What Are Prediction Markets? A Complete Guide to How They Work

What Is a Prediction Market?

A prediction market is a marketplace where people trade contracts based on what they think will happen in the future. These contracts, known as event contracts, are tied to specific outcomes, such as who will win an election, whether interest rates will change or which team will win a championship.

What makes prediction markets useful is that they bring together the opinions and knowledge of many different participants. Traders put money behind their predictions, giving them a financial reason to carefully consider the information available before taking a position.

As people buy and sell contracts, their collective expectations are reflected in market prices. This is why prediction markets are sometimes called forecasting markets or information markets. They turn the views of many participants into a constantly changing estimate of what is likely to happen.

What Is an Event Contract?

An event contract is the basic contract bought and sold on a prediction market. It is tied to a specific question about a future event and usually has two possible outcomes: Yes or No.

Each contract has clear rules that determine what must happen for it to settle as Yes or No. These are known as the resolution criteria. Once the event is decided, a correct contract typically settles at $1, while an incorrect contract settles at $0.

A Simple Prediction Market Example

Imagine a prediction market asking:

“Will Candidate A win the election?”

If a Yes contract is trading at $0.65, the market is effectively estimating that Candidate A has about a 65% chance of winning.

If you buy the Yes contract for $0.65 and Candidate A wins, the contract settles at $1. You receive $1, resulting in a $0.35 profit per contract before any applicable fees.

If Candidate A loses, the contract settles at $0, and you lose the $0.65 you paid for it.

The price can continue to change before the election as traders react to polls, news, and other information. So, a price of $0.65 represents the market's current estimate. It is not a guarantee that Candidate A will win.

How Do Prediction Markets Work?

Prediction markets work by creating a market around a specific question about a future event. Traders then buy and sell contracts based on how likely they think each outcome is.

As trading takes place and new information becomes available, contract prices can move to reflect the market's changing expectations. Once the event has a confirmed outcome, the market is resolved and the contracts settle.

1. An Event and Outcome Are Defined

Every prediction market starts with a clearly defined question, such as “Will Candidate A win the election?”

The question must have a deadline and clear rules for determining the result. These rules are important because everyone trading the market needs to know exactly what counts as a Yes or No outcome.

For example, the market rules might state that the result will be based on the official certified election results rather than media projections.

2. Event Contracts Are Listed

Once the question and rules are established, contracts for the possible outcomes can be listed for trading.

The simplest markets offer Yes and No contracts. However, some prediction markets have several possible outcomes. An election market, for example, could offer separate contracts for each candidate.

3. Traders Buy and Sell Contracts

Traders take positions based on how likely they think an outcome is to happen.

If someone believes Candidate A has a better chance of winning than the current market price suggests, they might buy Yes contracts. Someone with the opposite view may take a position against that outcome.

Traders don't necessarily have to wait for the event to finish. They can usually sell their position before settlement if they want to take a profit, limit a loss, or simply exit the market.

4. Prices Change as the Market Changes

Prediction market prices can move continuously as people buy and sell contracts.

New information can have a major effect. An election poll, interest rate announcement, player injury or breaking news story could cause traders to reassess the likelihood of an outcome.

Supply and demand then push contract prices higher or lower, meaning the market's estimated probability can change right up until the event is resolved.

5. The Event Is Resolved

When the event ends, the prediction market determines which outcome occurred using the resolution source specified in its rules.

This could be an official election result, government report, sports league or another predetermined source.

Clear resolution rules matter because real-world events aren't always straightforward. Poorly worded questions or unclear sources can lead to disputes over whether a contract should settle as Yes or No.

6. Contracts Settle

Once the result is confirmed, the contracts are settled.

In a typical binary prediction market, the winning contract settles at $1, while the losing contract settles at $0.

So, if you hold a Yes contract when the market resolves as Yes, you receive $1 per contract. If the market resolves as No, your Yes contract becomes worth $0.

How Do Prediction Market Prices Work?

Prediction market prices show how likely traders collectively think an outcome is to happen. In a typical market where a winning contract settles at $1, a contract trading for $0.60 can be interpreted as the market estimating roughly a 60% chance of that outcome occurring.

These prices aren't fixed. They move as traders buy and sell contracts and react to new information, so the implied probability can change throughout the life of the market.

From Contract Price to Implied Probability

The easiest way to understand prediction market prices is to think of them as probabilities.

