SEC Approves Cboe Contracts as Kalshi Faces New Legal Challenges

United States.- 16 October 2026 | www.zonadeazar.com The US prediction markets sector is entering a new regulatory phase following the Securities and Exchange Commission’s (SEC) approval of financial contracts linked to corporate performance indicators.

The authorisation will allow Cboe Global Markets to introduce binary options based on company-specific results, with Robinhood expected to become the first broker offering the products to retail investors.

Meanwhile, Kalshi and Polymarket are facing further legal challenges in Kentucky, while the Commodity Futures Trading Commission (CFTC) continues defending its jurisdiction over event contracts against state gambling regulators.

These developments highlight the growing distinction between financial prediction markets and products linked to sporting events.

SEC Approves New Cboe Contracts

The SEC has authorised Cboe to introduce binary options tied to specific performance indicators of publicly traded companies.

Unlike conventional options, whose values are primarily linked to underlying share prices, these instruments will be based on whether particular corporate targets are achieved.

Potential reference events include:

• Apple iPhone sales.
• YouTube advertising revenue.
• Nvidia data centre revenue.
• Other measurable corporate performance indicators.

The contracts will allow investors to take positions on specific business outcomes through a regulated securities exchange.

Robinhood to Become First Retail Broker

Cboe intends to introduce contracts covering 23 US-listed companies.

Robinhood is expected to become the first retail brokerage platform to provide access to these instruments, subject to the relevant operational requirements.

Both companies have also announced plans to waive trading fees until the end of 2026.

The initiative aims to make event-based financial products more accessible to individual investors.

For Cboe, it represents an opportunity to expand its derivatives offering.

For Robinhood, it introduces another category of financial instruments within its investment platform.

Two Regulatory Frameworks for Prediction Markets

The approval establishes an important distinction within the US market.

Cboe’s new contracts will trade as securities under SEC supervision.

By contrast, platforms such as Kalshi operate event-contract markets overseen by the CFTC.

This distinction matters because the agencies hold different regulatory responsibilities.

The SEC supervises securities markets, while the CFTC regulates futures and certain derivatives.

The coexistence of these frameworks may create additional opportunities for companies developing products linked to future events.

Paul Atkins Clarifies the Scope of Approval

Paul Atkins, Chairman of the SEC, explained that Cboe’s approval does not resolve existing jurisdictional disputes concerning other categories of event contracts.

He also clarified that the decision does not exclude the CFTC’s authority over products structured within its regulatory framework.

Atkins acknowledged the longstanding jurisdictional debates between the two agencies.

However, he presented the approval as an opportunity to strengthen cooperation between federal financial regulators.

Cboe’s authorisation does not constitute a general SEC approval of all prediction market products.

Kentucky: New Legal Pressure on Kalshi and Polymarket

While financial event-based products continue expanding, Kalshi and Polymarket face another legal development in Kentucky.

A federal magistrate judge has recommended returning the state’s enforcement cases against both platforms to state court.

The proceedings concern whether Kentucky’s gambling laws apply to certain sports-event contracts.

The recommendations refer to a decision issued by the US Court of Appeals for the Sixth Circuit on 25 September 2026, involving Kalshi litigation in Tennessee and Ohio.

That ruling examined arguments concerning the potential pre-emption of state gambling regulations by federal derivatives legislation.

Recommendations Are Not Yet Final

Importantly, the Kentucky proceedings have not yet been definitively returned to state court.

A federal district judge must first review and adopt the magistrate judge’s recommendations.

If approved, Kentucky could continue pursuing its claims under state gambling legislation.

Gaming attorney Daniel Wallach highlighted that this development could increase the platforms’ exposure to enforcement measures.

Potential consequences include:

• Court orders restricting operations.
• Geographical access restrictions.
• Additional compliance requirements.
• Measures targeting sports-event contracts.

States including Nevada, Michigan and Washington have already pursued restrictions on certain prediction market activities.

Underdog Files Lawsuit Against Tennessee

The regulatory dispute has also expanded to Underdog, a company offering fantasy sports and event-contract products.

On 13 October 2026, Underdog filed a federal lawsuit against Tennessee authorities.

The action followed a 9 October cease-and-desist letter from the state’s Sports Wagering Council.

The regulator warned of possible consequences including:

• Financial penalties.
• Civil enforcement measures.
• Potential criminal investigations.
• Possible revocation of Underdog’s fantasy sports licence.

Underdog argues that Tennessee cannot apply certain state gambling laws to its event-contract activities.

The company is seeking declaratory and injunctive relief.

CFTC’s New Rules Enter New York Litigation

The CFTC is also involved in litigation concerning the enforcement of gambling regulations in New York.

The dispute intensified following regulatory measures published on 9 October 2026 addressing the definition and classification of event contracts.

A federal court has asked the parties to explain how the new measures could affect a pending preliminary injunction request.

The procedural timetable includes:

• 16 October: deadline for federal officials to submit brief notices.
• 23 October: deadline for New York’s response.

The court has not yet determined what effect, if any, the new regulatory provisions will have on the proceedings.

The outcome could influence the ability of states to enforce gambling laws against certain federally regulated prediction market platforms.

Massachusetts Examines AI in Sportsbook Marketing

Separately, the Massachusetts Gaming Commission has requested information from licensed sportsbooks concerning the use of artificial intelligence in marketing and customer engagement.

On 9 October, Executive Director Dean Serpa sent a letter requesting voluntary responses by 3 November 2026.

The regulator is seeking information about:

• Artificial intelligence and machine learning systems.
• Customer deposit, loss and behavioural data.
• Algorithms used to select promotional recipients.
• Personalised offers and incentives.
• Timing and frequency of customer communications.
• Behavioural targeting.
• Problem gambling indicators.
• Human oversight of automated decisions.

The responses will remain confidential and will help inform future regulatory policy.

Kalshi Introduces Athlete Protection Measures

Kalshi has announced a partnership with Signify Group to identify online harassment and threats directed at athletes.

The initiative will use Threat Matrix technology to monitor public social media activity.

Coverage will include major sporting competitions and organisations such as:

• NFL.
• NBA.
• MLB.
• NHL.
• Professional tennis.

Kalshi has also introduced a rule prohibiting abusive behaviour and threats connected with trading activities.

Serious violations may result in permanent account closure.

The initiative follows concerns raised by professional sports organisations over harassment associated with gambling and prediction market participation.

DraftKings Develops Injury-Protected Contracts

DraftKings is also expanding its prediction market offering through its DKeX platform.

The company has self-certified contracts linked to individual NBA player statistics.

The products incorporate injury protection mechanisms covering situations in which a player participates in the first half of a game but does not return for the second.

Under specified conditions, the contract would settle at its pre-game fair market value.

The contracts could become available as early as 16 October 2026, subject to applicable requirements.

The initiative aims to address the impact of unexpected player injuries on sports-event contracts.

Next Steps and Impact

The SEC’s approval of Cboe’s new contracts represents an important development for financial products linked to future events.

Robinhood’s participation could increase retail investor access to this category.

However, prediction markets continue facing significant legal uncertainty, particularly concerning sports-event contracts.

Pending decisions in Kentucky, Tennessee and New York will be important in determining the respective powers of federal and state regulators.

Meanwhile, initiatives from Kalshi, DraftKings and other operators demonstrate continued product and technology innovation.

For the iGaming industry, these developments illustrate how prediction markets are evolving into an ecosystem combining finance, technology, sports betting and regulation.

The central challenge will be establishing clear rules that allow new products to develop while resolving jurisdictional disputes between the authorities responsible for overseeing them.

Editó: @fonta