Prediction Market Sector Splits into Liquidity Providers and Distribution Networks

The prediction market industry is experiencing swift changes as leading fintech companies such as

and look to broaden their presence, Bernstein analysts report. Robinhood, which currently accounts for more than half of Kalshi's trading activity through a partnership, plans to use its extensive reach to secure a greater portion of market revenues by introducing its own CFTC-approved derivatives exchange . This strategy puts Robinhood in direct competition with platforms like Kalshi and Polymarket, which as traders wager on topics ranging from political races to cryptocurrency trends.

Kalshi, a platform regulated by the CFTC, recently secured $1 billion in funding at a valuation of $11 billion,

. Kalshi’s regulatory compliance provides legal certainty and access to fiat currency, setting it apart from Polymarket’s decentralized, crypto-focused approach. Nonetheless, regulatory hurdles remain, especially in Nevada, where a court decision placed the platform under state gaming laws, . At the same time, Robinhood’s collaboration with Susquehanna to purchase MIAXdx—a derivatives exchange licensed by the CFTC—marks a move toward building institutional-level liquidity infrastructure .

Coinbase is also making its entry, with leaked application code and images indicating it plans to launch a Kalshi-backed prediction market at its December 17 event. The new platform will enable users to trade binary contracts on a variety of events, from elections to crypto achievements, with results verified by reliable data providers

. This move aligns with a wider industry shift: Yahoo Finance has teamed up with Polymarket, while . The total trading volume in the sector has , signaling increasing acceptance among mainstream users.

As regulatory loopholes close, compliance is becoming a key factor for success. Polymarket’s recent approval from the CFTC and its data partnership with Intercontinental Exchange

. Bernstein analysts estimate that Robinhood’s annualized revenues from prediction markets could , fueled by its 14 million active users and robust distribution tactics. However, risks to market integrity persist: the sports-betting controversies of 2025 highlight the ongoing need for strong governance and transparency to prevent reputational and regulatory issues .

The prediction market ecosystem is dividing into liquidity providers (Kalshi, Polymarket) and distribution platforms (Robinhood, Coinbase). As Robinhood and Coinbase incorporate regulated systems, the industry’s expansion will depend on balancing regulatory compliance with innovation. Bernstein continues to rate Robinhood as “outperform,”

, and suggests that Coinbase’s new prediction market could transform user participation in event-driven trading.