For example:

• A contract priced at $0.25 suggests roughly a 25% probability.
• A contract priced at $0.60 suggests roughly a 60% probability.
• A contract priced at $0.85 suggests roughly an 85% probability.

If our Candidate A contract moves from $0.65 to $0.75, the market's implied probability of Candidate A winning has increased from about 65% to 75%.

However, this doesn't mean Candidate A has a guaranteed 75% chance of winning. The price reflects what the market currently believes based on the information and trading activity available at that moment.

Why Prediction Market Prices Change

Prices change whenever traders become more or less confident about an outcome.

In an election market, a new poll or debate could change expectations. In sports, an injury to an important player could quickly move prices. Economic markets can react to inflation reports, employment data, or central bank announcements.

Prices can also move because of trader sentiment and changes in supply and demand. As new information arrives and traders adjust their positions, prediction market prices respond accordingly.

Bid, Ask, and the Bid-Ask Spread

The price displayed on a prediction market doesn't always mean you can immediately buy or sell a contract at exactly that price.

The bid is the highest price a buyer is currently willing to pay for a contract. The ask is the lowest price at which a seller is willing to sell it.

The difference between the two is called the bid-ask spread.

For example, buyers might be willing to pay $0.64 for a contract while sellers are asking $0.66. In this case, the bid-ask spread is $0.02.

Smaller spreads generally make it easier to trade close to the market's current price.

Liquidity and Trading Volume

Liquidity describes how easily contracts can be bought or sold without significantly affecting their price. Trading volume measures how much trading activity has taken place in a market.

Popular markets with many active buyers and sellers tend to have greater liquidity and tighter bid-ask spreads. Smaller markets may have fewer participants, making it harder to buy or sell at the price you expect.

This also matters when interpreting probabilities. A contract trading at $0.70 in a busy market with many participants may provide a more useful signal than the same price in a market where only a handful of people are trading.

Market Orders vs. Limit Orders

Prediction markets can offer different ways to place trades, with market orders and limit orders among the most common.

A market order tells the platform to complete your trade at the best price currently available. This can execute quickly, but the final price may be slightly different from the price you initially saw.

A limit order lets you choose the maximum price you're willing to pay or the minimum price you're willing to accept. This gives you more control over the price, but there is no guarantee that another trader will accept your order.

How Do You Make or Lose Money in a Prediction Market?

You can make or lose money in a prediction market in two main ways: by holding a contract until the event is resolved or by selling it before settlement.

It is important to distinguish between payout and profit. Your payout is the total amount you receive when a contract settles, while your profit is what remains after subtracting what you originally paid for the contract and any applicable fees.

Holding a Contract Until Settlement

Suppose you buy 100 Yes contracts at $0.60 each, costing you $60 in total.

If the event happens, each contract settles at $1. Your total payout is therefore $100, giving you a $40 profit before fees.

If the event doesn't happen, the contracts settle at $0. You receive no payout and lose the $60 you originally paid.

In this example:

• Total cost: $60
• Winning payout: $100
• Profit if correct: $40
• Return on the $60 spent: 66.7%
• Maximum loss: $60

Selling a Contract Before Settlement

You don't always have to wait until an event is over to make a profit.

Suppose you buy 100 contracts at $0.40 each, spending $40. New information then makes traders more confident that the event will happen, pushing the contract price to $0.60.

You could sell your 100 contracts for $60 and make a $20 profit before fees.

The final outcome of the event no longer matters to you because you've already closed your position. This ability to buy and sell as probabilities change is one of the main differences between prediction markets and traditional fixed bets.

Maximum Profit and Maximum Loss

Binary event contracts have clearly defined potential payouts.

If a contract costs $0.70 and settles at $1, your maximum potential profit from holding it to settlement is $0.30 per contract. If you're wrong and it settles at $0, your maximum loss is the $0.70 you paid.

This means the price you pay determines both your potential profit and your potential loss. Lower-priced contracts offer greater potential returns if you're correct, but their lower price also reflects the market assigning that outcome a lower probability.

Prediction Market Fees

Prediction market platforms can charge fees when users trade contracts. The exact structure varies by platform.

Some charge a fee when contracts are bought or sold, while others calculate fees based on factors such as the number of contracts, their price or potential payout.

These costs matter because they reduce your actual profit. A trade that produces a $20 gain before fees, for example, will leave you with slightly less once any applicable trading fees are deducted.

Why Do Prediction Markets Work?

