According to Bernstein analysts, prediction-market operators are bringing trading infrastructure in-house, a rapid shift that could trigger a wave of acquisitions at crypto platforms, sportsbooks, brokerages and standalone exchanges.

In a research report Monday, Bernstein said the industry is undergoing “operational consolidation,” with major platforms moving to control the forecast-market stack.

“Every consumer platform that matters has integrated the front-end and back-end of the prediction-market stack,” he said. This includes distribution, brokerage, exchange and clearing. This convergence placed businesses that historically operated in separate industries within the same competitive landscape.

Bernstein points to Robin Hood. Routing Large World Cup contract by Rothera, shared with Susquehanna and DraftKings. to begin DKeX and moving volume away from CME and Crypto.com infrastructure. The firm also cited Coinbase. Acquiring The launch of the clearing company and its event contracts as evidence that user platforms are trying to control more of the forecast-market stack.

Owning the infrastructure allows platforms to retain fees that previously went to outside partners, making acquisitions a faster way to distribute, license, or complete missing parts of the stack. However, the same convergence that strengthens the case for stability may also increase state and federal scrutiny by further blurring the regulatory boundary between financial trading and gambling.

Acquisition timeline. Source: Bernstein

Regulatory conflict can prevent consolidation.

Bernstein said regulatory scrutiny is one of the barriers to major mergers in the prediction-markets sector.

Linking crypto platforms with brokerages, sportsbooks and exchanges could improve margins and reduce dependence on outside partners, Bernstein said, adding that such deals could attract antitrust scrutiny and deepen disputes over whether sports event contracts should be regulated as financial derivatives or gambling products.

Related: About 60% of World Cup bettors on Polymarket are first-time crypto users.

This could further inflame jurisdictional disputes already underway in several states. Minnesota enacted what the Commodity Futures Trading Commission (CFTC) described as the first outright ban on prediction markets, while Illinois adopted legislation requiring platforms to obtain a state license before offering sports event contracts.

The value of online sportsbooks compared to leading prediction markets.
Source: Bernstein.

Kalshi challenged both states’ bans, saying federally regulated exchanges fall under the CFTC’s exclusive jurisdiction.

The growing resistance suggests that consolidation makes commercial sense but implementation will be difficult until regulators and courts decide where federal derivatives oversight ends and state gambling authority begins.

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