Charles Schwab Partners With Cboe on Prediction Market Contracts

Charles Schwab Corp. is partnering with Cboe Global Markets to develop and offer prediction market-like financial contracts, according to a report from The Wall Street Journal on June 20, 2026. The new product suite would allow Schwab's extensive client base to trade on the outcome of future events, marking a significant expansion of the brokerage's derivatives offerings. Shares of SCHW traded at $91.70, down 2.10% on the day, as of 14:27 UTC today.

Context — why this matters now

Prediction markets have historically operated in a regulatory gray area within the United States, with platforms like PredictIt facing significant scrutiny from the Commodity Futures Trading Commission. The involvement of a major, regulated brokerage like Charles Schwab represents a potential legitimization of event contract trading for retail and institutional investors. Cboe Global Markets brings its extensive experience in operating regulated options and futures exchanges to the partnership.

The current macroeconomic environment, characterized by heightened event risk surrounding elections, monetary policy decisions, and geopolitical conflicts, has increased investor demand for tools to hedge against or speculate on specific outcomes. This partnership emerges as the Securities and Exchange Commission and CFTC continue to evaluate the appropriate regulatory framework for such novel financial instruments. The collaboration signals a strategic effort to bring event-based contracting into the mainstream of regulated financial products.

Data — what the numbers show

Charles Schwab serves over 35 million brokerage accounts and holds more than $8.5 trillion in client assets, representing one of the largest retail investor platforms in the United States. Cboe Global Markets reported derivatives average daily volume of 12.9 million contracts in its most recent quarterly earnings, with options revenue reaching $424 million. The partnership could potentially tap into Schwab's enormous client base, which dwarfs the user counts of existing prediction market platforms by orders of magnitude.

Schwab's stock performance reflects broader market pressures, with shares trading near the lower end of their daily range of $90.86-$94.79. The stock's 2.10% decline contrasts with the financial sector's modest gains year-to-date. Cboe's market capitalization of approximately $19.5 billion positions it as a significant but specialized exchange operator compared to giants like CME Group at $76 billion.

Analysis — what it means for markets / sectors / tickers

The partnership creates a potential competitive threat to existing prediction markets and binary options platforms while potentially expanding the addressable market for event-based contracts. Traditional exchanges like CME Group and ICE may face increased competition in specialized derivatives products. Financial technology companies offering similar products could experience margin pressure as Schwab leverages its scale to potentially offer lower fee structures.

Regulatory acceptance remains the primary uncertainty, as the CFTC has previously expressed concerns about event contracts potentially falling outside traditional commodities regulation. The success of this initiative hinges on Schwab and Cboe successfully navigating the complex regulatory landscape and obtaining necessary approvals. Trading flow is likely to shift from unregulated platforms toward regulated venues if this product gains traction, potentially creating a new revenue stream for both companies.

Outlook — what to watch next

Key regulatory milestones include the CFTC's upcoming meeting on event contracts scheduled for July 15, 2026, and potential SEC rulemaking on binary options scheduled for comment period ending August 30, 2026. Market participants should monitor Schwab's product rollout timeline, expected to be announced in their Q3 earnings call on October 15, 2026.

Critical price levels to watch include SCHW's 200-day moving average at $89.50 and resistance at the $95.00 psychological level. Cboe's volatility index products may experience increased volume correlation with event contract trading activity. The regulatory approval process will determine whether these products can launch before the 2026 U.S. midterm elections, a major event cycle that typically drives prediction market volume.

Frequently Asked Questions

What are prediction markets in finance?

Prediction markets are exchange-traded platforms where participants can buy and contracts whose payouts depend on the outcomes of uncertain future events. These markets aggregate crowd-sourced information to generate probability estimates for specific outcomes, functioning as a form of collective intelligence. Unlike traditional securities, their value derives entirely from whether a specified event occurs rather than corporate performance or economic fundamentals.

How does this affect Charles Schwab competitors?

Competitors including Fidelity Investments, E*TRADE, and Interactive Brokers may face pressure to develop similar offerings or risk losing trading volume to Schwab. The partnership could accelerate industry-wide adoption of prediction market-style products among major brokerages. Regulatory approval for Schwab's offering would likely create a template that other registered broker-dealers could follow to launch comparable products.

Are prediction market contracts legally enforceable?

The legal enforceability of prediction market contracts depends on their regulatory status and structure. Contracts traded on CFTC-regulated designated contract markets like those Cboe operates are legally binding agreements. The key distinction lies between properly structured exchange-traded derivatives and unregulated gambling arrangements, which lack legal recourse for participants in case of disputes or platform failures.

Bottom Line

Schwab's partnership with Cboe represents a mainstream financial institution's most significant move into prediction markets.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.