Prediction markets work by bringing together the knowledge, opinions and expectations of many people and turning them into a single market price.

Instead of asking one expert what they think will happen, a prediction market allows many participants to act on their own information. As they buy and sell contracts, their different views are combined into a constantly changing estimate of an event's probability.

The Wisdom of Crowds

A large group of people can sometimes produce a better forecast than a single individual. This idea is commonly known as the wisdom of crowds.

One trader might know more about polling, another might closely follow economic data, while someone else may understand a particular industry extremely well. Prediction markets bring these different perspectives together rather than relying on a single source.

However, crowds aren't automatically correct. The quality of the market still depends on factors such as who is participating, what information they have and how actively the market is being traded.

Financial Incentives and “Skin in the Game”

Prediction markets give participants a financial reason to think carefully about their predictions.

In a survey, someone can say that an event has an 80% chance of happening without facing any consequences if they're wrong. In a prediction market, acting on that belief means putting money behind it.

Being right can produce a profit, while being wrong can result in a loss. This gives traders an incentive to look for situations where they believe the market has incorrectly priced an outcome.

Information Aggregation

Not every trader has the same information or reaches the same conclusion.

Suppose an election contract suggests Candidate A has a 60% chance of winning. A trader who has seen new polling data might believe the real probability is closer to 70% and buy Yes contracts.

Other traders may have different information and take the opposite position. As these participants trade against one another, their different views and information become reflected in the market price.

This process is known as information aggregation.

Why Being Confident Isn't Enough

Prediction markets don't measure how strongly people say they believe something. They measure what people are willing to trade on.

A trader who believes an outcome has an 80% chance of happening but isn't willing to buy when the market prices it at 50% has little effect on the market.

To influence the price, participants have to act on their beliefs by buying or selling contracts. In this way, prediction markets give more weight to opinions that traders are actually willing to put money behind.

Are Prediction Markets Accurate?

Prediction markets can be useful forecasting tools, but their probabilities should never be treated as guarantees.

Because market prices combine the views of many participants and can react quickly to new information, they can provide a useful picture of what people collectively expect to happen. Some prediction markets have historically performed well compared with other forecasting methods, including polls. However, their accuracy depends heavily on the quality of the market and the information available to traders.

Prediction Markets vs. Polls

Polls and prediction markets measure different things.

Prediction Markets vs. Expert Forecasts

Prediction markets combine the judgments of many participants rather than relying on a single expert.

When Prediction Markets Can Be Wrong

Prediction markets are still predictions, and there are several factors their probabilities can be inaccurate.

What Types of Prediction Markets Are There?

Prediction markets can be structured in several different ways. The main difference is how trades are matched, how prices are determined, and who operates the market.

Some work similarly to traditional financial exchanges, while others use automated systems or blockchain technology. Prediction markets can also operate without real money when their main purpose is research or forecasting.

What Can Prediction Markets Predict?

Prediction markets can cover almost any future event that has a clearly defined and verifiable outcome. Popular subjects include politics, sports, economics, technology, weather and entertainment.

The important part is that the market's result can be confirmed using an agreed source once the event is over.

Prediction Markets vs. Sports Betting

Prediction markets and sports betting can look very similar, especially when both offer markets on the same sporting event. In either case, you can put money behind an outcome and make or lose money depending on what happens.

The main difference is how the market operates. A traditional sportsbook sets the odds and accepts bets from customers. On many prediction markets, participants instead trade event contracts with other participants, with prices changing according to market activity.

Who Sets the Price?

At a sportsbook, the operator sets the odds for each outcome. Those odds can then be adjusted as new information becomes available or betting activity changes.

On a prediction market, prices are generally shaped by participants buying and selling contracts. If demand for a Yes contract increases, for example, its price may rise, increasing its implied probability.

This means prediction market prices are driven by the market rather than being set directly by a bookmaker.

Trading Against Other Participants vs. the House

With traditional sports betting, you generally place a wager with the sportsbook. The sportsbook acts as the counterparty and pays winning bets according to the odds offered.

Many prediction markets instead use an exchange-style model where participants trade with one another and the platform facilitates those trades.

The exact structure can vary between platforms, so not every prediction market works in precisely the same way.

Selling Before the Event Ends

A major feature of prediction markets is the ability to trade contracts before an event is resolved.

Suppose you buy a contract for $0.40 and its price later rises to $0.65. You may be able to sell the contract and take the $0.25 gain without waiting to see whether the predicted outcome actually happens.

