Prediction-market operators have increasingly moved to own more of their trading infrastructure, setting the stage for an acquisition wave across crypto exchanges, sportsbooks, brokerages and trading venues, according to Bernstein.
Summary
- Bernstein expects prediction markets to enter an acquisition phase as platforms consolidate trading infrastructure.
- Robinhood, Coinbase, DraftKings and Cboe are expanding in-house prediction market capabilities.
- Bernstein warns regulatory disputes between federal and state authorities could slow industry consolidation.
According to a research report published by Bernstein on Monday, the sector is entering a period of operational consolidation as consumer-facing platforms bring together distribution, brokerage, exchange and clearing functions under one roof instead of relying on outside providers.
The analysts wrote that “every consumer platform that matters has merged the front and back end of the prediction-market stack,” arguing that businesses once separated across financial trading, crypto and sports betting are now competing within the same market.
Consumer platforms are taking control of trading infrastructure
Recent product launches and acquisitions illustrate the trend outlined by Bernstein. Robinhood now routes major FIFA World Cup prediction contracts through Rothera, the exchange it jointly owns with Susquehanna, while DraftKings has introduced DKeX and redirected trading volume away from infrastructure supplied by CME and Crypto.com.
Coinbase has also expanded its presence by acquiring The Clearing Company and launching its own event contracts, a move Bernstein cited as another example of platforms assembling every part of the prediction-market business.
Instead of paying third parties for execution, clearing or exchange services, companies that own the full trading stack can keep more of the fees generated by customer activity. Bernstein said acquisitions may therefore become the fastest way for platforms to obtain licenses, reach new users or add missing infrastructure rather than building those capabilities internally.
Outside the crypto sector, traditional financial exchanges have also begun entering the market. Last week, Cboe Global Markets introduced Cboe Predicts, launching binary option contracts tied to the Mini-S&P 500 Index (XSP). Cboe said the products operate as security options under the existing U.S. regulatory framework for listed options, allowing traders to take yes-or-no positions on where the index finishes.
Large technology companies are also exploring the space. Meta has reportedly assembled a team to develop Arena, a prediction-market application expected to compete with platforms including Polymarket and Kalshi. According to reports, Arena will rely on a points-based system similar to video games instead of real-money wagering.
Regulatory disputes could slow dealmaking
While Bernstein sees economic incentives for consolidation, the firm warned that regulation remains one of the biggest obstacles to larger transactions.
The report said combinations involving crypto exchanges, brokerages, sportsbooks and derivatives venues could improve profitability by reducing dependence on external providers.
At the same time, Bernstein cautioned that such deals may attract antitrust scrutiny while intensifying debate over whether sports event contracts should be treated as financial derivatives or gambling products.
Regulatory disagreements are already emerging across the U.S. Bernstein noted that Minnesota has enacted what the Commodity Futures Trading Commission described as the first outright ban on prediction markets, while Illinois has passed legislation requiring platforms to obtain a state license before offering sports event contracts.
Kalshi has challenged both measures, arguing that exchanges regulated by the CFTC fall under the agency’s exclusive jurisdiction rather than state gambling authorities.
According to Bernstein, the commercial logic behind consolidation remains intact, but many of the largest acquisitions may prove difficult to complete until courts and regulators establish where federal derivatives oversight ends and state gambling regulation begins.
