Prediction Market Land Grab: DCMs, FCMs, and the Race to Control the Stack
Until lately, the federally regulated prediction market trade largely revolved round a single alternate. For a number of years, Kalshi operated as the solely energetic Commodity Futures Trading Commission-approved platform providing occasion contracts to U.S. retail merchants. That panorama is now shifting quickly.
Since the begin of 2025, 20 new Designated Contract Market filings or designations have appeared in the CFTC registry as firms search licenses to function regulated occasion contract markets in the United States. At the similar time, shopper buying and selling platforms and monetary companies are exploring a number of paths into prediction markets, from buying alternate infrastructure to constructing brokerage and distribution layers round current exchanges.
The result’s a race not simply to launch prediction market sites, however to management the infrastructure that powers them.
The regulatory stack behind prediction markets
The rise of CFTC-regulated prediction markets is occurring inside a regulatory framework designed for derivatives buying and selling. Understanding how these markets perform requires understanding the three core entities that make up that construction.
At the heart is the Designated Contract Market. A DCM capabilities as the alternate itself. It lists contracts, operates the order ebook the place consumers and sellers commerce, and enforces market integrity guidelines underneath the Commodity Exchange Act. Any U.S. prediction market alternate providing federally regulated occasion contracts should finally function by means of a registered DCM.
Futures Commission Merchants (FCMs) act as the brokerage layer between merchants and regulated exchanges. They preserve buyer accounts, safeguard buyer funds, handle margin necessities, and route orders to an alternate. FCMs are registered with the CFTC and supervised by the National Futures Association.
Finally, trades are sometimes cleared by means of a Derivatives Clearing Organization (DCO), the clearinghouse that processes and ensures trades after they’re executed. The DCO turns into the central counterparty to every transaction, standing between purchaser and vendor and making certain contracts settle even when one facet defaults.
Some firms function just one layer of this stack, whereas others purpose to management a number of elements of it or the total construction. Those structural selections more and more form how companies compete in prediction markets. As new DCM purposes surge, the licenses themselves have gotten strategic property and potential acquisition targets for firms searching for a regulated foothold in the market.
A pipeline underneath building
The rising pipeline of alternate filings exhibits how shortly the regulated prediction market sector is increasing.
Since the begin of 2025, 20 new DCM filings or approvals have appeared in the CFTC’s registry, reflecting a rapid expansion of firms searching for approval to function regulated exchanges. Seven exchanges have already been designated, whereas the different 13 are listed as pending as the company conducts its assessment.
The improve in filings has additionally coincided with a extra accommodating federal regulatory posture towards occasion contracts. Kalshi’s September 2024 court victory permitting its election markets weakened the CFTC’s skill to block related contracts. Under President Donald Trump’s second administration, CFTC Chair Mike Selig later directed the company to withdraw a proposed rule banning sports activities and political occasion contracts and initiated a rulemaking process to make clear how prediction markets ought to be regulated.
Not each DCM submitting is aimed particularly at prediction markets. Some candidates seem to be pursuing broader derivatives exchanges that would checklist conventional futures or choices contracts. Still, most of the new filings since 2025 have been tied to firms explicitly searching for to construct regulated occasion contract exchanges.
Acquisition and different methods to get to market
Several newly authorised DCMs shortly grew to become acquisition targets for bigger buying and selling platforms.
QCX, designated in July 2025, was acquired by Polymarket in October 2025 as a part of its effort to launch a regulated U.S. alternate. Railbird Exchange, authorised in June 2025, was purchased by DraftKings in October 2025 as the sportsbook operator moved to safe its personal alternate infrastructure. Aristotle Exchange, designated in September 2025, was acquired by Underdog in March 2026.
Some of these acquisitions additionally included clearing infrastructure. Both QCX and Aristotle held approvals not solely as DCMs but additionally as DCOs, giving their consumers management over each the alternate and clearing layers.
The acquisition offers counsel that alternate licenses themselves have gotten invaluable entry factors into the market. For firms searching for a foothold in regulated occasion contracts, buying a DCM might show quicker than constructing one from scratch and going by means of the generally prolonged approval course of.
Several different DCM candidates are actually transferring by means of the approval pipeline. Sporttrade, Ludlow Exchange (Novig’s proposed DCM entity) and Smarkets are every pursuing exchange-style event trading platforms constructed round sports activities markets however able to itemizing different occasion contracts. XV Exchange is creating an identical platform constructed on know-how from the STX sports activities alternate, whereas DimeTrades plans to launch in 2026 and supply sports activities and different market sorts.
