What Are Prediction Markets?
Polymarket, Kalshi, and how event betting works.
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. Major platforms include Polymarket (crypto-based) and Kalshi (the first CFTC-regulated prediction market in the US).
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
The share price reflects the market's collective probability estimate.
Major Platforms
Popular Prediction Markets
| Platform | Focus | Currency |
|---|---|---|
| Polymarket | Politics, crypto, current events | USDC (crypto) |
| Kalshi | Economics, events, weather | USD (regulated) |
| Predictit | US politics | USD (limited stakes) |
| Manifold | Anything (play money/mana) | Virtual currency |
Good to Know
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 – Markets often predict better than polls
Strategy Insight
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
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
- 4Markets often predict outcomes better than polls or experts
- 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). Kalshi received CFTC designation as the first regulated event contracts exchange in the US (2020). Regulatory framework for prediction markets under the Commodity Exchange Act.
- The Promise of Prediction Markets by Arrow et al. (Science, 2008). Research on prediction market accuracy versus polls and expert forecasts.
- Platform-specific details (Polymarket, Kalshi, PredictIt, Manifold) sourced from each platform's public documentation and terms of service.
Mathematical claims are independently verifiable. BonusBell platform analysis reflects data from 220+ tracked platforms as of March 2026.