediction markets derive their energy from relevance. The flywheel is a cultural thing. People trade things that are related, things that are already being discussed, and the prices of those contracts become part of the conversation. It would be very difficult to recreate it within the narrow lanes of economic performance without losing much of what made this format attractive.
Even in a regulated world, boundaries continue to be debated.
Mr. Kalsi’s attempt to list political contracts led to a high-profile legal battle with the CFTC, and the 2024 appellate decision became a key reference point in the debate over whether certain political event contracts should be treated as permissible under the commodity system.
This debate is not what Cboe is proposing, but it illustrates how the closer you get to the market in any area, the more you invite debates about gaming, public policy, and incentives.
So while Cboe’s products, anchored to economic criteria, may be able to avoid the loudest fights, they also risk feeling sterile next to a platform where you can list the questions that dominate group chats.
While exchanges can borrow a probability-based UI, they cannot simply borrow the world of topics that have fueled the cultural momentum of prediction markets.
Gambler interface issues
Stochastic trading comes with a secondary tension, but it doesn’t go away just because the rails are regulated.
A yes/no frame lowers the psychological barrier to participation. While this is good for accessibility, it also invites criticism that the format is designed for enforcement purposes: quick resolution, simple narrative, and the feeling that you’re buying the odds rather than taking a risk.
There are also significant market structure risks, even for clean, well-run venues. Thin liquidity can cause prices to rise, making probabilities a noisy artifact.
Settlement incentives may attract attempts to exploit the referential process, especially around boundary conditions where the definition of the contract is more important than the underlying economic truths.
And vague expressions are poisonous. When contracts are left open to interpretation, the first dispute becomes a problem and trust quickly evaporates.
Regulated venues can mitigate some of these risks. Definitions can be standardized, reconciliation procedures can be made public, and abusive behavior can be policed. But since that criticism is about design, it cannot eliminate the core seduction criticism. Contracts that turn uncertainty into a single tradable number, whether or not they are settled through a well-known clearinghouse, always look like a financialized version of gambling to some observers.
What to look for when Cboe actually launches
If Cboe takes this product from idea to concrete, success will be in the boring microstructural details.
Rather than just a launch spike, you want to see tight spreads that persist beyond the novelty phase and volume that persists beyond the first week. Also, brokers want it in a visible location rather than burying it. Because distribution is the key to doing this on an exchange.
You will also want to see how quickly your contract menu can expand without triggering regulatory disputes. Setting stock index thresholds within narrow ranges will provide early proof of survival. A broader realization of economically meaningful event-style contracts would provide evidence that the format can grow within the framework.
Another key factor may be the political tone surrounding it.
Quiet acceptance is a form of permission. Loud dissent can freeze expansion, even if it doesn’t break the product. The Karshi dispute shows how quickly the debate can shift from new market forms to unlicensed gambling, and how difficult it can be on a state-by-state basis.
Cboe’s move is, after all, a recognition that prediction markets have exported something valuable to the broader financial world: a compact way to trade beliefs. The open venue built the culture and taught users the interface.
Regulated venues have the distribution and legitimacy that large retail capital still prefers. The question is whether that legitimacy can coexist with a format that at first glance looks like odds.
Wall Street isn’t going to turn into a prediction market anytime soon. But retailers seem to be working hard to absorb the parts of prediction markets that they find easiest to understand and incorporate them into a structure that can survive the cycles of backlash that inevitably follow from regulators and politicians and the simple things that are popular.
Whether it becomes a permanent new retail habit will depend on what a licensed market can safely list and how much of it can capture all the energy without crossing the line that turns a traded product into a gamble.
