Prediction Markets Face ‘Full Stack’ Versus ‘Fast Track’ Tech Decisions

The U.S. prediction markets sector is undergoing rapid transformation, with leading operators forced to choose between building a licenced technology stack or accelerating deployment via partnerships and acquisitions. This strategic dilemma, now intensified by regulatory shifts and surging challenger exchanges, is altering both product strategy and competitive positions for firms like Flutter, Underdog, Kalshi, and Novig.

Flutter’s Prediction Market Caution Reflects Regulatory Hurdles

Flutter Entertainment’s approach to prediction markets has become a bellwether for operator strategy. On its Q2 earnings call, departing CEO Peter Jackson addressed speculation regarding a proprietary exchange, noting, “We’ve just got to be thoughtful that we position ourselves as well as we can,” as new Commodity Futures Trading Commission (CFTC) regulations appeared likely to upend how operators could structure market making and exchange ownership.

Recent decisions underscore Flutter’s conservatism: FanDuel Predicts’ sports and novelty contracts moved to Crypto.com, while its financial event contracts remained with CME Group. Jackson, speaking at an Oppenheimer event, downplayed the long-term regulatory tolerance for U.S. prediction markets and reaffirmed confidence in traditional sportsbook models. Flutter’s reluctance to go ‘all-in’ appears rooted in regulatory flux — a partial hedge as litigation, such as New York’s $36bn suit against Kalshi, puts the sector’s future in question.

Licences and the ‘Full Stack’ Debate: Building from the Ground Up

Operators active in prediction markets confront a classic build-vs-buy choice. Novig CEO Jacob Fortinsky articulates the ‘full stack’ approach — securing a Designated Contract Market (DCM) licence in June 2026 was essential for controlling market infrastructure, contract listing, participant matching, and price discovery. As Fortinsky explains:

“Becoming a DCM was important because Novig was built to be the exchange, not simply a broker providing access to someone else’s marketplace.” — Jacob Fortinsky, Novig

A DCM licence, he argues, gives full control over the player experience, transparent pricing, and product innovation. ProphetX operates similarly, with both DCM and Derivatives Clearing Organisation (DCO) licences key to its B2B model. CEO Dean Sisun highlights the scalability of exchanging rather than customer acquisition:

“We are not going out and acquiring customers, we are partnering with the groups that are acquiring customers and are effectively sharing in the revenue from those customers.” — Dean Sisun, ProphetX

Underdog chose a hybrid route, entering prediction markets via Crypto.com and then acquiring Aristotle Exchange (with all three CFTC licences — DCM, DCO, and Futures Commission Merchant (FCM)) before being purchased by IG Group for up to $1.3bn. This push for a ‘full licence stack’ positions Underdog as both operator and infrastructure provider.

Partnerships, Acquisitions, and the ‘Fast Track’ Model

For those seeking rapid entry, acquisitions and partnerships present a shortcut. FanDuel and DraftKings have used arrangements with existing platforms — DraftKings’ purchase of Railbird Technologies enabled the launch of proprietary exchange DKeX by instantly acquiring a DCM licence. Robinhood and Susquehanna’s joint stake in MIAX derivatives exchanges led to the platform now powering Robinhood’s prediction markets.

Adam Kaplan of Astralis Capital Management views regulatory speed-to-market as the principal factor behind these moves. Building a compliant, sports-focused exchange is time-consuming — ProphetX’s Sisun notes the long lead time. By acquiring a licenced operator, firms avoid the initial regulatory process, although integrating sports exchange capabilities into newly purchased platforms is not trivial.

Competitive Landscape: Kalshi, Novig, and Challenger Strategies

The market’s configuration has seen Kalshi rise as the triple-licenced standard-bearer, holding the DCM, DCO, and now FCM approvals. Its model positions it as both exchange and customer-acquisition competitor, an arrangement some brokers (like ProphetX) view as disadvantageous for B2B partners.

Novig, positioning itself as a sports-native challenger, reported $125m in trading volume during its first week post-launch, according to Eilers & Krejcik Gaming. That places it second to Nadex (owned by Crypto.com), which services DraftKings, FanDuel, and Fanatics, with $31.7m daily contract volume. Novig’s Fortinsky stresses that focusing on sports enables superior internal pricing and user experience, echoing Kaplan’s assertion that "companies that came from sports betting or DFS bring stronger internal pricing capability."

Meanwhile, FanDuel Predicts currently holds only a brokerage licence, focusing on market making, from which it generated $6m in Q2 and targets $50m in 2026. Whether Flutter will escalate investment in licensing and tech stack remains uncertain. Kaplan suggests the operator must quickly adapt to avoid ceding ground to more nimble competitors.

Build Versus Buy in Practice: Lessons and Trade-Offs

The endgame for operators is product control, licensing, and agility. Surveying the field:

• Novig: built its exchange as a DCM licence holder
• ProphetX: owns both DCM and DCO licences for B2B/B2C reach
• Underdog: entered via acquisition to gain the full stack, then sold to IG Group
• DraftKings: acquired Railbird for DCM access, later FCM status
• Kalshi: established all three licences over six years
• Polymarket US: bought QCEX for $112m, has DCM and DCO
• FanDuel Predicts: brokerage only, with a focus on market making revenue

Acquisition often speeds licensing but integrating new tech or sports-oriented features remains a challenge. Build-first entrants like Novig benefit from end-to-end control but may face a longer regulatory journey. The model chosen shapes market dynamics, pricing, and B2B and B2C opportunities.

The Outlook: Prediction Markets Demand Strategic Flexibility

With the regulatory climate unsettled — underscored by ongoing litigation and shifting CFTC positions — operators must avoid single-bet strategies. As the experiences of Novig, Kalshi, and Underdog demonstrate, successful prediction market positioning can be achieved through multiple pathways, provided the right balance of speed, control, and licensing is struck. FanDuel, Flutter, and others face building pressure to refine their approach or risk being leapfrogged by newer, more focused challengers.

Despite legal uncertainty around sports event contracts, U.S. prediction markets warrant close attention from anyone in the online gambling industry seeking to capture the next phase of market evolution. For further reading on product and regulatory developments across wagering formats, visit news or regulation.