Other filings level to totally different fashions. PMEX Markets, the exchange entity for Pluto, is searching for approval to launch occasion contract buying and selling tied to AI infrastructure. tZERO, a digital-asset buying and selling platform with roots in crypto market infrastructure, has additionally filed for DCM status because it explores how occasion contracts may match inside a broader derivatives providing.
Active (Designated) Exchanges
| Operator / Exchange | Licenses | Status | Consumer Interface | FCM / Distribution Partners | Other Key Partners / Notes |
|---|---|---|---|---|---|
| KalshiEX | DCM, DCO | Designated Nov. 2020 | kalshi.com | Robinhood Derivatives, Coinbase Financial Markets, WeBull, PrizePicks, Sleeper | CF Benchmarks (crypto settlement); SIG (Series E investor); hub-and-spoke distribution mannequin |
| QCX / Polymarket US | DCM, DCO | Designated July 2025; acquired by Polymarket Oct 2025 | polymarket.com (US) | PrizePicks (contracted, not energetic but) | ICE/NYSE ($2B investor); Dome/unified API (acquired); Yahoo Finance (knowledge) |
| CDNA (Crypto.com Derivatives North America) | DCM, DCO, FCM | HedgeStreet designated 2004; acquired by Crypto.com in 2022 | OG app; Crypto.com app | Fanatics Markets (*introducing dealer); DraftKings Predictions (introducing dealer); Underdog** (FCM) | Trump Media’s Truth Predict, Hollywood.com (white-label purchasers) |
| CME Group | DCM, DCO | Prediction markets launched Dec 2025 | Via FCMs | FanDuel Predicts app (FCM and co-owned brokerage with CME); DraftKings Predictions app (***introducing dealer by way of Gus III LLC IB / Wedbush FCM) | N/A |
| MIAXdx (Robinhood / SIG JV) | DCM, DCO, SEF | Acquired Jan. 2026 (now referred to as Rothera); occasion contract itemizing anticipated 2026 | Robinhood app (transition in progress) | Robinhood Derivatives (FCM); open to different FCMs | SIG (JV co-owner); MIAX retains 10% fairness stake |
| Railbird Exchange (DraftKings) | DCM | Designated June 2025; acquired by DraftKings Oct. 2025 | DraftKings Predictions / TBD | DraftKings (mother or father) | In-house alternate buildout |
| Aristotle Exchange (Underdog) | DCM, DCO | Designated Sept. 2025; acquired by Underdog Jan. 2026 | Underdog platform | Underdog (mother or father) | Underdog markets at the moment distributed by way of CDNA; acquisition brings clearing infrastructure in-house |
| Gemini Titan | DCM | Designated Dec. 2025 | gemini.com | N/A | Winklevoss Capital; built-in with Gemini crypto alternate; five-year licensing course of |
| Xchange Alpha | DCM | Designated Jan. 2026; focusing on late summer time 2026 launch | FCM-routed solely; no direct retail interface | TBD | MIAX Futures Exchange (clearing accomplice); CRO Bella Rozenberg (former CFTC) |
| Electron Exchange | DCM, DCO | Designated Aug 2025 | Not publicly disclosed | Not publicly disclosed | Limited public particulars accessible |
| Quanta Exchange | DCM | Designated May 2025 | Not publicly disclosed | Not publicly disclosed | Limited public particulars accessible |
| ForecastEx | DCM, DCO | Designated June 2024 | forecastex.com; IBKR ForecastTrader (Interactive Brokers) | Interactive Brokers (mother or father; FCM) | Lumina (reported backing); yield on open positions; targets institutional / company treasury section |
*An Introducing Broker (IB) introduces buyer orders however doesn’t maintain buyer funds, a significant regulatory distinction. Fanatics acquired Paragon in July 2025 particularly to get hold of the IB registration. Paragon Global Markets, LLC, d/b/a Fanatics Markets IB, is registered with the CFTC as an Introducing Broker.
**Underdog acquired Aristotle Exchange (its personal DCM/DCO) in March 2026, so it’s actively transferring away from CDNA as an alternate accomplice.
***DraftKings (by way of Gus III LLC) is the IB that takes the buyer’s order; Wedbush Securities is a third-party FCM that DraftKings routes by means of (which really holds the buyer’s cash and handles clearing).
An further alternate, PredictIt, deserves a point out right here. While not technically a DCM, the academic-focused political markets platform owned by Victoria Univ. of Wellington operates underneath a CFTC no-action letter. The website obtained full approval in Sept. 2025 after a July 2025 authorized victory, together with elevated most place limits of $3,500.
