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Kalshi may soon have some new competitors in the prediction market space, with two major players either making acquisitions or reportedly seeking to do so in order to access the federally regulated market that remains on a collision course with the U.S. sports betting sector.
Prominent international prediction market Polymarket announced Tuesday (July 22) that it had acquired QCX, a small derivatives exchange approved by the U.S. federal government's Commodity Futures Trading Commission, alongside clearinghouse QC Clearing, in a move that the company called “a significant step” toward expanding access to the United States.
The transaction came just days after Front Office Sports separately reported that DraftKings was “in acquisition talks” with Railbird Exchange.
In both cases, the smaller exchanges only recently received approval from the CFTC to become designated contract markets (DCMs), with Railbird receiving its order of designation on June 13 and QCX receiving approval on July 9.
The process to become a regulated DCM is a lengthy one, typically taking at least two years and often more from start to finish.
As a result, buying an existing exchange is likely to be a more expedient way for companies looking to access a prediction markets space that has exploded since Kalshi and others started offering trades on the outcome of sports events at the turn of the year.
To date, there are only 21 active designated exchanges in the U.S., although four of those are operated by the same company, the Chicago Mercantile Exchange (CME) Group.
Polymarket bills itself as the world’s largest prediction market, but despite being an American company, it has been unable to accept trades from U.S. customers since a 2022 settlement with the CFTC in which it agreed to block American users after operating an unregulated market.
Federal law enforcement officials have since investigated whether the company was allowing U.S. customers in spite of the agreement, including reportedly conducting a raid of Polymarket CEO Shayne Coplan’s home, but multiple outlets reported last week that the investigation had now been dropped.
"Polymarket is the largest prediction market globally and has become synonymous with understanding the probability of current events," Coplan said in a statement. "Demand is greater than ever — not just in user growth and trading volume, but in how mainstream audiences are turning to Polymarket to separate signal from noise, bias and speculation.
"Now, with the acquisition of QCX, we are laying the foundation to bring Polymarket home — re-entering the U.S. as a fully regulated and compliant platform that will allow Americans to trade their opinions."
The company did not provide a timeline for how soon the deal could close and when the U.S. launch could take place.
One notable link is that in Railbird’s announcement last month that it had received its CFTC approval, the company said it would partner with QC Clearing for clearing services, which serves as the counterparty between each trade on a designated contract market.
Many exchanges, including Kalshi as well as other major commodities exchanges, have a vertically integrated DCM and clearinghouse.
But if DraftKings was to reach a deal to acquire Railbird, it could either have to work directly with Polymarket, which would immediately be a major player in the space, or find another clearinghouse, as Railbird does not have one of its own.
The signs of heavyweight competition joining the prediction markets space come at a time of ongoing regulatory uncertainty, with Kalshi mounting and so far winning legal challenges against cease-and-desist orders filed by state gaming regulators in various states including New Jersey, Nevada and Maryland.
The CFTC also has its own issues, as Brian Quintenz, who was nominated to become CFTC chairman by President Donald Trump, was supposed to receive a vote from the Senate Committee on Agriculture, Nutrition and Forestry on Monday.
However, Quintenz’s nomination was pulled from the agenda, with Bloomberg reporting that the absence of Republican Senator Cindy Hyde-Smith from the hearing would have meant that the votes were not present to vote to approve the nomination and send the issue of Quintenz’s nomination to the full Senate for consideration.
Democrats on the committee reportedly would not have voted to advance the nomination of Quintenz, who serves on the board of Kalshi and is an advocate for expanding prediction markets.
The CFTC, typically a five-member body, currently has only two active commissioners, and both of which have already announced their intention to leave the commission in the coming months.
