Prediction Markets: Technological Strategies Between 'Full Stack' and Partnerships

The rise of prediction markets compels major operators to define whether they will integrate the entire chain of licenses and technology ('full stack') or opt for strategic collaborations or direct acquisitions. Recent decisions by Flutter Entertainment, Underdog, and Novig showcase differentiated bets in the face of emerging regulations and the threat of new competitors with their own licenses.

Flutter Adjusts Its Bet Amid Regulatory Pressure

During the Q2 2026 earnings call, Peter Jackson, outgoing CEO of Flutter Entertainment, refrained from committing to the launch of its own prediction market exchange. Flutter announced that FanDuel Predicts would migrate its sports and special events contracts to Crypto.com, while keeping financial event contracts on the CME Group platform. Jackson cited regulatory complexity as a determining factor, implicitly referring to proposals from the U.S. regulator Commodity Futures Trading Commission (CFTC) to address conflicts of interest between exchange operators and market makers:

"We simply must be careful how we position ourselves," Jackson explained during the call.

In a later forum, Jackson emphasized that the regulatory permissiveness in the U.S. for these products may not hold, prompting Flutter to reinforce its traditional sports betting model, considering that "under equal conditions, online sports betting wins out for its generosity and product." This cautious stance is evident as the group faces the influence of new operators with DCM licenses, such as Kalshi, which threatens to account for two-thirds of the market capitalization lost by Flutter in the past year.

Underdog and the Bet on Regulatory 'Full Stack'

The Daily Fantasy Sports (DFS) platform Underdog adopted a different strategy: it first launched prediction markets via Crypto.com in September 2025 and then acquired Aristotle Exchange (approved by the CFTC) in March 2026. This allowed it to access a "full stack of licenses": Designated Contract Market (DCM), Derivatives Clearing Organization (DCO), and Futures Commission Merchant (FCM). This set of permissions was key in Underdog’s acquisition by IG Group for up to $1.3 billion.

Advantages and Challenges of Operating with Own Licenses

Acquiring own licenses entails greater control but also more technical and regulatory responsibilities. Jacob Fortinsky, CEO and co-founder of Novig, sums it up by highlighting that "becoming a DCM was essential because Novig was born to be the exchange, not just a broker accessing outside markets." A DCM decides which contracts to list, how to match participants, and the market integrity, and it allows Novig to build a native sports product and maintain total control over the user experience and pricing.

From an investment perspective, Adam Kaplan of Astralis Capital Management points out the key distinction with an FCM license: "With an FCM, you only transfer customer orders to an external exchange. The DCM gives you complete control over the product and market structuring." ProphetX, which expedited its pivot by obtaining DCM and DCO licenses, focuses its model on B2B: it provides technology and settlement to brokers and avoids competing for client acquisition, which it views as a financial and scalable advantage over B2C operators like Kalshi or Polymarket.

Build, Buy, or Combine Strategies?

The debate between developing proprietary technology or acquiring established operators intensifies in prediction markets. Over the last 12 months, the acquisition option has gained traction. Robinhood, in partnership with Susquehanna, acquired 90% of MIAX to create Rothera; DraftKings purchased Railbird Technologies, thus launching DKeX as its own exchange. Underdog demonstrated that it is viable to combine both tactics.

For Fortinsky of Novig, clarity of purpose was key in choosing to build a sports exchange from scratch after obtaining the DCM designation. Dean Sisun, CEO of ProphetX, warns that ground-up development is complex and particularly challenging in sports, while acquisition accelerates entry and bypasses regulatory timelines, but does not always resolve technological integration.

Kaplan emphasizes that buying allows operators to absorb best practices and accelerate launches, although he notes the counterpoint: operators originating from sports betting or DFS tend to design better internal pricing systems for sports events and player markets, giving them a competitive edge in this vertical.

Competitiveness and Market Capture Against Established Leaders

Kalshi, with its trio of licenses (exchange, broker, and clearing house), is the benchmark to beat. For operators without proprietary technology, Sisun of ProphetX believes they must partner with companies like his own, avoiding feeding competitors that also capture users like Kalshi. His hypothesis: "companies will start to shift their business away from Kalshi for this reason."

Novig reported over $125 million in trading volume in its first week and averaged $23.3 million daily across contracts, positioning itself as the second challenging exchange after Nadex (owned by Crypto.com, which receives flow from DraftKings, FanDuel, and Fanatics), which averages $31.7 million according to data from Eilers & Krejcik Gaming as of August 23, 2026. Novig capitalizes on its exclusive focus on sports trading and the opportunity to learn from previous regulatory limitations and user experience.

Kaplan agrees that finding niches or adopting a B2B angle can make a difference for challengers. On the other hand, he criticizes the recent lack of innovation at FanDuel: "It’s been six or seven years since they’ve led with new products," he claims.

Anatomy of the 'Stack': A Licensing Game

Strategies vary: Novig focused on DCM; ProphetX combines DCM and DCO licenses; Underdog acquired the entire stack to integrate it; DraftKings absorbed Railbird and obtained DCM and FCM licenses in July 2026. Kalshi, meanwhile, secured its licenses much earlier than the competition, while Polymarket US acquired QCEX with CFTC approval in 2025 for $112 million.

FanDuel Predicts, from Flutter, currently only holds a broker license and focuses on market making: it reported revenues of $6 million in this area in the second quarter and expects to reach $50 million in 2026. Adam Kaplan believes Flutter has open options, but it must focus on its strengths and adapt to regain leadership, even as the presence of sporting events in prediction markets remains uncertain.

The prediction market sector remains in an experimental phase and demands both regulatory and technological responses. Startups have shown that there is no single path to compete and that rapid learning can make a difference. As the legality of contracts for sports events in the U.S. remains ambiguous, the growth of this vertical compels the entire online gaming sector to pay attention and define clear positions.