News from the Prediction Market

Binary Options Proposal

According to a report from Bloomberg on Monday, Nasdaq has filed a proposal with the Securities and Exchange Commission to introduce binary options linked to its prominent 100 index and its smaller counterpart. This filing represents the exchange’s initial step into offerings that function similarly to prediction markets, where contracts yield a fixed payout if certain conditions are fulfilled and become worthless otherwise. Nasdaq plans to list binary options tied to its stock indexes.

The contracts proposed by Nasdaq, known as “Outcome Related Options,” are set to trade within a range of $0.01 to $1. Prices will fluctuate toward either extreme based on traders’ evaluations of the likelihood of specific outcomes. This structure is similar to that found on prediction market platforms like Polymarket and Kalshi, where binary contracts usually conclude at $1 for accurate predictions.

Since the contracts would be categorized as securities options, they would be subject to the jurisdiction of the SEC instead of the Commodity Futures Trading Commission, which regulates numerous existing event-style contracts provided by independent prediction platforms like Polymarket and Kalshi. This regulatory differentiation is an intentional structural aspect of the proposal.

Prediction Market Insights

The filing from Nasdaq comes as trading volumes based on predictions continue to break records. In February, the total monthly volume for Kalshi and Polymarket reached around $18.4 billion, marking the sixth month in a row of record-breaking figures. Previously, January had set a peak of just over $17 billion. Polymarket and Kalshi are examples of prediction market platforms.

Other significant exchanges are also entering this arena. Cboe Global Markets has indicated that it is considering a comeback of binary, all-or-nothing options linked to financial benchmarks. Meanwhile, CME Group is broadening access to cryptocurrency derivatives as the appetite for continuous trading increases. Coinbase has introduced prediction markets on its platform for digital asset traders, and Gemini, which recently obtained CFTC approval to function as a Designated Contract Market, is now able to provide regulated prediction markets to U.S. clients.

Earlier this month, SEC Chair Paul Atkins referred to prediction markets as a "significant concern," highlighting the potential for regulatory overlap between the SEC and the CFTC. This remark intensified the discussion regarding the classification and oversight of event-based contracts as traditional exchanges and crypto platforms begin to implement similar structures. Nasdaq’s contracts will be priced between 1 cent and $1.

Nasdaq’s New Offerings

As of the time this article was published, Nasdaq had not provided a response to a request for comment. The proposal from the exchange is still awaiting SEC approval, and a timeline for its launch has not been established. Nasdaq plans to list binary options tied to its stock indexes.

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