Pioneer in Options Market Trading Cboe Announces Entry into Prediction Markets, Not Following Sports Trends, Firmly Taking a Financial and Stable Route, Plans to Launch Proprietary Products Linked to Financial Outcomes and Economic Events.

Source: Jinshi Data

According to foreign media reports, Cboe Global Markets Inc. plans to launch its own prediction market business within a few months. However, unlike some competitors, the company will not temporarily engage in sports-related products but will focus on financial and economic events.

The Chicago-based derivatives exchange operator has become one of the latest exchange companies to enter the emerging and rapidly developing prediction market industry. This industry offers event contracts regulated by federal authorities, similar in form to traditional betting products.

Cboe CEO Craig Donohue stated in an interview that, unlike other financial institutions collaborating with prediction market startups or sports betting companies, Cboe plans to launch proprietary products linked to financial outcomes and economic events.

Currently, prediction markets in the U.S. mainly operate through platforms like Kalshi and Polymarket, converting various events (such as the duration of government shutdowns, the probability of Federal Reserve interest rate cuts, economic data releases, commodity prices, etc.) into tradable contracts, providing trading opportunities for users with judgment or research capabilities.

"This field is developing rapidly, but I believe it is still in the early stages," Donohue said in the interview. "Our current focus is on our own organic growth, and we hope to see results in the coming months."

Just on Wednesday, Cboe's competitor, CME Group Inc., announced a partnership with Flutter Entertainment Plc's online sports betting division, FanDuel, to launch a consumer application centered around prediction markets.

Since winning a federal court ruling last year, the prediction market exchange Kalshi has utilized event contracts to bypass state regulations on online gambling. Meanwhile, its competitor Polymarket announced on Wednesday that it is restarting services for U.S. customers after relocating its business due to previous legal disputes.

Although sports betting is the fastest-growing segment of the prediction market business, Donohue stated that Cboe will avoid this area due to legal uncertainties. "I know there may be considerable profit margins," he said, "but it also comes with a lot of litigation and regulatory risks; that is someone else's battlefield. For Cboe, we will continue to focus on areas with financial and economic impact."

In recent years, Cboe has adjusted its expansion strategy, focusing on internal growth rather than expansion through mergers and acquisitions.

"I believe our best growth opportunities still come from our core large businesses," Donohue said in another interview. "In recent years, we have consistently seen strong growth among retail customers." As individual investors' speculative tendencies increase, the U.S. capital markets have also become more globalized.

Donohue believes that prediction markets will attract a new audience that may later engage with Cboe's other products, such as short-term options contracts. However, he also pointed out that the risks associated with sports-related trading are too high.

"The last thing you want to do is make a lot of money off those who cannot profit in the market in the long term," he said.

Cboe's stock price has risen about 30% this year, outperforming competitors CME Group and Intercontinental Exchange, and reached an all-time high this past Monday.

Cboe is known for pioneering the options market in the 1970s and has transformed from a traditional trading floor to an electronic trading platform. The company acquired Bats Global Markets in 2017 to expand into equities, exchange-traded funds, and foreign exchange trading. Donohue stated that prediction markets provide the company with further expansion opportunities.

"We know there is a large number of investors in the market who want to express their views on index trends, stock market volatility, individual stock options, and securities price movements."

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