Charles Schwab is entering the prediction market space through a partnership with Cboe Global Markets to offer binary options contracts tied to S&P 500 performance. These yes-or-no wagers will pay a fixed cash settlement if the index closes above or below target prices, marking a significant expansion for the traditional brokerage into alternative investment products.

The contracts differ from platforms like Kalshi and Polymarket, which list futures contracts rather than options. Schwab's offering includes a 'plus zone' feature allowing partial payouts when traders are mostly correct, even without exact predictions. Customers can expect access in the coming months, according to people familiar with the matter.

CEO Rick Wurster previously criticized prediction markets as blurring gambling and investing lines, telling the Wall Street Journal in December that they were 'not high on our list at the moment.' However, he acknowledged Schwab might need to offer event contracts if they became a competitive necessity for customers who want both stock trading and prediction market access simultaneously.

Robinhood and Interactive Brokers have already embraced prediction markets as popular trading tools, putting pressure on Schwab to follow suit. This move signals mainstream acceptance of prediction markets and suggests traditional brokerages view them as essential rather than experimental products for retaining retail traders.