Traditional sportsbook bets are generally placed at fixed odds and then settled according to the final result, although some sportsbooks offer cash-out features that allow bettors to close certain wagers early.

Fees vs. Sportsbook Margin

Sportsbooks typically make money by building a margin, often called the vig or juice, into their odds. This means the odds offered to bettors don't perfectly reflect the underlying implied probabilities of all possible outcomes.

Prediction markets can instead generate revenue through trading or transaction fees. Traders may also face a bid-ask spread — the difference between the prices available to buy and sell a contract.

The exact costs vary between platforms, so neither structure should automatically be considered cheaper. Traders need to consider the total cost of placing and exiting a position.

Prediction Markets vs. Traditional Financial Markets

Prediction markets borrow several features from traditional financial markets. Participants buy and sell contracts, prices change according to market activity, and positions can often be sold before they settle.

The key difference is what gives the contract its value. Stocks and bonds are tied to companies, assets or debt, while prediction market contracts are tied to whether a specific event happens. Once that event is resolved, the contract settles and stops trading.

Event Contracts vs. Stocks

Buying a stock gives you partial ownership of a company. Its value can rise or fall based on factors such as the company's earnings, growth prospects and wider economic conditions. Some stocks also pay dividends to shareholders and can potentially be held indefinitely.

An event contract doesn't provide ownership in a company or asset. Its value depends on the outcome of a specific event and, once that event is resolved, the contract settles at its predetermined value.

Event Contracts vs. Futures Markets

Futures and event contracts both involve taking a position based on something that will happen in the future.

Traditional futures contracts are generally tied to an underlying asset or financial measure, such as oil, gold or a stock market index. Their value changes along with the price of that underlying market.

An event contract instead asks whether a clearly defined outcome will occur. A typical Yes/No contract ultimately settles at $1 or $0 depending on the result.

Event Contracts vs. Options

Options give traders the right to buy or sell an underlying asset at a specified strike price before or on a particular date. Their value can be affected by several factors, including the underlying asset's price, time until expiration and expected volatility.

Basic prediction market contracts are simpler. Their value is based primarily on the probability of a defined event occurring, and the contract ultimately settles according to whether that outcome happens.

For example, an option could depend on how far a stock moves above or below a particular price, while an event contract might simply ask “Will the S&P 500 close above 7,000 by December 31?”

How Are Prediction Markets Regulated in the US?

Prediction markets in the US operate within a developing regulatory framework. At the federal level, event contracts fall under the oversight of the Commodity Futures Trading Commission (CFTC) when they are offered through regulated derivatives markets.

However, that doesn't mean every prediction market or every type of contract is automatically available everywhere. Federal regulators and individual states continue to disagree over how some event contracts, particularly those involving sports and other gambling-like outcomes, should be treated.

The Role of the CFTC

The Commodity Futures Trading Commission is the federal agency responsible for overseeing US derivatives markets, including futures, options and certain event contracts.

The CFTC regulates the exchanges where federally regulated prediction-market contracts can be listed and traded. It also sets rules covering areas such as market integrity, reporting, customer protection and prohibited trading practices.

The agency has increased its focus on prediction markets as the industry has grown, including issuing new guidance and enforcement advisories during 2026.

Designated Contract Markets (DCMs)

A Designated Contract Market, or DCM, is an exchange that has been approved by the CFTC to offer regulated derivatives contracts.

DCMs must meet federal requirements covering areas such as trading practices, market monitoring and financial safeguards.

Several prediction-market exchanges operate as DCMs, allowing them to list event contracts under CFTC oversight. Being a DCM does not mean every possible event contract is automatically approved, however. Exchanges still have rules and procedures they must follow when introducing new markets.

Federal Regulation vs. State Law

One of the biggest legal questions surrounding prediction markets is where federal authority ends and state gambling law begins.

Prediction-market operators generally argue that event contracts traded on CFTC-regulated exchanges are derivatives governed by federal law. Some states argue that contracts based on outcomes such as sporting events amount to gambling and should also comply with state gaming laws.

This disagreement has led to lawsuits involving regulators, states and prediction-market operators. The CFTC itself has argued that it has exclusive authority over federally regulated prediction markets, while several states continue to challenge that position.

For that reason, it is misleading to simply say that prediction markets are “legal in all 50 states.” Availability can depend on the platform, the type of event contract and the latest court or regulatory decision.

