Bernstein Says Prediction Markets’ Push Into Vertical Integration May Spur M&A Wave

Prediction-market platforms are rapidly moving to own their trading infrastructure, a shift that could unleash a wave of large mergers and acquisitions.

Cointelegraph reported on June 29 that Bernstein analysts, in a research note published the same day, said the prediction-market industry has entered an “operational integration” phase. Major platforms are increasingly trying to control the entire prediction-market stack directly.

Any meaningful consumer platform has already integrated the front end and back end of the prediction-market stack, Bernstein wrote. Distribution, brokerage, exchange and clearing functions are converging into a single competitive arena. The firm cited Robinhood’s use of KalshiEX, an exchange it said is co-owned with Susquehanna, to handle World Cup contracts. It also pointed to DraftKings’ launch of its in-house exchange, DKeX, to reduce reliance on CME Group and Crypto.com infrastructure. Coinbase’s acquisition of The Clearing House and its launch of event contracts fit the same pattern.

Owning infrastructure allows platforms to internalize fees previously paid to outside partners, Bernstein wrote. It added that M&A is the fastest route to fill gaps in distribution, licensing and the broader stack.

Regulatory risk, however, could become a major obstacle to consolidation. Combinations involving crypto platforms, brokers, sportsbooks and exchanges could draw antitrust scrutiny. Disputes may also intensify over whether sports event contracts should be treated as financial derivatives or gambling products.

Minnesota has passed legislation that the Commodity Futures Trading Commission described as the first outright ban on prediction markets. Illinois adopted a bill requiring platforms to obtain a state license before offering sports event contracts. Kalshi is challenging both state actions, arguing that federally regulated exchanges fall under the CFTC’s exclusive jurisdiction.

Even if integration makes commercial sense, Bernstein said execution may remain difficult until courts and regulators more clearly define the boundary between federal oversight of derivatives and state gambling authority.