STX was arguably a regulated sports exchange before prediction markets were cool.
The exchange launched in Ontario’s regulated online gambling market more than three years ago, before the boom of federally regulated sports prediction markets in the U.S. that began in late 2024 and that is now thoroughly disrupting things south of the border.
But the plan, according to STX founder and CEO Justin Deutsch, has always included the states. That is why Deutsch and Co. applied late last year to the Commodity Futures Trading Commission (CFTC) for licensure as both a designated contract market (DCM) and derivatives clearing organization (DCO).
- STX launched in Ontario over three years ago but has long planned to expand into the U.S. prediction market sector.
- The company is seeking CFTC licenses to bring its regulated platform, consumer protections, and technology to all 50 states.
- STX also plans to keep growing in Canada, with Alberta next and potential opportunities in broader non-sports prediction markets.
Pending those CFTC approvals, STX is poised to apply the lessons learned and products tested in the Ontario sports betting and iGaming market to the much larger U.S. market.
“Our mission since inception was to operate a prediction market across all 50 states in the U.S.,” Deutsch told Covers this week via email. “We focused on building out infrastructure and getting feedback from power users in Ontario while others paved the regulatory path with the CFTC. Once it became clear that our products would be approved at the CFTC, we began the journey to get the licensing.”
STX's time in Ontario, which has more than 30 provincially regulated online sportsbooks (but just one exchange, STX), has been challenging, Deutsch noted. Much of that time has gone toward developing features required by regulators rather than those designed to attract more traders. Still, that experience and those features may help stateside.
“Now our platform is geared up to take on the complexities of federal regulation,” Deutsch said. “In fact, we have more consumer protections than the CFTC even requires, so we hope to set a new gold standard in that regard.”
— STX (@stx_app) August 7, 2026
Having trader protections informed by a regulated market for online gambling may indeed be welcomed by some onlookers worried about the explosion of prediction market activity. The intense fight that’s broken out over the legality of sports event contracts has included accusations that the exchanges lack the same level of consumer protection as state-regulated sportsbooks.
Even with that legal threat to prediction markets, which now includes a possible U.S. Supreme Court review, new names and faces are still entering the space.
While Kalshi currently accounts for around 85% of trading volume, challengers include longtime online sportsbook operators such as DraftKings and FanDuel, as well as sports-focused exchange operators like Novig and ProphetX.
Only in America
According to data collected by Aldrin Research, CFTC-regulated prediction markets have seen more than $46 billion in notional trading volume over the past month, around 80% of which is tied to sports or parlays that may include sports. Ontario, meanwhile, sees around CA$1 billion in monthly sportsbook handle.
While handle and volume aren’t exactly the same (the latter includes both the “taker” and “maker” side of a trade, which is sort of like counting both a person’s bet and the potential amount a sportsbook would have to pay them), the opportunity in the U.S. is obviously huge.
Deutsch believes the “pie is big enough” for plenty of companies to win. Where he particularly sees opportunity is providing the plumbing for big consumer brands that have a lot of potential traders but no infrastructure to meet that demand.
“Although many big brands now have their own products … there are many, many more that don't have the technology or licensing to be able to operate a prediction market, but they have a database of users who they could monetize if they could provide access to those markets,” Deutsch said. “An exchange is a middleman and the years we have spent iterating on our platform and APIs position us to be a great partner for both institutional liquidity providers on one side and distribution brand partners on the other.”
Despite the giant opportunity looming in the U.S., STX is not abandoning Canada. Deutsch said STX's plan is to continue operating in Ontario and that after the U.S., the next market it is looking to launch in is Alberta, which opened its regulated iGaming market in July.
Any further expansion in Canada on the sports side might be forced to abide by provincial gambling rules. Canadian financial regulators recently announced they had no plans to authorize trading of sports event contracts, which suggests they aren’t about to bless a nationwide form of sports-related contract trading as has been done in the U.S.
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Old news
Deutsch said that news wasn’t really news for STX, though. STX had to work with the Ontario Securities Commission when it obtained its Ontario iGaming license, “and (the commission) took the stance of all sports contracts would be governed by the (Alcohol and Gaming Commission of Ontario),” he said.
Still, the Canadian investment and securities watchdogs aren’t saying no to prediction markets entirely. They are authorizing a limited set of contracts for trading, albeit in connection with subjects such as economics and the environment. Deutsch sees opportunity there as well.
“My hope in the long term would be that we could hold both a license with AGCO and the relevant financial regulator and as long as we comply with each we hope to be able to offer all types of prediction market contracts within the same platform,” he said. “The other option is we license our platform to a financial player who already has those licenses and allow them to operate the non-sports exchange while we operate the AGCO-governed exchange.”
Deutsch is supportive of Canada adopting a more U.S.-like posture toward prediction markets, saying they have “real economic utility” and could keep trading activity onshore. That may never happen, though.
There is perhaps another long-shot route STX could take to beef up its Canadian business. That would be the legal bid Ontario launched to connect its iGaming regulatory scheme to others abroad.
If you have asked me recently for an Ontario DFS update, here it is.
— Geoff Zochodne (@GeoffZochodne) July 14, 2026
The Supreme Court will hold a hearing on the appeal of the Court of Appeal for Ontario's decision on international iGaming liquidity. If Supreme Court leaves decision untouched, could create path back for DFS. https://t.co/T2jub6VLSz
What the provincial government envisions is a way for Ontario-based online gamblers to participate in games that also include players based outside of Canada. This could help with “peer-to-peer” games such as online poker and pay-to-play daily fantasy sports contests. Both of those verticals took a hit in Ontario after the province launched its regulated iGaming market in 2022, as the rules of that market include that all players must be physically located in Ontario.
Ontario's government already has one majority opinion from its top court saying this would be legal. However, that opinion has been appealed to the Supreme Court of Canada, with a hearing scheduled for October. If it’s upheld by the Supreme Court, it could pave the way for some interesting product innovation in Ontario.
Prediction markets are technically another peer-to-peer product. In Ontario, though, STX’s trader pool is limited to traders who are in the province. Would it perhaps be possible, then, and depending on what the Supreme Court says, for STX to link its Ontario traders with those abroad?
Early days, TBD, but maybe there’s something there, Deutsch suggests.
“(The court reference) doesn't explicitly discuss exchanges - initially was targeting poker, I believe - but that may have changed,” he said. “I have had discussions with regulators about how it would open up the liquidity pool for our product in Ontario, so, yes, you are on the right track in that thinking.”