Why Prediction Market Regulation Keeps Changing

Prediction markets are developing much faster than the rules surrounding them.

Courts and regulators are still considering questions such as which events can legally form the basis of a contract, how sports-related markets should be classified and whether federal derivatives law overrides state gambling restrictions.

The CFTC has also been reviewing whether additional rules specifically covering prediction markets are needed. In March 2026, it opened a rulemaking process seeking public input on the regulation of event contracts.

What Are the Risks and Limitations of Prediction Markets?

Prediction markets can be useful, but they come with both financial risks for traders and limitations as forecasting tools.

A contract can lose its entire value, thin markets can be difficult to trade, and prices can sometimes be distorted by poor information, emotional behavior or manipulation. Even a well-functioning prediction market only reflects what participants currently believe — it does not know the future.

You Can Lose Your Entire Position

Binary event contracts usually settle at either $1 or $0.

If you buy a Yes contract and the market ultimately resolves as No, the contract becomes worthless. This means you can lose the full amount you paid for the position if you hold it until settlement.

Liquidity Risk

Some prediction markets attract large numbers of traders, while others have very little activity.

In a thin market, you may be able to enter a position but struggle to sell it later at the price you want. A lack of buyers and sellers can also create wider bid-ask spreads and make prices move more sharply after relatively small trades.

Market Manipulation

Prediction market prices can sometimes be influenced by large traders.

This is more of a concern in smaller markets, where one large order may move the price significantly. A sudden price movement therefore doesn't always mean that genuinely important new information has entered the market.

The competitor material also highlights manipulation as one of the main limitations of prediction markets, particularly where trading activity is limited.

Insider Information

A prediction market becomes less fair when some traders possess important information that isn't available to everyone else.

This can be particularly problematic when someone has direct knowledge of an upcoming decision or can influence the event itself.

In these situations, the market may look highly accurate because the price moves toward the correct outcome, but ordinary traders may be competing against participants with a major informational advantage. The competitor material specifically raises this issue in relation to recent prediction-market controversies.

Behavioral Bias and Herding

Prediction markets are still made up of people, so human biases can affect prices.

Traders may become overconfident, follow the crowd or react too strongly to recent news. Political or personal preferences can also influence how people assess an outcome.

If many participants make the same mistake at the same time, the market price can move away from a more realistic probability.

Resolution and Oracle Risk

A prediction market doesn't settle based on what traders feel happened. It settles according to the exact rules written into the contract.

That makes the wording of the question and its resolution source extremely important.

For example, a political event might appear to have clearly happened in everyday terms, but the contract could require a specific official declaration before it can settle as Yes.

Blockchain-based markets face a similar issue through oracles, which provide the real-world information used to settle smart contracts. If the source is unclear, disputed or incorrect, settlement can become controversial.

Regulatory Risk

The legal environment around prediction markets is still developing.

Court decisions, regulatory interpretations and state-level restrictions can affect which platforms or contracts are available. A market that is accessible today may face restrictions later, especially in disputed areas such as sports or political event contracts.

The competitor set itself reflects how quickly this area changes, with different pages giving conflicting accounts of state availability and legal status.

Prediction Markets Are Not Guarantees

A prediction market price represents an estimate, not certainty.

If a contract trades at $0.90, the market is suggesting roughly a 90% probability of that outcome occurring. It does not mean the event is guaranteed.

A 90% probability still leaves a 10% chance of the opposite result. High-probability events can and do fail to happen, which is why prediction-market prices should always be treated as forecasts rather than facts.

Can Prediction Markets Be Manipulated?

Yes, prediction markets can be manipulated, particularly when a market has low liquidity or relatively few participants. A trader or coordinated group making large trades may be able to push a contract price higher or lower and temporarily change its implied probability.

However, moving the market price is not the same as manipulating the real-world event itself. Other traders can respond to an artificially distorted price, potentially pushing it back toward what they believe is a more realistic probability.

How Large Trades Can Move Prices

How easily a prediction market can be moved depends partly on its market depth — how many buy and sell orders are available at different prices.

In a busy market with many participants, a large trade may have relatively little effect. In a thin market, the same trade could cause a much larger price movement because there are fewer orders available.

This is one reason prices in small, illiquid markets should be interpreted with greater caution.

Why Manipulation Can Create Opportunities for Other Traders

Prediction markets have a built-in mechanism that can sometimes work against attempts to distort prices: other traders can take the opposite position.

