Before we start, here’s how prediction markets work
Wondering, “What are prediction markets?” Join us for a quick overview to get you up to speed.
Prediction markets allow you to buy and sell event contracts that are linked to yes/no outcomes of future real-world events. You can make a guess on the outcome of events such as sports, politics, climate, culture, economics, and more. Each market represents a question:
- What price will crude oil reach by the end of the month?
- Which team will win the Premier League?
- Who will be the Texas Senate winner?
- What will be the Song of the Year on Spotify?
While the most common type of contract is yes/no, there are other options available. For instance, you may encounter multiple-choice questions that give you a list of potential outcomes to choose from. Alternatively, you might be given a numerical range, such as $20-$50 or $60-$100. Either way, prediction markets are designed to take a shot at how likely a specific event is to happen.
Let’s learn more about prediction market prices
Now that you are caught up, we can get stuck into uncovering how prediction market prices work.
Prediction market price meaning
Event contracts typically trade between $0.01 and $0.99. The higher the price, the more likely the market considers the outcome to be. Likewise, a lower price indicates that the event is less likely to happen. When the event is officially settled and resolved, trading will stop. All contracts are then settled. If the outcome happened, then you settle at $1. Otherwise, it settles at $0.
Market price probability
The price of a contract is more than what you pay to trade the event contract. It’s also the implied probability. The price reflects how likely the market believes the outcome will occur. For example, if a yes contract is priced at $0.70, the market believes that there is a 70% chance of that outcome happening. Here’s an overview of how it works, so you can hit the ground running:
| Prediction market | ‘Yes’ contract price | ‘No’ contract price | Probability |
| Will Justin Bieber streams be up this week? | 97¢ | 3¢ | 97%/3% |
| Will the Virginia redistricting referendum pass? | 86¢ | 14¢ | 86%/14% |
| Will it rain in NYC today? | 29¢ | 71¢ | 29%/71% |
Using the first example in the table, you can see that the market believes that there’s a 97% chance for Justin Bieber’s streams to be up this week, which is likely influenced due to his recent performance at Coachella. If his traffic is increased this week, those who traded ‘Yes’ contracts for 97¢ will receive a profit of 3¢.
Event contract prices fluctuate
As people buy and sell event contracts based on their beliefs, it means that the price can also change. As new information comes in and views change over time, the prices are altered along with the implied probability. New information can come in the form of injuries, data releases, news, and much more. For example, if a key player is injured before a soccer match, traders may think it’s less likely for them to win and adjust accordingly. But a key thing to keep in mind is market liquidity. If there are fewer traders, the market can fluctuate more than others.
Profit: What happens when you predict correctly
Once the official result has come in, trading will stop, and all contracts will be settled. If you predicted correctly and traded an event that happened, you will make a profit. All contracts settle at $1, so you can calculate your profit by deducting the cost you initially traded at. For example, if you traded a contract for $0.60 and settled at $1, your profit is $0.40.
If you pick the wrong outcome, you will lose
If you traded an event that didn’t happen, your contract will settle at $0. As such, you will lose the cost you paid initially. Using the above example, if your event contract was $0.60, you would lose the $0.60 upfront cost. Of course, you will also need to take into account any fees that are due. This will vary depending on your prediction market site of choice, so make sure you have an understanding of the price structure beforehand.
You can sell your contract
Let’s say the price changes, and you see a potential to make a profit without waiting for the official outcome. You can sell your contract on to another trader to pocket a nice profit without the waiting. Quite simply, once you have bought a yes/no contract, you can either sell it or keep it. Selling a contract is a good idea if a price shifts in your favor, giving you a solid profit margin. For example, if you bought a contract for $0.40 and the market shifts to $0.70, you could sell for a $0.30 profit.
What can impact the prediction market prices
Event contracts very rarely remain at the same price. Of course, this entirely depends on the market, but it’s not a common occurrence. With many factors influencing the prices of prediction markets, let’s take a closer look at how this happens:
Pros and cons of prediction market prices
Now you know exactly how prediction market prices are set and can fluctuate with market opinion, you have a solid handle on what to expect. While you can track the prices in real-time, they can fluctuate rapidly depending on the market.
Pros and Cons
Pros
- Prices reflect real-time opinions
- Probability often outperforms polls
- Track live price fluctuations
Cons
- Prices can be very unpredictable
Best prediction market sites to explore
We keep up with all the latest prediction markets news, which has helped us to pinpoint the top sites in the industry right now. We highly recommend trying out either of the following 3 prediction market sites for a diverse and engaging experience:
Kalshi - Excellent variety of markets
Kalshi: Pros and Cons
Pros
- CFTC-regulated prediction market
- US-based
- User-friendly interface
- Sport, politics, and more predictions
Cons
- High risk involved
Kalshi is widely renowned as one of the industry’s biggest prediction market sites, as you may have seen in our Kalshi review. It’s fully regulated by the CFTC and offers a broad selection of markets. You can get stuck into a variety of genres, including sports, culture, crypto, climate, tech, and so much more. Kalshi also has a clear, fixed pricing structure that’s easy to calculate. You are never kept in the dark about what fees you are going to pay, with less than 2% taken on each transaction. When it comes to accessing the site, you can either use the browser site or install the iOS or Android app. Either way, your experience is tailored to your preferred device, allowing you to manage your account from home or on the move.
Crypto.com - A crypto-focused prediction market site
Crypto.com: Pros and Cons
Pros
- Focus on crypto and sports markets
- iOS and Android apps
- No-fee payments
- Top-tier account security
Cons
- No sign up bonus
Crypto.com covers US and global markets, with sports and crypto being the most prominent on the site. We found the availability of other categories, including politics, finance, and economics, as well as the recent arrival of culture. While Crypto.com might have a modest selection compared to other prediction market sites, it’s steadily expanding. Crypto.com accepts 400+ crypto, meaning that everyone is covered from BTC to ETH, DOGE, SOL, and more. When it comes to security, Crypto.com is among the most impressive sites, protecting users with high-end security, including 2FA and biometrics.
Polymarket - Fantastic market depth for political events
If you are more interested in politics and economic prediction markets, then Polymarket will hit the spot. We found event contracts in both genres that cover US and global outcomes. For instance, we encountered questions on US elections, local elections, and even major elections in other countries. But it’s not just about politics here, as we also stumbled across the likes of sports, finance, tech, and crypto. If you checked out our Polymarket review, you will already know that there’s a browser site and apps available for iOS and Android. In our experience, both work just as seamlessly as the other.
Conclusion: Prediction market prices adjust with the market opinion
As you can see, prediction market prices are more than the cost of the event contract. When you see a contract price, it reflects the cost of trading that specific outcome and the implied probability based on the market view. These prices aren’t guarantees; they are predictions and probabilities that can change along with public opinion. For example, a yes contract might be priced at $0.75, but it could fall or rise with the latest news.
Now that you have learned about event contract prices and how it indicates probability, you have a solid base of understanding. If you are ready to get started, why not check out our top prediction market sites on this page? Tap our banners to view your favorite sites and register a new account.