Gambling Online 101
beginner
7 min readWhat Are Prediction Markets?
How event contracts work, why price discipline matters, and how different prediction venues fit together.
BonusBell Team
Prediction markets are platforms where you buy and sell shares in the outcomes of real-world events — elections, economic data, weather, court rulings, and more. Shares are priced between $0.01 and $0.99, reflecting the market's implied probability, and pay out $1.00 if the outcome occurs. Depending on the venue, those contracts may trade under a US event-contract framework, a global crypto-native structure, or a play-money environment.
Probability Basics
Coin Flip
50% / 50%
Die Roll
16.67% each
38
Roulette
2.63% per #
How Prediction Markets Work
Instead of fixed odds, prediction markets use a share/contract model:
- You buy shares in an outcome (e.g., "Will X happen?")
- Shares are priced $0.01 to $0.99
- If the outcome happens, shares pay $1.00
- If it doesn't happen, shares are worth $0.00
Share Pricing Example
Shares at $0.65 = 65% implied probability=Buy 100 shares for $65, win $100 if correct (+$35 profit)
The share price reflects the market's collective probability estimate.
Price It: Prediction Market Contract Lab
Market vs your number
Market-implied probability
62.0%
Edge per share
+$0.08
Max loss
$62.00
Max profit
$38.00
Expected value on this position
+$8.00
The market is only a price. Your edge exists when your probability estimate is better than that price.
Price Is the Whole Game
Prediction markets look exotic at first, but the core decision is simple: is the current price above or below your best estimate of the true probability? If you think an event resolves 70% of the time and the market lets you buy at $0.62, the contract may be worth owning. If the market is already at $0.78, the same thesis may no longer be attractive.
Major Platforms
Popular Prediction Markets
| Platform | Focus | Currency |
|---|---|---|
| Polymarket / Polymarket US | Politics, current events, culture | Venue-dependent |
| Kalshi | Economics, events, weather, sports-style event contracts | USD |
| Predictit | US politics | USD (limited stakes) |
| Manifold | Anything (play money/mana) | Virtual currency |
Good to Know
Regulatory status varies by venue. The current CFTC designated-contract-market list includes Kalshi and QCX LLC d/b/a Polymarket US, while other event venues may use a different legal structure. Know which venue you are actually using and what rules govern it.
Types of Markets
Binary (Yes/No)
"Will [event] happen?" Shares resolve to $1 or $0.
Multiple Choice
"Which candidate will win?" Winning choice pays $1, others $0.
Scalar/Range
"What will be the value of X?" Payout based on final number.
Linked Series
Related markets that span time (e.g., monthly inflation)
Why People Trade
Prediction markets attract traders for different reasons:
- Profit from information edge – You know something the market doesn't
- Hedging – Offset real-world risks tied to outcomes
- Entertainment – Stake in events you follow closely
- Research – Well-structured markets can aggregate dispersed information efficiently
Strategy Insight
The best opportunities come when markets overreact to news. A probability jumping from 30% to 50% on a rumor might be mispriced if you have reason to doubt the news source.
Key Differences from Sports Betting
Prediction Markets vs Sports Betting
| Aspect | Prediction Markets | Sportsbooks |
|---|---|---|
| Pricing | Exchange (bid/ask) | Fixed by book |
| Exit | Sell before resolution | Usually stuck with bet |
| Vig | Spread between buy/sell | Built into odds |
| Liquidity | Varies by market | Usually high |
| Events | Anything verifiable | Sports focused |
Risks to Understand
Warning
- Liquidity risk – Thin markets may not let you exit at fair prices
- Resolution disputes – What happens if outcome is ambiguous?
- Regulatory risk – Platforms may face legal challenges
- Counterparty risk – Especially on unregulated platforms
Good to Know
A prediction contract can be directionally correct and still be a bad trade if you paid too much. The edge comes from price discipline, not from merely being “right” about the story.
Key Takeaways
- 1Prediction markets let you buy shares in real-world outcomes
- 2Share prices reflect implied probability (e.g., $0.65 = 65%)
- 3You can sell before resolution—unlike traditional betting
- 4The edge comes from buying a better price than your own probability estimate
- 5Understand liquidity and platform risks before trading
Sources & References
- Binary contract pricing ($0.01-$0.99 mapping to 1-99% implied probability) is standard financial mathematics for event derivatives.
- Commodity Futures Trading Commission (CFTC). The CFTC designated-contract-market materials are the primary source for which US event-contract venues currently operate under that framework. (DCM list; Kalshi filing)
- The Promise of Prediction Markets by Arrow et al. (Science, 2008). Research on prediction market accuracy versus polls and expert forecasts.
- Platform-specific mechanics, fees, and order behavior should be checked against each venue’s own public documentation before you trade live markets. (Kalshi Help Center; Polymarket Help Center)
Mathematical claims are independently verifiable. BonusBell platform analysis reflects our tracked platform directory and dated evidence checks as of March 2026.