Bernstein Sees M&A Wave as Prediction Markets Consolidate

Bernstein says players like Kalshi, Polymarket, and DraftKings are increasingly building their own exchange infrastructure, while the CFTC and U.S. states are still fighting over oversight.

Key Takeaways

• Bernstein expects consolidation in prediction markets could spark a new wave of M&A in sports betting and financial markets.
• Big players increasingly want to control both distribution and exchange infrastructure themselves, with deals and partnerships backing that up.
• Regulatory uncertainty is still high, while Robinhood and Coinbase have the strongest position, according to Bernstein.

The fast-moving consolidation around prediction market infrastructure could set off a fresh round of mergers and acquisitions across sports betting and financial markets, according to Wall Street broker Bernstein. The firm said the boundaries between exchanges, brokerages, and sportsbooks are becoming harder to define, while major players push to own both distribution and the underlying infrastructure.

The Stack Is Getting Tighter

Bernstein said that over the past eight months, almost every major consumer-facing prediction market operator has tried to bring both the customer relationship and the exchange layer in-house. That shift, the analysts argued, leaves companies like Kalshi and Polymarket in an unusual spot: they could be acquisition targets, but they could also be buyers, since they already control the stack even if their distribution still trails the biggest names.

The broker pointed to a string of recent deals and partnerships as evidence that the trend is already underway. DraftKings acquired Railbird to build out its DKeX exchange, Robinhood partnered with Susquehanna on Rothera, Coinbase bought The Clearing Company soon after introducing event contracts, and Flutter created a dual-FCM setup to maintain access to multiple exchanges.

Regulation Is Still the Brake

Even with the market expanding quickly, legal and regulatory uncertainty remains a major overhang. State regulators and gaming officials say sports event contracts amount to unlicensed betting, while the CFTC maintains that it has sole federal authority. At the same time, the agency is drafting new federal rules for prediction markets in an effort to bring more clarity and keep legal innovation moving in a fast-growing segment.

That combination of rapid growth and unresolved rules makes consolidation especially important for investors and companies, particularly as large sports betting operators move in as well. FanDuel, for instance, reportedly plans to allocate as much as $300 million (€263 million) to its own prediction market platform, while DraftKings has already rolled out DraftKings Predictions alongside its traditional sportsbook.

Why This Matters for Europe

For European crypto readers, the bigger point is that prediction markets are starting to resemble a blend of crypto-style trading infrastructure, online gambling, and retail trading. If the U.S. market keeps maturing, it could shape how platforms design their products, which firms can reach users, and how regulators classify this type of investment product.

Bernstein also said the economics are already shifting in favor of firms that own their own exchange. Those companies keep revenue that would otherwise go to third parties. Robinhood routed its highest-volume World Cup contracts through Rothera instead of Kalshi, while DraftKings moved prediction market trading off CME and Crypto.com infrastructure and onto DKeX at the end of June.

In Bernstein’s view, Robinhood and Coinbase are in the best position right now because they combine broad consumer reach with fully owned regulated infrastructure. DraftKings has also gained ground through Railbird, while Kalshi and Polymarket still look like natural acquisition candidates because they have exchange technology but not the same distribution scale as the biggest platforms.