Executive Summary
Prediction markets are often described as simple yes/no markets whose prices represent probabilities. That description misses most of what matters commercially. Behind the interface is an increasingly conventional market structure involving regulated exchanges, clearing infrastructure, liquidity providers, brokers, APIs and data distribution.
The Market Is More Than the App
In the US, a CFTC-regulated Designated Contract Market, or DCM, is an exchange operating under the Commodity Exchange Act. DCMs have ongoing obligations covering areas including market integrity, position limits, surveillance, financial resources and system safeguards. They can generally introduce new contracts through CFTC product-certification procedures rather than seeking individual approval for every listing.
That distinction matters. The exchange, the customer interface and the clearing layer do not have to be the same business. Kalshi, for example, operates a DCM while Kalshi Klear is separately registered with the CFTC as a Derivatives Clearing Organization. Other companies can sit above those layers as brokers or distributors.
Liquidity Is a Separate Function
A contract can be legally listed and technically available while still being commercially irrelevant. Someone must continuously price risk, provide executable depth and absorb temporary imbalances between buyers and sellers. Kalshi now operates formal market-maker programmes, RFQs and liquidity incentives precisely because listing a market and creating a usable market are different things.
Distribution is becoming another independent layer. Interactive Brokers now places contracts from Kalshi, CME Group and ForecastEx into one interface, compares available prices and fees, and routes customers to the best available net price. In that model, the customer relationship increasingly belongs to the broker while exchanges compete underneath for execution.
PSG View
Prediction markets should increasingly be analysed as a market-structure stack, not a collection of consumer apps. Exchange licensing, clearing, liquidity, distribution and data can each become separate businesses with different margins and competitive advantages. As more venues enter the market, control of customer distribution and liquidity may ultimately matter as much as ownership of the exchange itself.
The next stage will be whether prediction markets develop the same specialist ecosystem seen in other financial markets: independent execution providers, institutional brokers, market-data vendors, clearing relationships and sophisticated cross-venue routing. That would materially lower the barrier for financial and consumer platforms to offer event contracts without building an exchange themselves.
For informational purposes only. Nothing published by Prediction Strategy Group constitutes investment, trading or legal advice.