In a significant development for event-based trading, Nasdaq has submitted a regulatory filing seeking approval from the U.S. Securities and Exchange Commission (SEC) to launch new outcome-based options. This move comes amidst growing popularity for prediction markets like Kalshi and Polymarket, despite ongoing controversy surrounding issues such as gambling and insider trading.
The proposal by Nasdaq involves the introduction of “outcome-related options” connected to the Nasdaq-100 Index, which includes 100 of the largest non-financial companies listed on the exchange, such as industry giants like Apple, Nvidia, Meta, Amazon, and Tesla. Additionally, Nasdaq aims to offer these options on the Nasdaq-100 Micro index, which is tailored for smaller trades.
These binary options would allow traders to make yes-or-no wagers on specific outcomes. For instance, participants might bet on whether the Nasdaq-100 will close above or below a predetermined level by a given date. The pricing of these contracts is designed to range from $0.01 to $1, reflecting the market’s assessment of the likelihood of an event’s occurrence. If the event materializes, traders stand to gain, while contracts that do not result in the predicted outcome will become worthless.
The timing of Nasdaq’s initiative is notable, as prediction markets have increasingly entered the mainstream landscape of finance and media. Platforms like Kalshi and Polymarket, established in 2018, have gained traction after accurately predicting major political events, such as the outcomes of the upcoming 2024 presidential election and the 2025 New York City mayoral race. This visibility has been bolstered by partnerships with significant media organizations, including a collaboration between CNN and Kalshi, as well as Polymarket’s association with the Golden Globes. Most recently, the Associated Press announced it would provide Kalshi with data and race calls for both national and state elections.
However, the rise of these marketplaces has not come without scrutiny. Critics have voiced concerns about potential insider trading, particularly related to high-stakes global events. Instances such as the political upheaval surrounding former Venezuelan President Nicolas Maduro or U.S. military action in Iran have especially drawn criticism. Although both Kalshi and Polymarket publicly discourage insider trading, Polymarket has taken a more controversial stance by encouraging those with specialized knowledge to utilize their expertise within the marketplace. Its user guide explicitly states that experts in specific fields can profit from their insights while contributing to a more accurate market.
As Nasdaq treads into this evolving territory of outcome-based trading, the industry will be watching closely to see how regulatory bodies respond and how the market reacts to these innovations.