Pending prediction market alternate candidates
| Operator / Exchange | Licenses Sought | Filed | Consumer Interface (Planned) | Notes |
|---|---|---|---|---|
| XV Exchange | DCM, DCO | Dec 2025 | Standalone U.S. platform | Affiliated with STX (Canadian sports activities alternate); CEO Justin Deutsch; vertically built-in mannequin; sports activities and broader occasion contracts |
| tZERO | DCM, DCO | Nov 2025 | tZERO platform | CEO Alan Konevsky; tokenized securities background; derivatives together with prediction markets, futures, and choices |
| Smarkets Board of Trade Exchange | DCM, DCO | March 2026 | U.S. platform | Smarkets UK mother or father (~$3B annual quantity); backed by SIG; CEO Jason Trost; peer-to-peer CLOB mannequin |
| PMEX Markets (Pluto) | DCM | Feb 2026 | Pluto platform | Event contracts tied to AI infrastructure |
| Sporttrade | DCM | Jan 2026 | Sporttrade platform | Exchange-style sports activities mannequin; no home edge |
| Ludlow Exchange (Novig) | DCM | Jan 2026 | Novig platform | Affiliated with Novig sports activities alternate |
| Water Street Labs | DCM | Jan 2026 | Not publicly disclosed | Limited public particulars accessible |
| Optex Markets | DCM | Jan 2026 | Not publicly disclosed | Limited public particulars accessible |
| ProphetX | DCM | Nov 2025 | ProphetX | Peer-to-peer alternate interface with CLOB + RFQ execution |
| RSBIX | DCM | Sept 2025 | Not publicly disclosed | Partnered with UK-based alternate Matchbook |
| OneChronos Markets | DCM | July 2025 | Not publicly disclosed | Limited public particulars accessible |
| Juice Exchange | DCM | Jan 2026 | Not publicly disclosed | Limited public particulars accessible |
| DimeTrades (PredictCraft Mkt Inc.) | DCM | Feb 2026 | DimeTrades platform | Founders Alan Galicot, Alexander Galicot, Joshua Nachassi; QC Clearing LLC (Polymarket’s QCEX clearing arm) designated as clearing accomplice |
Three working fashions rising in occasion contract buying and selling
As the variety of licensed exchanges grows, firms coming into the prediction market house are more and more clustering round three working constructions. Each displays a special method to constructing and controlling the infrastructure behind a prediction market alternate.
Hub-and-spoke distribution
One mannequin facilities on a single alternate that distributes its markets by means of outdoors platforms.
Kalshi is the clearest instance. The firm operates the alternate and clearing infrastructure whereas accomplice platforms join their very own customers to its order ebook. Firms together with Robinhood, Coinbase, Webull, and PrizePicks have routed buyer trades to Kalshi’s markets on this method.
The benefit of this mannequin is scale. A single alternate can develop its attain by connecting to a number of retail platforms, permitting it to entry massive consumer bases with out relying solely by itself shopper platform. For the companions, the association supplies a quick manner to add an occasion contract alternate product.
The danger is that profitable distribution companions may ultimately resolve to construct or purchase their very own exchanges, permitting them to internalize buying and selling exercise that beforehand flowed to the alternate.
White-label infrastructure
A second method depends on what is commonly described as a white-label mannequin. In this construction, a regulated alternate operates the buying and selling and regulatory infrastructure whereas shopper manufacturers distribute these markets by means of their very own platforms. Unlike the hub-and-spoke mannequin, the place a number of brokers route orders to a single alternate, the white-label construction locations the alternate largely behind the scenes whereas totally different firms current the markets by means of their very own branded interfaces.
One instance is Crypto.com Derivatives North America (CDNA). The firm at the moment operates the solely platform with the full regulatory stack, holding registrations for a DCM, DCO, and FCM. That construction permits CDNA to present the alternate, clearing and brokerage infrastructure behind event-contract buying and selling. Platforms together with Fanatics Markets, Trump Media’s Truth Predict, and Hollywood.com distribute (or are planning to distribute) markets powered by CDNA’s alternate infrastructure, whereas Crypto.com’s personal buying and selling platform gives the similar contracts. DraftKings Predictions added CDNA markets in February 2026 to complement its CME Group providing. Underdog, which launched prediction markets in September 2025, additionally routes by means of CDNA, however its acquisition of Aristotle Exchange in March 2026 offers it its personal alternate infrastructure.
Both DraftKings and FanDuel Predicts supply contracts from CME Group. While FanDuel Predicts is an FCM, it took a special path by embarking on a joint venture with CME, not simply an FCM-DCM relationship. Unlike DraftKings, FanDuel has not acquired its personal DCM.
