The exchange is not the app
A sportsbook owns its customer: the account, the app, the promotions, the relationship. An exchange is infrastructure, and the fastest-growing prediction markets have reached many of their customers through somebody else's app. Understanding the distribution layer is understanding why the product grew so quickly (combined monthly volume on the two largest venues rose from under $5 billion in September 2025 to about $24 billion in April 2026, on Pew Research Center's analysis), and why the partners it signed are the ones that decide its future.
Brokerages
One of the largest channels for regulated event contracts in the United States is retail brokerages. A customer who already has a share-dealing app, an identity verified against financial rules and a funded account can trade an event contract in the same interface as a stock, with no new sign-up, no gambling-specific verification and no sense of having entered a betting product. The brokerage, acting as a futures commission merchant, routes the order to a designated exchange and earns its own transaction revenue on it. Robinhood's derivatives arm, for example, holds capital and deposits for event contracts under CFTC rules and the rules of the exchanges it uses, which include KalshiEx, ForecastEx and Rothera, a joint venture with Susquehanna that bought 90% of the MIAXdx exchange in January 2026.
For the exchange this is the whole game: tens of millions of verified, funded adults reachable without acquiring them (Robinhood alone reported 28.4 million funded customers at 30 June 2026). For the brokerage it is a new revenue line with very high engagement: Robinhood's event contract revenue rose from $10 million in the second quarter of 2025 to $156 million a year later, 12% of its net revenue. For a gambling regulator it is the model's most provocative feature. A state that has decided its residents may not bet on sport finds them doing so through a stockbroker, possibly at 18 (the largest US prediction market, Kalshi, admits customers from 18, where most states set 21 for sports betting), and the brokerage's answer is that it is offering a federally regulated financial product.
Brokerages have not been uniform. Some have offered sports contracts nationally; some have withdrawn them from states where litigation is unfavourable, as Robinhood did in Nevada, where it agreed to stop offering new sports contracts from 1 December 2025 after losing a preliminary injunction motion; and the exchanges they route to differ too: ForecastEx, for example, describes its contracts as covering economic, political and climate outcomes. Those decisions track the legal map in lesson three, and a brokerage's risk appetite is now a variable in the industry's competitive analysis.
Crypto exchanges and wallets
The crypto-native venues distribute through the crypto ecosystem: wallets, exchanges, aggregators and the blockchain itself, on which anyone can build an interface to the same contracts. This is what "non-custodial" means in practice. The venue does not hold the customer's funds or, in the purest form, know who the customer is; it publishes a market and the trades settle on-chain.
That architecture is why the crypto-native venues have been blocked rather than licensed in the markets that have acted. A gambling regulator can order internet providers to block a domain, as France's regulator did to Polymarket in July 2026, and can pursue the customers, as South Korean police did in 2026, going after 26 people who had traded on Polymarket as illegal gamblers, but it cannot revoke a licence the venue never held or fine an entity it cannot serve. The largest venue's answer to the American market was to acquire a designated exchange: Polymarket bought QCEX for $112 million in July 2025, and the exchange now operates as Polymarket US under a CFTC designation, a regulated product run alongside the global one (in April 2026 Polymarket US traded $1.3 billion against $9 billion on the international platform), which is an admission that the architecture and the licence are alternatives, not complements.
Sportsbooks and casinos
The licensed operators arrived last and may matter most. By the end of 2025 DraftKings and FanDuel had chosen their routes into the product: DraftKings agreed in October 2025 to buy Railbird, a CFTC-designated exchange, and launched its prediction markets offering in December 2025, while FanDuel partnered with CME Group to launch FanDuel Predicts the same month. The other routes are to apply for designation directly or to distribute another exchange's contracts through a sportsbook app. The strategic logic was covered in lesson five. The distribution logic is simpler: a sportsbook has millions of verified betting customers (FanDuel describes itself as having approximately 17 million), a brand, a marketing budget and, in states without legal betting, nothing to sell them until now.
