The prediction market industry is entering a new phase of consolidation as major platforms increasingly bring trading infrastructure under one roof, a trend that could fuel mergers and acquisitions across crypto exchanges, brokerages, sportsbooks, and financial technology firms, according to a new report from Bernstein.

Analysts believe companies are no longer satisfied with simply offering consumer-facing prediction markets. Instead, they are seeking ownership of the entire trading ecosystem from user interfaces to exchange infrastructure and clearing services.

Platforms Are Building End-to-End Ecosystems

Bernstein describes the shift as “operational consolidation,” where companies integrate every layer of the prediction market stack.

Rather than relying on third-party exchanges or clearing providers, platforms are increasingly managing their own brokerage, trading, settlement, and distribution infrastructure. This allows firms to retain more transaction revenue while improving operational efficiency and user experience.

The strategy also positions companies to expand into adjacent financial services without depending on external partners.

Industry Leaders Are Expanding Their Infrastructure

Several major players have already begun reshaping their businesses around this model.

Robinhood recently routed major World Cup prediction contracts through Rothera, the exchange it jointly owns with Susquehanna, giving it greater control over execution and settlement.

DraftKings has also expanded its in-house capabilities through DKeX, reducing reliance on external trading infrastructure previously provided by firms such as CME Group and Crypto.com.

Meanwhile, Coinbase strengthened its derivatives ambitions by acquiring The Clearing Company while continuing to expand its event contract offerings.

According to Bernstein, these developments indicate a broader industry trend toward vertically integrated prediction market platforms.

M&A Activity Could Accelerate

As firms race to complete their infrastructure stacks, acquisitions may become the fastest way to secure missing capabilities.

Instead of building exchanges, clearing systems, licensing frameworks, or brokerage operations from scratch, companies may choose to acquire businesses that already possess those assets.

This could trigger increased deal activity across crypto exchanges, regulated brokerages, prediction market operators, and sportsbook companies seeking greater scale and regulatory reach.

Regulatory Challenges Remain

Despite the commercial appeal of consolidation, Bernstein warns that regulation remains one of the industry’s biggest obstacles.

As prediction markets increasingly blur the lines between financial derivatives and sports betting, regulators continue to debate which authorities should oversee the sector.

Large mergers involving exchanges, sportsbooks, and crypto platforms could also attract heightened antitrust scrutiny as regulators examine market concentration and competitive fairness.

Jurisdictional Disputes Continue

The regulatory landscape remains fragmented across the United States.

Some states have moved to tighten oversight of prediction markets. Minnesota has introduced legislation restricting certain prediction market activities, while Illinois now requires operators offering sports event contracts to obtain state licenses.

Kalshi has challenged those measures, arguing that federally regulated event contracts fall exclusively under the authority of the Commodity Futures Trading Commission (CFTC) rather than individual state regulators.

The outcome of these legal disputes could significantly influence how quickly the industry consolidates.

Why It Matters

Prediction markets are rapidly evolving from niche platforms into broader financial ecosystems that combine trading, brokerage, clearing, and settlement under a single roof.

While vertical integration could improve efficiency, reduce costs, and create new acquisition opportunities, regulatory uncertainty continues to cast a shadow over the sector.

As the industry matures, the balance between innovation, competition, and regulation is likely to determine whether the next phase of prediction market growth is driven by consolidation or constrained by legal challenges.