Bernstein: Kalshi and Polymarket Could Become Acquisition Targets Due to Lack of Distribution Channels
N.R. Finch
A Bernstein report finds that every major consumer-facing prediction platform has moved to own both distribution and exchange infrastructure in the past eight months — Kalshi and Polymarket, strong on tech but weak on user reach, are now logical M&A targets as prediction markets merge with sports betting and consumer finance.
Why is every major platform suddenly building its own exchange?
Over the past eight months, nearly every major consumer prediction platform has pursued the same goal: controlling both user distribution and exchange infrastructure.
The moves came fast: DraftKings acquired Railbird to launch DKeX; Robinhood partnered with Susquehanna to build Rothera; Coinbase bought The Clearing Company and rolled out event contracts; Flutter set up a dual-FCM structure — a compliance framework for accessing multiple exchanges — to keep multi-exchange optionality.
This means → platforms used to handle only the "front-end," routing trades to someone else's exchange. Now they want the entire chain — from user to matching engine to clearing — in-house.
Does the economics of self-built exchanges actually work?
The data already answers this. Robinhood routed high-volume World Cup contracts to its own Rothera instead of Kalshi. DraftKings migrated prediction-market trading from CME and Crypto.com infrastructure to DKeX in late June.
In plain terms = fees and data value that once flowed to third-party platforms now stay inside the company.
The scale is already meaningful: Coinbase's prediction market hits ~$100 million in annualized revenue; Robinhood has traded over 16 billion event contracts this year; DraftKings disclosed annualized consumer prediction-market volume near $3.4 billion.
Why would Kalshi and Polymarket become acquisition targets?
Bernstein analyst Ian Moore's core call: Kalshi and Polymarket have the full exchange tech stack but visibly lag in user distribution.
This means → they have the "engine" but lack the "storefront." For platforms that already have massive user bases but no exchange license or tech, buying is faster than building.
This reflects a structural shift: the competition in prediction markets is no longer about contract design — it is about who can own both users and infrastructure at once.
Who holds the strongest competitive position?
Bernstein rates Robinhood and Coinbase as the current leaders — both combine large-scale consumer user bases with fully owned, regulated infrastructure.
DraftKings closed the gap through its Railbird acquisition but is still catching up.
The report even flags that a Flutter–DraftKings merger — described as "highly unlikely" — would carry strategic value: cutting promotional spend, improving user-acquisition efficiency, and creating operational synergies across prediction-market infrastructure and market-making.
Put simply = the industry is shifting from "everyone builds alone" to "merge where you can." The bar for cross-sector M&A is dropping fast.
How will regulatory uncertainty shape this wave of consolidation?
The CFTC is advancing formal rulemaking on event contracts, but the legal dispute between state gambling regulators and federal oversight remains unresolved.
This means → regulatory ambiguity affects two things at once: deal timing (who dares move first) and valuation (more uncertainty means cheaper sellers).
Bernstein's overarching view: prediction markets, sports betting, and consumer finance are converging into a single competitive landscape. Previously unthinkable cross-sector combinations — sportsbooks buying exchanges, exchanges buying sportsbooks — have all entered the realm of possibility.
Content is for reference only, not financial advice.