Options exchange Cboe enters the prediction market, focusing on financial and economic events.

Source: Jin10

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 delve into sports-related products but will focus on financial and economic events.

This Chicago-based derivatives exchange operator has become one of the latest exchange companies to enter the emerging and rapidly growing prediction market industry. This industry offers federally regulated event contracts, which are similar in form to traditional betting products.

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

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

“This field is developing rapidly, but I believe it is still in its early stages,” Donohue said in an interview. “Our current focus is on organic development, and we hope to see results in the coming months.”

On Wednesday, Cboe's competitor, the Chicago Mercantile Exchange Group Inc. (CME Group Inc.), announced that it will collaborate with Flutter Entertainment Plc's online sports betting division, FanDuel, to launch a consumer application focused on predictive markets.

Since winning a federal court ruling last year, the prediction market exchange Kalshi has been using event contracts to bypass state regulations on online gambling. Its competitor Polymarket, on the other hand, announced on Wednesday that it is restarting its services for U.S. customers after previous legal disputes led to the relocation of its business.

Although sports betting is the fastest-growing sector in the prediction market business, Donohue stated that Cboe will steer clear of this area due to legal uncertainties. “I know there may be significant profit margins,” he said.

“But that also comes with a lot of litigation and regulatory risks, which is someone else's battlefield. For Cboe, we will continue to focus on areas that have financial and economic impacts.”

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

“I believe that our best growth opportunities still come from our core large businesses,” Donohue said in another interview, “In recent years, we have continued to see strong growth among retail customers.” As the speculative tendencies of individual investors increase, the U.S. capital markets have also become more globalized.

Donohoe believes that the prediction market will attract a new audience that may come into contact with other Cboe products in the future, such as short-term options contracts. However, he also points out that the risks associated with sports-related trading are too high.

“The thing you least want to do is to make big money off those who cannot profit in the market in the long run,” he said.

Cboe's stock price has risen by about 30% this year, outperforming competitors CME Group and Intercontinental Exchange, and reached a record high this 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 the stock, exchange-traded fund, and foreign exchange trading sectors. Donohue stated that the predictive markets provide the company with further expansion opportunities.

“We know that there are a large number of investors in the market who wish to express their views on index trends, stock market fluctuations, single stock options, and changes in security prices.”