Schwab enters prediction markets despite CEO's gambling warnings

Charles Schwab will begin working with exchange operator Cboe Global Markets to offer prediction markets that let customers place wagers on the performance of the S&P 500.

The all-or-nothing options contracts will be rolled out in the coming months, a spokesperson for Schwab confirmed to InvestmentNews following a report from The Wall Street Journal. Customers will be able to place yes or no bets on the closing price of the S&P 500 to receive a cash settlement if they predict correctly or nothing if they are wrong.

“We are actively working with Cboe on their rollout of binary options. The Mini-S&P 500 Index (XSP) is expected to roll out at Charles Schwab in the coming months,” a Schwab spokesperson told InvestmentNews.

Schwab users will also be able to access a Cboe feature called “the plus zone,” according to the Journal, that allows traders to earn a partial payout if they are mostly right, even if the closing price of the index isn’t exactly on target. The brokerage’s entry into prediction markets comes five years after founder Charles R. Schwab invested in Kalshi, which has become the most popular prediction markets exchange alongside its top competitor Polymarket. 

“Cboe’s approach with prediction markets aligns with where we see the greatest value for our clients in this space—focusing on financial-related contracts and bringing greater transparency and credibility to help investors navigate this new area of investing with more confidence,” a spokesperson for Schwab said in a statement to InvestmentNews.

Kalshi had had a partnership with Robinhood, but that brokerage has begun shifting its prediction markets around the FIFA World Cup to Rothera, an exchange that Robinhood co-owns with Susquehanna International Group. Schwab CEO Rick Wurster warned of the “conflation between gambling and investing” in his keynote session at last year’s Impact conference for financial advisors.

“I just don't want young people in our country that think that betting on the Monday Night Football game is equivalent to being invested for the long term in stocks and bonds,” Wurster said in November at Schwab’s conference in Denver. “In financial services, there's a blending of investing in gambling, and I think it started out with the best of intentions with something called prediction markets.”

Schwab’s family ties to prediction markets extend beyond founder Charles Schwab participating in Kalshi’s 2021 Series A funding round. His granddaughter, Samantha Schwab, was head of business development at Kalshi for over a year before President Donald Trump appointed her in January 2025 to be deputy chief of staff for the US Department of the Treasury. Trump's son, Donald Trump Jr., is an advisor to both Kalshi and Polymarket.

“Financial services firms thought prediction markets will allow our clients to take a point of view on what's going to happen with the employment report, what's going to happen with the inflation report or what the Fed is going to do,” Wurster added in November. “They built these capabilities to do all of that, and then they realized there's not a lot of interest in these events with the general public.”

Goldman Sachs has been analyzing trade activity on Kalshi and Polymarket to follow sentiment on economic and geopolitical events. Earlier this year, JPMorgan said it was reviewing internal rules for how its employees could interact with prediction markets. 

Advisor Gabriel Shahin, founder of California-based RIA Falcon Wealth Planning, told InvestmentNews that he thinks “it’s great” for Schwab to be entering prediction markets. 

“It’s where the industry is going. 24 hour trading is coming. It’s where the world is going. Why lose business to competition. If they can monetize and keep more business at Schwab then that’s better for everyone. Advisors, clients and Schwab,” said Shahin, whose RIA custodies assets with Schwab.

“I like it and they have been known to be trendsetters like no [fee] trades a while back,” Shahin added, referring to Schwab’s move in 2019 to cut its online brokerage fees to zero.