The benefit of the white-label construction is that the infrastructure supplier can earn income on each contract traded throughout a number of shopper platforms, no matter which model attracts the consumer. By powering the alternate, clearing and brokerage layers behind the scenes, the operator participates in buying and selling exercise throughout all of the platforms distributing its markets.
The problem is that these companions nonetheless management the buyer relationship. If a profitable platform later acquires its personal alternate infrastructure, it might migrate buying and selling exercise onto its personal alternate reasonably than routing it by means of a accomplice.
Vertical integration by means of acquisition
A 3rd technique entails shopper buying and selling platforms buying their very own alternate infrastructure reasonably than counting on outdoors suppliers. Robinhood’s buy of MIAXdx with Susquehanna International Group in January illustrates this method. By proudly owning the alternate layer instantly, Robinhood can transfer past performing solely as a distribution platform and function the market the place contracts are listed and traded.
Like the Underdog/Aristotle, Polymarket/QCX, and DraftKings/Railbird offers talked about beforehand, the transfer displays a push by shopper platforms to convey alternate infrastructure in-house reasonably than depend upon exterior companions.
The benefit of this mannequin is management. Owning the alternate infrastructure permits firms to hold charges that may in any other case circulation to a accomplice and to introduce new contracts extra shortly. The tradeoff is complexity. Operating a regulated derivatives alternate introduces compliance, surveillance, and clearing tasks that add vital regulatory and operational calls for.
Why FCMs maintain leverage in prediction markets
Exchange licenses decide the place contracts are listed, however the brokerage layer usually determines the place buying and selling exercise finally flows. In prediction markets that place is often held by FCMs, the companies that preserve buyer accounts and route orders to exchanges. Because each commerce passes by means of that brokerage relationship, FCMs take part in the income generated no matter which alternate finally lists the contract.
Robinhood illustrates how highly effective that place may be. The firm entered prediction markets purely as an FCM, routing buyer orders to outdoors exchanges like Kalshi. According to company disclosures, Robinhood customers traded greater than 12 billion occasion contracts in 2025 and one other 5.8 billion contracts in the first two months of 2026, making prediction markets one in all the platform’s fastest-growing segments. That scale underscores how shortly buying and selling exercise can accumulate at the brokerage layer when hooked up to a big retail platform.
Other firms are positioning themselves round the similar brokerage layer. Coinbase, for instance, at the moment distributes prediction markets by routing buyer orders to Kalshi, permitting it to take part in the buying and selling circulation with out working its personal alternate.
“Fanatics took a special method, buying Paragon Global Markets to energy the brokerage layer behind Fanatics Markets. In that construction, Paragon, registered as an Introducing Broker reasonably than a full FCM, refers buyer orders to CDNA, which operates the underlying alternate and clearing infrastructure. Introducing Brokers occupy an identical place to FCMs in the distribution chain, connecting customers to exchanges, however with one key distinction: they don’t maintain buyer funds. That duty falls to the alternate or a separate clearing FCM.
DraftKings at the moment follows the similar mannequin in its providing of CME and CDNA markets. It operates by means of its subsidiary Gus III LLC as a registered Introducing Broker, with buyer funds held by third-party FCM Wedbush Securities. For shopper manufacturers coming into prediction markets, the IB construction gives a quicker, lower-complexity path to market than standing up a full FCM — at the value of ceding some management over the buyer relationship.
In a market the place a number of exchanges might compete for order circulation, the brokerage layer usually determines the place that buying and selling exercise, and the income tied to it, finally lands.
What the infrastructure race means for merchants
For merchants, the increasing alternate panorama will doubtless convey each advantages and rising pains. As extra DCMs compete for order circulation, charges and spreads have a tendency to slim, bettering pricing and entry throughout platforms.
At the similar time, the speedy development of recent venues, mixed with the transfer towards vertically built-in platforms, may depart liquidity extra fragmented in the close to time period. Platforms that after routed trades to shared exchanges might more and more direct exercise to their very own order books, forcing merchants to navigate a number of venues to discover the finest costs.
Over time, that competitors might strengthen the sector. The arrival of established exchanges and institutional buying and selling companies may deepen liquidity and enhance value discovery, however it might additionally cut back pricing inefficiencies some retail merchants depend on. During this transition, nevertheless, merchants ought to anticipate a extra advanced and aggressive buying and selling atmosphere.
The publish Prediction Market Land Grab: DCMs, FCMs, and the Race to Control the Stack appeared first on DeFi Rate.
