Prediction markets: How They Work
Prediction markets explained: how event contracts work, CFTC-regulated platforms, fees, and how they compare to sportsbooks.
Prediction market platforms 8
No gambling licence where we cover
PolymarketRestricted or unlicensed in most markets we cover- Operator
- Not stated
- Since
- 2020
- Products
- Not stated
LimitlessBlockchain prediction market, no gambling licence- Operator
- Not stated
- Since
- Not stated
- Products
- Not stated
NovigUS peer-to-peer market; not a sportsbook licence- Operator
- Not stated
- Since
- Not stated
- Products
- Not stated
PredictItUS prediction market; not a gambling licence- Operator
- Not stated
- Since
- Not stated
- Products
- Not stated
ProphetXUS prediction exchange, not a licensed sportsbook in our markets- Operator
- Not stated
- Since
- Not stated
- Products
- Not stated
DraftKings PredictionsUS event contracts, not a licensed sportsbook product- Operator
- DraftKings Inc.
- Since
- Not stated
- Products
- Not stated
Fanatics MarketsUS event contracts, not a licensed sportsbook product- Operator
- Not stated
- Since
- Not stated
- Products
- Not stated
Prediction markets are exchanges where you buy and sell contracts on real-world outcomes, elections, economic data, sports, weather and more. Each contract pays out $1 if the event happens, and trades between $0 and $1 as the market's confidence shifts. It is the closest thing to a stock market for information.
How it works
Event contracts: every market is a yes/no question. A 'yes' share trading at 65¢ implies the market collectively prices a 65% chance of the event happening.
Trading, not betting against the house: you buy from and sell to other participants. Prices move with news and volume, and you can exit a position before resolution: something fixed-odds sportsbooks do not offer.
Resolution and payout: when the event resolves, correct shares pay $1 and incorrect shares expire worthless. Your profit is the difference between your average price and the payout.
Regulation: in the US, event contracts are traded on CFTC-regulated exchanges. Rules about which contract types are permitted continue to evolve: the operator's terms state what is available where.
What to check before you commit
- Check the fee schedule: most platforms charge trading fees on both entry and exit, small per-trade, meaningful over many trades.
- Look at liquidity: a market with thin volume has wide spreads, which is a real cost to every trade.
- Understand the resolution source: each contract specifies exactly which data decides the outcome. Read it before trading, not after.
- Treat it as trading: position sizing, thesis and exit discipline matter more here than in fixed-odds betting.