Prediction Markets Are Building Walls: Bernstein Says Kalshi and Polymarket Are Logical M&A Targets
Bernstein analysts say the rush to own both exchange infrastructure and consumer distribution is reshaping the prediction market industry, and Kalshi and Polymarket could find themselves acquisition targets as a result.
Wall Street research firm Bernstein warned in a note published June 29 that the prediction market sector is entering a consolidation phase. Consumer platforms that have spent the past year acquiring or building their own exchange rails now hold a structural advantage over pure-play exchanges like Kalshi and Polymarket, which have the technology but not the audience. The combination, Bernstein argues, creates conditions for a wave of mergers and acquisitions across sportsbooks, exchanges, and consumer finance firms.
The Infrastructure Grab
The shift became visible on June 24, when DraftKings announced the launch of DKeX, a proprietary prediction markets exchange embedded directly in its Sports and Casino mobile app. DKeX represents the culmination of a vertical integration strategy that DraftKings began in December 2025, when the company first launched "DraftKings Predictions" as a standalone product. The exchange launch completes that multi-step process, bringing the full prediction market stack under one roof rather than representing an overnight strategic pivot.
DraftKings built DKeX on technology and a CFTC Designated Contract Market license acquired through its purchase of Railbird Technologies. Before the launch, DraftKings routed its prediction market users through CME and Crypto.com infrastructure. That arrangement is now over. The company pulled that trading volume in-house, keeping the margin on roughly $3.4 billion in annualized consumer prediction volume. Total annualized trading volume, a figure that also includes institutional and market-maker activity layered on top of consumer trades, reached $11.3 billion for the week ending June 21. That week coincided with peak FIFA World Cup activity, which Bernstein had previously projected would generate a $5 to $10 billion consumer volume surge across platforms.
Robinhood followed a parallel path. The company launched the Rothera exchange, built in partnership with Susquehanna, and routed its highest-volume FIFA World Cup contracts through Rothera rather than Kalshi. Robinhood has traded more than 16 billion event contracts year to date in 2026, with Bernstein projecting roughly $586 million in prediction market revenue for the full year.
Coinbase, which acquired The Clearing Company to obtain its own exchange infrastructure, is generating approximately $100 million in annualized prediction market revenue. Bernstein described Robinhood and Coinbase as holding the strongest competitive positions in the space, noting that Robinhood's 13 million monthly active users and Coinbase's 9 million give each platform a scale advantage that pure-play exchanges cannot replicate at the same scale, particularly when absorbing volume surges like those driven by the FIFA World Cup.
Flutter, the Dublin-based sports betting conglomerate and one of the largest gambling operators in the world, took a different route, establishing a dual Futures Commission Merchant structure that preserves access to multiple exchanges rather than cutting them out entirely.
Bernstein's note stated directly: "Operational consolidation is blurring the lines between exchanges, brokerages and sportsbooks, creating conditions for acquisitions."
Market Context
Prediction market global volume reached approximately $51 billion in 2025. The first quarter of 2026 alone recorded $36.6 billion in volume, putting the full-year pace on track for approximately $240 billion. Bernstein's long-range forecast puts the sector at $1 trillion in annual volume by 2030, with revenues potentially exceeding $10 billion.
Kalshi currently leads the exchange landscape. The platform posted $17.9 billion in monthly trading volume in May 2026, capturing roughly 57% of the overall prediction market, a figure that reflects competition across all platforms in the space and not solely the Kalshi-versus-Polymarket comparison. Polymarket recorded $7.1 billion in the same month. Together, the two platforms held $1.11 billion in open interest as of May 1, with Kalshi accounting for $630.7 million. That combined figure represented 98% of total open interest across all prediction markets as of that date, a concentration that makes both platforms the most logical candidates for any consolidation move.
Polymarket operates differently from its US-regulated competitors. The platform settles trades in USDC on the Polygon blockchain, giving it on-chain transparency and near-instant settlement, and it recorded approximately $9.7 billion in 30-day on-chain volume as of May 2026. Kalshi relies on traditional banking and FCM infrastructure. The consolidation moves by DraftKings and Robinhood are primarily off-chain and CFTC-regulated, not blockchain-native. This distinction matters for the portion of the market that has historically preferred permissionless access. It also creates meaningful integration challenges for any CFTC-regulated acquirer that might pursue Polymarket: folding a blockchain-native, on-chain settlement platform into a regulated off-chain structure would require resolving fundamental architectural and jurisdictional tensions that currently have no established regulatory playbook.
Outside the US, the Picture Diverges
The regulatory moat that DraftKings, Robinhood, and Coinbase are building depends entirely on CFTC licensing. That pathway does not exist in most other jurisdictions, and international markets are moving in the opposite direction.
India is the sharpest example. In May 2026, the Ministry of Electronics and Information Technology ordered internet service providers to block Polymarket, citing the country's Promotion and Regulation of Online Gaming Act 2025, which came into force on May 1. Kalshi was reported to be next. India, Japan, and South Korea collectively represent the largest user base for crypto-native event forecasting in Asia, according to TRM Labs, making the Indian crackdown a meaningful drag on global Polymarket volumes. Indian users can still access Polymarket through VPNs, but the government has issued advisories targeting VPN providers as well. The crackdown fits a broader pattern in Indian crypto regulation: the government imposes a 30% flat tax on crypto gains and a 1% tax deducted at source on transactions, and the Reserve Bank of India has consistently characterized crypto assets as speculative instruments, signaling a posture of containment rather than accommodation.
South Africa presents a different but equally unresolved problem. Legal analysts at ENS Africa describe prediction markets as falling into a gap among four overlapping regulatory frameworks: crypto asset law under the Financial Sector Conduct Authority, derivatives regulation under the Financial Markets Act, the National Gambling Act's broad definition of betting, and exchange control under National Treasury's draft Capital Flow Management Regulations, which governs cross-border crypto flows. No South African regulator has formally resolved how prediction market products are classified. As ENS Africa observed: "There is still uncertainty where a crypto-linked product starts functioning less like a token and more like a contract on an event." Without that clarity, institutional infrastructure investment on the DraftKings model appears impractical, according to analysts familiar with the regulatory environment.
Sub-Saharan Africa and the Limits of Consolidation
The M&A consolidation wave taking shape in the United States does not extend meaningfully to Sub-Saharan Africa, and the gap matters. Nigeria consistently ranks among the top ten countries globally for crypto peer-to-peer volume, according to data from Chainalysis and TRM Labs, reflecting deep grassroots adoption driven by currency volatility and limited access to traditional financial infrastructure. Across the broader region, Polymarket's USDC-on-Polygon model functions as the primary accessible entry point to prediction markets precisely because it requires no brokerage account, no US phone number, and no CFTC-licensed intermediary. The proprietary walled gardens that DraftKings, Robinhood, and Coinbase are constructing are structurally inaccessible to this user base. If US consumer volume continues migrating into closed, regulated platforms, the open liquidity pools on Polygon, Base, and Arbitrum may thin over time, reducing the depth available to the global users who depend on them most.
What Comes Next
The CFTC published a proposed prediction market rule on June 10, asserting exclusive federal jurisdiction over event contracts. That rulemaking is still in progress, even as state gaming regulators push back by classifying sports event contracts as unlicensed gambling. The regulatory outcome will determine how defensible the CFTC license moat actually is, and whether platforms that have spent heavily to acquire those licenses retain the structural competitive advantage that Bernstein's thesis depends on.
For builders and users outside the US, blockchain-native platforms on Polygon, Base, and Arbitrum remain the most accessible infrastructure layer, though the absorption of US consumer volume into proprietary walled gardens could reduce liquidity on those open platforms over time.