A prediction market is an exchange where you buy and sell contracts on the outcome of a real event. Each contract pays $1 if the outcome happens and nothing if it doesn't, and it trades at a price somewhere in between.
That price is the whole idea. If a contract on a candidate winning an election trades at 65 cents, the market is collectively estimating a 65% chance. You are not taking a price from a bookmaker — you are trading against other people, and the price moves as they change their minds.
How does buying a contract actually work?
You pick a market, choose Yes or No, and buy at the price showing.
Say a contract is trading at 40 cents and you buy ten of them for $4. Two outcomes:
- The event happens. Each contract settles at $1, so you receive $10 — a $6 profit.
- It doesn't. The contracts settle at zero and you lose the $4.
The price is a direct statement of implied probability. A contract at 25 cents is the market saying roughly one in four. If you think the real answer is one in three, that gap is your reason to buy — and our odds converter will translate any contract price into American, decimal or fractional odds if you're more used to reading those.
Do Yes and No prices always add up to $1?
Close, but not exactly — and this trips up almost everyone.
In theory Yes and No are two sides of the same outcome, so they should sum to $1. In practice the prices you see quoted are the best available buy prices on each side, and there is usually a gap between what buyers will pay and what sellers will accept. That gap is the spread.
So you might see Yes at 62 cents and No at 40 cents, summing to $1.02. That two-cent overlap is a real cost, and on thin markets it can be much wider. A market with plenty of participants has a narrow spread; one with few has a wide one. That difference is liquidity, and it matters more to your returns than most beginners expect.
Where can you trade — and why "Polymarket" means two different things
Thirteen venues now hold registration with the Commodity Futures Trading Commission, the US regulator for these markets. The three most beginners encounter first:
- Kalshi — the largest by volume, US-based, trades in dollars, and the deepest sports markets.
- Polymarket US — the CFTC-regulated US entity, operating since Polymarket acquired an existing licensed exchange in December 2025.
- Robinhood — event contracts inside the brokerage app most people already have, executed on Kalshi and other registered exchanges.
The full picture, including which venues are actually trading and which have registration but no live market, is in our guide to every CFTC-regulated venue.
How is this different from a sportsbook?
Three real differences, and one myth.
You trade against other people, not the house. A sportsbook sets a price and takes the other side of your bet. An exchange matches you with someone who disagrees. Nobody at the venue has a position against you.
You can exit. A sportsbook bet is settled by the event unless the book offers you a cash-out at a price it chooses. On an exchange you sell at whatever the market is paying.
The price is public information. Because it's a market, the price is a live probability estimate that anyone can read — which is why news outlets now quote these markets during elections and tournaments.
The myth is that there's no cost. You will read that prediction markets have no house edge. It is true that there's no bookmaker margin baked into the price, but that does not make trading free. Every venue charges a fee, and you also pay the spread on the way in and again on the way out. Fees vary by venue, by market and sometimes by price, and they change — three platforms revised their schedules in the first half of 2026 alone. We keep a current breakdown of what a trade actually costs, with figures taken from each platform's own published schedule.
Treat "no house edge" as a description of how the price is formed, not a claim about what you pay.
The honest read
Prediction markets are simpler than they sound and harder than they look. The mechanic is a contract that pays $1 or nothing. The difficulty is that a market price is other people's opinion, and beating it means being better informed than the crowd — not just having a view.
Start small, on a market you genuinely understand, and read the spread before you read the price. A contract that looks cheap on a market with no volume is not cheap; it's just unpriced.
And check where you're allowed to trade before you fund anything. Availability is decided by your state and by the venue's registration, not by whether the app lets you sign up.
Fees, venue availability and regulation in this area change often. This page was last reviewed on 30 July 2026.