Definitional pages, written before anything else on this site. They carry no affiliate links — if a page here convinces you to open an account, that happens on a review page, not here.
A prediction market is an order book where people trade contracts that settle at $1 or $0 depending on a real event. You buy from or sell to another user, not the house. The price at which a contract trades is the market's implied probability, and you can sell your position at any time before the event resolves.
An event contract is an agreement that pays a fixed $1 if a specified real-world event happens by a stated date and $0 if it does not. It is a binary, all-or-nothing instrument whose price between $0 and $1 reads as the market's probability of that event.
A price of 0.65 means the market prices the event at roughly a 65% chance. It does not mean a 65% payout — the contract still pays $1 or $0 in full. A high price like 0.90 is not 'safe'; it still loses everything about one time in ten, and the profit on a win is only 10 cents per dollar.
A prediction market is an exchange where people buy and sell contracts that pay $1 if a specific event happens and $0 if it does not. Because the contract trades between those two values, its price reads directly as the market's implied probability of the event.
A prediction market settles when the event resolves against a written rule, at which point winning contracts pay $1 and losing ones pay $0. Settlement is governed by that rule's wording, not by what most people assume the event meant. Disputed or ambiguous outcomes are resolved by the venue's designated resolution process, which can delay payout.
Liquidity is how much size you can buy or sell near the current price without moving it. A liquid market has tight spreads and deep order books; a thin one has wide spreads and moves several cents on even a modest order. For most traders, liquidity matters more than the headline price, because every cent of slippage comes out of expected profit.
Most prediction markets charge a taker fee proportional to price × (1 − price), which is highest near 50% and tapers toward zero at 0% and 100%. Makers who provide liquidity usually pay nothing and may earn a rebate. The spread between bid and ask is a second, separate cost that hits every round trip.
Most traders lose because the costs — the spread and the taker fee — exceed their edge, and because a high win rate is an illusion: buying a 0.90 favourite wins nine times but the one loss wipes out the nine small wins. It is an arithmetic problem, not a prediction-skill problem.
Prices are set by an order book of limit orders. Market makers quote both sides and earn the spread; when news arrives, takers cross the spread and the price moves. Thin markets with few makers can stay mispriced for a long time because nothing forces convergence.
In a prediction market there is no house; you trade contracts against other users, prices move on an order book, and you can sell early. In a sportsbook, the operator sets the odds and takes the other side of your bet, with the margin built into the odds. Prediction markets charge explicit fees and spreads; sportsbooks hide their margin in the odds.