$12T Schwab Bets on the Index, Not the Election: S&P 500 Prediction Markets Incoming 🎯

Charles Schwab, the brokerage holding up to $12 trillion in customer assets, is partnering with derivatives exchange Cboe Global Markets to launch a prediction market that tracks the S&P 500's performance, the Wall Street Journal reported Thursday, citing people familiar with the matter. The firm disclosed plans during its first-quarter earnings call earlier this year, when CEO Rick Wurster said Schwab would "likely have prediction markets," distinguishing financial market offerings from those tied to sports, politics, and entertainment.

Unlike crypto prediction platforms Polymarket and Kalshi, which list futures-style contracts on event outcomes, Schwab's product will take the form of all-or-nothing options contracts. Each binary option would pay a fixed cash amount or expire worthless depending on whether the S&P 500 closes above or below a specified target price. Schwab and Cboe are also exploring a related product built around Cboe's "Plus Zone" feature, which would deliver a partial payout to traders whose predictions land close to the final outcome even when the index does not finish exactly at the target. The companies have discussed expanding the lineup to other indexes and financial benchmarks, according to the WSJ.

Schwab plans to focus on events with objectively verifiable outcomes in financial markets rather than contracts tied to politics, sports, or other real-world events. The contracts are expected to be made available to customers in the coming months, with a potential expansion of the offering thereafter.

The launch positions Schwab as the latest entrant into a rapidly expanding prediction markets industry. Interactive Brokers previously rolled out its own prediction markets platform with integrations from Kalshi, CME Group, and ForecastEx, while Coinbase (COIN) and Robinhood (HOOD) have both recently introduced prediction market offerings. Last month, Schwab expanded its customer offerings by launching spot trading for Bitcoin and Ethereum to a batch of its retail users following a successful employee pilot. The firm, which has $11.8 trillion in total customer assets, has also expressed interest in stablecoins, with Wurster saying in July that offering them is "something we do want to be able to offer." Shares of SCHW finished down nearly 3% on Thursday at around $91.70, with U.S. markets closed Friday for the Juneteenth holiday.