An operator distributing exchange contracts through its app has to decide what the customer sees. One screen with odds and contracts side by side, or two products under one brand, or a contract offer only in states where the sportsbook is not licensed. Each choice has a regulatory reading. A licensed sportsbook offering unlicensed contracts to customers in its own licensed state invites its regulator's attention; offering sports contracts only where online sports betting is not legal is the model FanDuel chose, saying Predicts would offer sports contracts only in states without legal online sports betting, except on tribal lands, and withdraw them as states legalise. It is a model the states are watching closely.
Casinos and tribal operators face a harder version. A tribe with compact exclusivity sees an exchange as a competitor it cannot match on terms; the class III ruling described in lesson three is its defence. Tribes have also gone after the distributors: Robinhood reports that tribes have sued an exchange, Robinhood and its derivatives arm over event contracts accessible on or near tribal lands.
Media, data and leagues
Sports leagues and their data companies signed with the exchanges quickly (the NHL named Kalshi and Polymarket official prediction market partners in October 2025, and Genius Sports agreed an official data, media and integrity deal with Kalshi in August 2026), for the same reason they signed with sportsbooks a few years earlier: a venue that trades on their games is a customer for their data and a partner for their content, and a league inside the tent has more say over integrity than a league outside it. Broadcasters have integrated exchange prices into coverage: CNN made Kalshi its official prediction market partner and CNBC signed a multi-year exclusive deal in December 2025, both with an on-air Kalshi ticker, and the prices are quoted in political and financial media as forecasts, which is marketing no sportsbook has ever been given for free.
The media channel has a regulatory edge. Advertising sports betting is regulated in the states that license it (in Pennsylvania, for example, gambling advertisements may not be misleading and must carry a problem-gambling helpline message); a broadcaster showing "the market's probability" on screen is doing something the same states have not decided how to treat. Affiliates, the performance-marketing channel that drives much of licensed sportsbook acquisition, are an obvious channel for exchange promotion for the same reason, and the affiliate compliance frameworks in the Marketing Compliance course do not yet have a category for it.
International distribution
Outside the United States the regulated exchanges have little presence, because a designated contract market's designation means nothing to a gambling regulator in Europe or Asia (Britain's Gambling Commission said in February 2026 that current prediction market products would appear to need a betting intermediary licence), and the crypto-native venues are blocked where regulators have acted. The licensed betting exchanges in Britain and elsewhere are the local equivalent; in Britain they have existed since 2000. The international question for an exchange is therefore whether to seek gambling licences market by market, as the betting exchanges did, or to stay with the crypto architecture and accept the blocks. Both are being tried.
For an operator outside the United States, the practical question is different: whether to launch an exchange-style product under an existing licence, which in Britain would mean the betting intermediary licence the betting exchanges already hold. The economics of a peer-to-peer book inside a licensed operator are the economics of a betting exchange, which are well understood, and the political advantage of offering the product within the licensed system rather than watching it arrive from outside is obvious to regulators who have watched the American litigation since 2025.
What a partnership decides
A distribution partnership with an exchange settles four things, and each is worth negotiating rather than accepting.
Liquidity. Whether the partner's flow goes into the exchange's central book or a segregated one. A shared book gives the partner's customers better prices and gives the exchange the partner's liquidity; a segregated book keeps the partner's data private and its prices worse.
Identity and compliance. Who verifies the customer, to which standard, and who is responsible when a state regulator asks. The partner's licensed status does not transfer to the exchange, and a state may treat the partner as the one offering the product: Wisconsin's April 2026 lawsuit over sports contracts names Robinhood and Coinbase alongside Kalshi.
Economics. The fee split, the market-maker arrangements and whether the partner is permitted to hedge its sportsbook liabilities on the exchange, which can be the most valuable right in the agreement for an operator with a book.
Exit. What happens if the law changes. An agreement signed since 2025 should address the litigation expressly, and an operator that cannot exit cleanly when a state wins has taken on a risk the exchange does not share.
What to take from this lesson
Exchanges grew through other people's apps: brokerages first, then sportsbooks, with leagues and media supplying credibility and reach. Distribution is where the regulatory exposure now sits, because the partner is the entity a state can reach. A partnership with an exchange is a decision about liquidity, identity, economics and exit, and the last of those is the one most likely to be tested.