Polymarket and Kalshi to introduce S&P 500 price-betting products, expanding the scope of prediction markets

Prediction-market platforms Polymarket and Kalshi are rolling out products that let users bet on moves in stock indexes, a development that is said to be setting up a competitive dynamic with the traditional options market.

According to Bloomberg on the 9th, the two platforms recently launched event contracts that allow bets on the level of the S&P 500. Investors can wager in a “yes/no” format on whether the index will reach a specific price range.

Previously, the common way to express a directional view on the S&P 500 was to buy put or call options in the options market. By contrast, prediction markets allow users to place the same price view through a simpler contract structure.

Event contracts are structured to pay out $1 if the outcome is correct. For example, if a contract is priced at 4 cents, it means the market is assigning a 4% probability to that event occurring. Recently on Kalshi, a contract reflecting the probability that the S&P 500 will finish the year between 8,000 and 8,200 points traded at around 4 cents.

Similar bets are possible in the options market as well. However, investors must take into account multiple factors such as volatility and time value, and the structure is relatively complex. This has led to analysis that the simple betting format is proving attractive to retail investors.

Investor Danny Moses, known from the film “The Big Short,” said, “This approach simplifies the market so anyone can understand it, lowering the barrier to entry for investing.”

Regulatory issues remain uncertain. While Kalshi is overseen by the U.S. Commodity Futures Trading Commission (CFTC), Polymarket operates mainly overseas. There is also the possibility that an expansion of stock-related betting could bring it under the oversight of the U.S. Securities and Exchange Commission (SEC).

The market is still limited in size. Since December last year, the notional amount of year-end S&P 500 index-related bets traded on Kalshi has been about $1 million. Still, major exchanges such as Nasdaq, CME Group, and Cboe have also introduced binary-structured products that allow bets on financial-market events, and analysis suggests the boundary between prediction markets and traditional derivatives markets is increasingly blurring.