Prediction Market Consolidation Could Drive Mergers Across Crypto and Sports Betting, Bernstein Says

Prediction market operators are increasingly bringing key parts of their trading infrastructure in house, a trend that could spark a new wave of mergers and acquisitions across the crypto, brokerage, sportsbook and exchange industries, according to a new research report from Bernstein.

The report describes the shift as “operational consolidation,” with major platforms now managing distribution, brokerage, exchange and clearing services under one roof instead of relying on third-party providers.

Companies Aim to Cut Costs and Expand Market Control

Bernstein highlighted several recent moves supporting this trend. Robinhood now routes major World Cup event contracts through Rothera, the exchange it co-owns with Susquehanna. DraftKings has launched DKeX, reducing its reliance on infrastructure from CME and Crypto.com. Meanwhile, Coinbase acquired The Clearing Company and introduced event contracts to strengthen its prediction market business.

Owning more of the infrastructure allows companies to keep trading fees, gain regulatory licenses faster and fill gaps in their business through acquisitions rather than partnerships.

Regulatory Challenges May Slow Industry Consolidation

Despite the commercial benefits, Bernstein warned that greater consolidation could attract increased antitrust and regulatory scrutiny. As prediction markets continue to blur the line between financial derivatives and gambling, regulators are paying closer attention.

The report noted that Minnesota has introduced the first outright ban on prediction markets, while Illinois now requires state licenses for sports event contracts. Kalshi has challenged both measures, arguing that federally regulated exchanges fall under the exclusive authority of the Commodity Futures Trading Commission (CFTC).

Bernstein said future mergers may depend on how courts and regulators define the boundary between federal derivatives oversight and state gambling laws.