Suppose a large trader pushes a contract from $0.50 to $0.70 even though other participants still believe the outcome has roughly a 50% chance of happening.

Those traders may now see the contract as mispriced and trade against the move. If enough participants do this, their activity can push the price back toward its previous level.

Manipulation can therefore be harder to maintain in markets with plenty of informed participants and strong liquidity.

When Manipulation Becomes More Serious

The issue becomes more serious when traders can influence more than just the contract price.

An insider might have access to important non-public information, while in some cases a market participant could potentially have direct influence over the event being predicted. The competitor material highlights recent concerns about prediction markets where traders may have had access to privileged information before other participants.

Coordinated trading can also be more difficult for a market to correct, particularly when liquidity is low.

Finally, unclear market rules can create another form of risk. If the wording or settlement conditions are ambiguous, participants may disagree about what actually counts as a winning outcome even after the real-world event has occurred.

What Are Prediction Markets Used For Beyond Trading?

Prediction markets aren't only places for people to speculate on future events. They can also be used as forecasting and decision-making tools.

By combining the expectations of many participants into a single probability, prediction markets can provide organizations, researchers and policymakers with another way to assess what might happen in the future.

Election and Political Forecasting

Politics has been one of the most established uses of prediction markets.

Academic projects such as the Iowa Electronic Markets have used prediction markets to study and forecast election results. Instead of asking participants who they personally support, these markets encourage them to predict who they believe will actually win.

The resulting market probabilities can then be compared with polls and other election forecasting methods.

Economic Forecasting

Prediction markets can be used to estimate the likelihood of future economic events.

Markets might cover questions such as whether the Federal Reserve will change interest rates, where inflation will be at a certain date or whether an economic indicator will reach a particular level.

Because prices change as participants react to new information, these markets can provide a continuously updated picture of expectations.

Business Forecasting

Companies can also use prediction markets internally to help forecast business outcomes.

Employees might trade using points or virtual money on questions such as whether a project will meet its deadline, whether sales will reach a target or whether a new product will succeed.

The idea is to combine information spread across different parts of a company. Employees working directly on a project, for example, may collectively have useful information that isn't fully reflected in an official forecast.

Research and Public Policy

Prediction markets can provide researchers and policymakers with another source of information when assessing uncertain future events.

For example, markets could help estimate the likelihood of a policy achieving a particular result or the chances of a proposed regulation being introduced.

They shouldn't replace traditional research, economic models or expert analysis. Instead, market probabilities can provide an additional forecasting signal that can be considered alongside these other sources when making decisions

A Brief History of Prediction Markets

Prediction markets may feel like a recent development, but the idea of putting money behind predictions about future events has existed for centuries.

What has changed is the technology behind them. Prediction markets have evolved from informal political betting to academic experiments, online platforms and, more recently, blockchain-based and federally regulated event-contract markets.

Early Political Betting Markets

Some of the earliest examples of prediction markets involved betting on political and election outcomes.

Long before modern polling existed, people traded wagers based on who they expected to win elections. These early markets were much less structured than today's platforms, but they followed the same basic idea: participants put money behind their expectations about a future event.

The Iowa Electronic Markets

A major step toward modern prediction markets came in 1988, when the University of Iowa launched the Iowa Electronic Markets (IEM).

The academic project allowed participants to trade contracts based on election and economic outcomes. Researchers could then study whether market prices provided useful forecasts of future results.

The IEM became an important example of how markets could be used to collect information and measure expectations rather than simply for speculation.

The Rise of Online Prediction Markets

The internet made prediction markets much easier to operate and access.

Online platforms could bring together larger groups of participants, update prices in real time, and offer markets covering far more than elections. Politics was joined by subjects such as economics, technology, entertainment and other measurable events.

This helped prediction markets develop from relatively small academic experiments into platforms accessible to a much wider audience.

Blockchain and the Modern Prediction Market Boom

Blockchain technology introduced another model for prediction markets.

Decentralized platforms can use cryptocurrencies, smart contracts and oracles to facilitate trading and settle markets without relying entirely on a traditional centralized operator.

More recently, regulated US exchanges have expanded access to event contracts covering areas such as politics, economics and sports. Together with the growth of blockchain-based platforms, this has helped bring prediction markets to a much larger mainstream audience.

Key Prediction Market Terms to Know

Prediction markets use some terminology borrowed from financial trading alongside terms specific to event contracts. Here are the most important ones to understand: