DraftKings’ recent introduction of its DKeX exchange signifies a notable shift in the prediction market sector, characterized by a trend of major trading, cryptocurrency, and betting entities integrating their exchange infrastructure internally. Analysts at Bernstein, a research and brokerage firm, have identified this development as part of a broader strategy across the industry.
Key Takeaways
- DraftKings’ launch of the DKeX exchange indicates a move towards in-house infrastructure for prediction market operations.
- This consolidation trend allows platforms to retain revenue previously allocated to third-party providers.
- Mergers and acquisitions within the prediction market sector are becoming increasingly likely as a result of these strategic shifts.
- Platforms with strong consumer reach are combining proprietary exchange capabilities with established distribution networks.
- Pure-play prediction market exchanges, while possessing infrastructure, may face challenges related to scale and consumer access compared to larger integrated platforms.
According to Bernstein analysts, DraftKings transitioned its prediction market activities from third-party infrastructures like CME and Crypto.com to its own CFTC-regulated venue, DKeX. This move followed an eight-month period dedicated to developing the necessary components. The firm noted that DraftKings acquired Railbird, a CFTC-designated contract market, for up to $250 million in October 2025, with the DKeX launch representing the culmination of this integration process.
“The revenue share that used to leave the building now stays inside it,” the analysts observed, highlighting the financial benefits of internalizing exchange operations.
Similar strategic developments have been observed across the industry. Bernstein pointed to Robinhood and Susquehanna, who rebranded MIAXdx as Rothera and subsequently managed high-volume World Cup contracts through this platform rather than utilizing Kalshi, a previous service provider for such activities. The firm indicated that Robinhood has processed over 16 billion event contracts year-to-date in 2026, a significant increase from the 12 billion processed throughout all of 2025.
Coinbase has also pursued an “everything exchange” strategy by launching event contracts and subsequently acquiring The Clearing Company to bring its clearing operations in-house. Bernstein reported that Coinbase achieved approximately $100 million in annualized prediction market revenue within two months of its launch.
Pure-play exchanges hold infrastructure but trail on scale
Despite the trend of major platforms developing their own comprehensive prediction market infrastructure, Bernstein noted that significant differences persist in terms of consumer engagement and reach. Analysts indicated that Robinhood and Coinbase have made substantial progress by integrating large-scale distribution with proprietary exchange and clearing capabilities. DraftKings is also advancing in this direction through its acquisition of Railbird and the rollout of DKeX.
In contrast, platforms such as Kalshi and Polymarket, while operating regulated infrastructure, are identified as having less extensive consumer distribution compared to the larger, integrated platforms. This positions them as potential acquisition targets or acquirers as the industry continues its consolidation. Kalshi holds a private valuation of approximately $22 billion, and Polymarket is valued at $15 billion, contrasting with DraftKings’ market capitalization of $12.5 billion and Flutter’s $17 billion.
Polymarket’s acquisition of QCEX for $112 million was aimed at supporting its re-entry into the U.S. market. Kalshi currently serves as a key incumbent, with many emerging platforms seeking to bypass its services through the development of proprietary infrastructure.
M&A question turns ‘tangible’
Bernstein suggested that the ongoing convergence of sportsbooks, brokerages, and exchanges is broadening the scope for potential mergers. This could involve sportsbooks acquiring exchanges, trading platforms acquiring sportsbooks, or consolidation among betting operators themselves. The firm identified a potential merger between Flutter and DraftKings as strategically advantageous, though it assigned a probability of less than 5% due to anticipated regulatory scrutiny. It referenced the FTC’s 2017 intervention to block a DraftKings-FanDuel merger, which was based on concerns that the combined entity would dominate over 90% of the U.S. daily fantasy sports market.
The strategic rationale for such a merger remains compelling, given that DraftKings and Flutter possess two of the most valuable customer acquisition databases in American betting and hold complementary positions within the prediction market value chain.
Ratings and risks
Bernstein reaffirmed its Outperform ratings for DraftKings, Robinhood, and Coinbase, while maintaining a Market-Perform rating for Flutter. Key downside risks for DraftKings and Flutter cited by the firm include unfavorable sporting outcomes, slower adoption of parlay betting, changes in online gaming taxation, delays in state-level legalization, and reputational concerns.
For Robinhood, regulatory risks associated with payment for order flow and oversight of cryptocurrency trading were highlighted. Coinbase, according to Bernstein, faces ongoing competitive pressures from international exchanges and brokers, potential delays in U.S. digital asset legislation, and the broader volatility inherent in the cryptocurrency market.
Details can be found on the website : www.theblock.co