ProphetX bets on federal regulation with move toward prediction markets

On the BettingStartups Podcast, Benzaquen discussed ProphetX’s next chapter: filing with the Commodity Futures Trading Commission (CFTC) to operate as a federally regulated prediction market—its fourth regulatory model in seven years.

Before pursuing CFTC oversight, ProphetX operated under a state-issued betting exchange license in New Jersey. “We held that license for a little over two years and ultimately gave that up because of the pitfalls of being able to operate an exchange or a prediction market nationally in the U.S.,” Benzaquen said, reflecting on the company’s early chapter as one of the few licensed exchanges in the country. “We truly believe we found our home at the CFTC.”

ProphetX has cycled through multiple regulatory frameworks in its search for scale and sustainability. After leaving New Jersey, it pivoted to a sweepstakes-based model that allowed the company to reach roughly 40 states and rebuild national momentum. But Benzaquen admitted it was never a perfect fit. “The headwinds we knew would always come with the sweepstakes model,” he said. “It was a great vertical for us to be able to build the business back up, get some scale, really see some product market fit on a national level… But sweepstakes in itself is not the best regulatory vertical for, I would say, any sports platform, let alone an exchange.”

That friction, combined with rising state crackdowns on sweepstakes betting, accelerated the company’s decision to pursue CFTC oversight. “Being able to get to a much more akin terminology and regulatory vertical that the product belongs in will be a huge uplift for our consumers, for ourselves,” Benzaquen said.

Under the new model, ProphetX will focus on sports event contracts rather than the wide array of non-sports markets popular on other exchanges. “We’re definitely a sports-first and sports-native platform,” he said. “The depth of markets across all these sports and the leagues that we carry is pretty unmatched.” While sports will remain its core, ProphetX plans to expand selectively, starting with crypto. “Crypto derivatives will probably be our first step into those secondary markets,” he added.

One area where ProphetX is taking a firm stance is liquidity. Unlike competitors such as Kalshi, the company will not operate an affiliated trading arm. “Trading on your own platform and monetizing your own customer base just has a ton of inherent obstacles associated with it,” Benzaquen said. “The biggest way to build a fair and competitive exchange environment is to have it truly be laissez-faire and not be involved in the ecosystem.”

That commitment to fairness carries through to ProphetX’s product development. Benzaquen highlighted the company’s recently launched request-for-quote (RFQ) system for parlays—technology he called “one of the hardest projects we’ve ever built.” The RFQ allows users to build multi-leg bets that are priced through a real-time bidding process among connected market makers. “We want the look and feel of the experience to mimic a sportsbook as much as humanly possible,” he said.

As the company awaits progress on its application—currently delayed by the federal government shutdown—Benzaquen said the team is preparing for its next stage of growth. “We’ve been looking for a way to bring our product to all 50 states and nationalize our liquidity pool… We feel like we’re right on the precipice of that.”

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