Robinhood prepares to bring corporate event options to retail investors, while Kalshi and Polymarket face fresh legal pressure in Kentucky.
Dimitri Karastelev / Unsplash
Wall Street is moving further into event-based trading, even as sports prediction markets continue fighting state regulators. The Securities and Exchange Commission (SEC) has approved Cboe’s plans to list options tied to corporate performance, with Robinhood expected to become the first broker to bring the products to retail investors.
Meanwhile, a federal magistrate judge in Kentucky has recommended that enforcement lawsuits against Kalshi and Polymarket be returned to state court. Also, the Commodity Futures Trading Commission’s (CFTC) newest rulemaking has entered the agency’s litigation in New York and prompted arguments in a new Underdog lawsuit against Tennessee.
The Big Story: SEC Approves Cboe Corporate Prediction Contract Options
The SEC has approved Cboe’s request to list binary options tied to corporate performance, bringing prediction-market-style trading to a traditional securities exchange.
Instead of trading based on stock prices, investors will be able to take positions on specific company results, such as Apple’s iPhone sales, YouTube advertising revenue or Nvidia’s data center revenue.
Cboe plans to start with contracts covering 23 companies, with Robinhood expected to be the first retail broker to offer them. Both companies plan to waive trading fees through the end of 2026.
The approval could be significant for the prediction market industry. It brings another major financial exchange into event-based trading, with Robinhood providing retail investors with access to contracts tied to corporate performance.
Unlike Kalshi and other CFTC-regulated prediction market exchanges, Cboe’s products will trade as securities under SEC oversight. That gives event-based trading another regulatory framework amid the growing litigation over the legality of sports event contracts.
However, SEC Chairman Paul Atkins made clear that the decision does not settle broader questions about which regulator oversees event-based trading.
“The SEC’s approval order today does not address—and does not foreclose—CFTC jurisdiction over KPI contracts,” Atkins said, referring to products structured to fall under the commodities regulator’s authority.
Atkins also pointed to decades of jurisdictional disputes between the SEC and CFTC, describing the approval as a sign of greater cooperation between the two regulators.
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Kentucky Judge Recommends Remanding Kalshi and Polymarket Cases
A federal magistrate judge in Kentucky has recommended remanding the state’s enforcement lawsuits against Kalshi and Polymarket to state court.
The recommendations cite the Sixth Circuit’s Sept. 25 ruling in litigation involving Kalshi in Tennessee and Ohio, which addressed federal preemption arguments concerning sports-event contracts under the Commodity Exchange Act.
Gaming attorney Daniel Wallach, who highlighted the filings, noted that returning the cases to state court could expose the operators to injunctions and geofencing requirements, as seen in states such as Nevada, Michigan and Washington.
Neither recommendation is final. A district judge must adopt the findings before the cases can return to state court, where Kentucky could continue pursuing its gambling-law claims.
Underdog Sues Tennessee Despite Sixth Circuit Ruling
Underdog filed suit in federal court on Oct. 13 following an Oct. 9 cease-and-desist letter by Tennessee’s Sports Wagering Council. Tennessee warned of fines, civil penalties, potential criminal investigations and possible revocation of Underdog’s fantasy sports license.
Despite acknowledging the Sixth Circuit ruling, Underdog maintains that Tennessee cannot enforce gambling laws against its event-contract activities. The company cites the CFTC’s latest rulemaking and seeks declaratory and injunctive relief.
New York Court Seeks Input on CFTC’s Proposed Rules
The Oct. 9 rulemaking has also become an issue in the CFTC’s litigation against New York. A federal court has directed the parties to address how the new rules could affect a pending request for a preliminary injunction.
Federal officials may submit short notices by Oct. 16, with New York’s response due Oct. 23. The court has not yet decided what impact, if any, the rules will have on the injunction request.
Massachusetts Questions Sportsbooks on AI Marketing
The Massachusetts Gaming Commission has asked licensed sports betting operators to explain how they use artificial intelligence, machine learning and automated decision-making in marketing and customer engagement.
In an Oct. 9 letter, Executive Director Dean Serpa requested voluntary written responses by Nov. 3 covering eight areas:
- AI systems: Tools used, third-party vendors and automated decision-making.
- Customer data: Whether betting patterns, deposits, losses or VIP status influence marketing.
- Recipient selection: How algorithms identify and rank customers for promotions.
- Offer personalization: Whether systems determine promotional types, values and eligibility.
- Timing and frequency: How systems decide when and how often to contact customers.
- Behavioral targeting: Whether models optimize promotions based on spending, profitability or predicted engagement.
- Responsible gambling: Whether indicators of gambling-related harm trigger additional marketing and what safeguards exist.
- Human oversight: Whether employees can review, override and explain automated decisions.
The commission said the responses would remain confidential and help inform future regulatory policy.
PrizePicks Expands Into Digital Trading Cards
PrizePicks has become the latest operator to enter the growing digital trading-card pack-opening market.
The company has introduced PrizePicks Packs, which allows customers to purchase and open digital packs containing physical trading cards, including basketball, football, and Pokémon collectibles.
Packs range from $1 to $2,500. Customers can request shipment of their cards or sell them back to PrizePicks for 100% of their assessed fair market value.
PrizePicks follows rival Underdog, which launched a similar product last month. Other companies entering the market include Fanatics and sweepstakes casino operator Crown Coins, while Coinbase recently teased its own entry.
Kalshi Introduces Athlete-Harassment Protections
Kalshi has partnered with Signify Group to monitor online harassment and threats targeting athletes, coaches and other sports personnel. The initiative covers major professional sports, including the NFL, NBA, MLB, NHL and professional tennis.
Signify’s Threat Matrix technology will monitor public social media activity, while investigators will assess serious cases of abuse. The exchange has also introduced a rule prohibiting abuse or threats related to trading activity, with enforcement measures that may include permanent account closure.
The move follows a September appeal by five major professional leagues and their players’ unions calling for lifetime bans on abusive bettors. BetMGM introduced similar protections in February, while states including Ohio and West Virginia already have provisions allowing the exclusion of bettors for threats or harassment.
DraftKings Moves Toward Injury-Protected Prediction Markets
DraftKings’ prediction-market exchange, DKeX, has self-certified NBA player-statistics contracts with injury-protection provisions. The move follows Kalshi’s introduction of similar injury protection for certain NFL player markets last week.
Under the proposed terms, a contract would settle at its pregame fair market price if a player participates in the first half but not the second half and fails to meet the specified statistical target. The contracts could become available as early as Oct. 16.
Springfield Challenges MGM Casino Sale
The city of Springfield, Massachusetts, is fighting MGM Resorts International in court over the operator’s proposed sale of MGM Springfield to Canadian private equity firm Clairvest.
MGM claims the city has improperly delayed the proposed sale of the $970 million casino for approximately two years and is seeking $500 million in damages.
Springfield argues that MGM has failed to meet its obligations under its 2013 host community agreement, including commitments related to jobs, gaming capacity. The city maintains that the agreement gives it the authority to withhold approval of the sale and is seeking to keep the dispute in public court rather than private arbitration.
