Bernstein says prediction-market platforms are consolidating exchanges, brokerages and clearing into single entities

Prediction-market operators are increasingly buying up the infrastructure behind their own platforms, brokerages, exchanges and clearing systems, in a trend Bernstein analysts call ‘operational consolidation,’ according to a new research report.

The firm says the shift, already visible in moves like Robinhood’s routing of World Cup contracts through its jointly owned exchange Rothera and DraftKings’ launch of its own exchange, DKeX, could fuel a wider wave of acquisitions across crypto exchanges, brokerages, sportsbooks and trading platforms.”

Rather than relying on third-party providers for critical services, companies are increasingly seeking to own every layer of the trading process. Bernstein believes this strategy could improve profitability, strengthen customer relationships and accelerate expansion into new markets. However, the same shift could also invite greater scrutiny from regulators and antitrust authorities.

“Every consumer platform that matters has merged the front and back end of the prediction-market stack,” Bernstein analysts wrote in the report, referring to the convergence of distribution, brokerage, exchange and clearing functions within a single platform.

Platforms race to own the entire prediction-market stack

The accelerating prediction market consolidation trend reflects a broader push by major financial and crypto companies to reduce dependence on external infrastructure providers.

Bernstein highlighted several high-profile examples illustrating this strategic shift.

Trading platform Robinhood has begun routing major World Cup prediction contracts through Rothera, the exchange it jointly owns with trading firm Susquehanna, reducing reliance on outside trading venues. Meanwhile, DraftKings has launched its own exchange, DKeX, redirecting trading activity that previously flowed through infrastructure operated by CME Group and Crypto.com.

The analysts also pointed to Coinbase’s acquisition of The Clearing Company, alongside its rollout of event contracts, as another example of platforms building end-to-end control over prediction-market operations.

According to Bernstein, owning the underlying infrastructure allows firms to retain revenue that would otherwise be shared with outside partners. Instead of paying fees for brokerage, clearing or exchange services, vertically integrated businesses can capture those economics internally.

The report suggests acquisitions could become the fastest way for companies to fill strategic gaps, whether by securing regulatory licenses, expanding customer distribution or adding missing components of the trading stack.

As prediction market consolidation gathers pace, companies that already possess valuable infrastructure assets could become attractive takeover targets.

M&A opportunities come with mounting regulatory challenges

While operational integration offers clear commercial benefits, Bernstein cautioned that consolidation is unlikely to happen without regulatory resistance.

The firm said larger transactions combining crypto exchanges, sportsbooks, brokerages and financial trading platforms could attract heightened antitrust scrutiny, particularly as traditionally separate industries increasingly overlap.

Beyond competition concerns, regulators continue to debate whether sports-related event contracts should fall under financial market regulations or state gambling laws.

That distinction has become one of the industry’s biggest unresolved legal questions.

“If prediction markets continue converging with sportsbooks and traditional financial exchanges, regulators will likely face increasing pressure to clarify where derivatives regulation ends and gambling oversight begins,” the report suggests.

The growing prediction market consolidation trend therefore creates both economic opportunity and legal uncertainty, with companies navigating an evolving regulatory framework that remains far from settled.

Industry observers say the outcome of ongoing legal disputes could ultimately determine how quickly consolidation accelerates.

State-level legal battles intensify as federal authority is tested

Regulatory tensions are already playing out across several U.S. states.

Bernstein noted that Minnesota became the first state to impose an outright ban on prediction markets, a move acknowledged by the Commodity Futures Trading Commission (CFTC) as a significant regulatory development.

Meanwhile, Illinois enacted legislation requiring platforms offering sports event contracts to obtain a state license before operating within the state.

Those actions have intensified an ongoing jurisdictional dispute between state regulators and federally supervised exchanges.

Prediction-market platform Kalshi has challenged both states’ restrictions, arguing that exchanges regulated by the CFTC fall under exclusive federal oversight rather than individual state gambling authorities.

Kalshi has consistently maintained that its event contracts qualify as federally regulated financial derivatives instead of gambling products, a legal position that could have wide-reaching implications for the broader industry.

Until courts provide greater clarity, Bernstein believes large-scale prediction market consolidation may remain constrained despite strong commercial incentives.

The uncertainty also creates additional risk for companies considering acquisitions or infrastructure investments before the legal landscape is fully established.

Consolidation could reshape the industry’s competitive future

Bernstein’s report suggests the long-term direction of the market is becoming increasingly clear: companies want ownership of the full prediction-market value chain.

By integrating brokerage, trading, exchange and clearing operations, platforms can improve operational efficiency, increase margins and strengthen customer retention while reducing dependence on third-party service providers.

Yet the strategy comes at a time when regulators are paying closer attention to the rapidly expanding intersection between crypto, financial derivatives and sports wagering.

That combination means prediction market consolidation could become one of the defining themes shaping both investment activity and regulatory policy over the coming years.

Whether through acquisitions, strategic partnerships or in-house development, companies appear determined to control more of the infrastructure behind event-based trading.

However, Bernstein concludes that the pace of prediction market consolidation will ultimately depend not only on corporate strategy but also on how lawmakers, regulators and courts resolve the growing conflict between federal derivatives oversight and state gambling authority.

Until those legal boundaries become clearer, dealmaking may continue—but the industry’s largest transactions are likely to face increasingly close examination from both competition regulators and financial watchdogs.