What is a prediction market?

A prediction market is not a bookmaker. Nobody sets odds and nobody takes the other side of your bet by default. It is an order book: you buy a contract from someone who wants to sell it, and the price you agree on is the output.

The contract is simple

Every market issues two complementary contracts:

• Yes pays $1 if the event happens, $0 if it does not.
• No pays $0 if the event happens, $1 if it does not.

Exactly one of them settles at $1. That is the entire payoff structure.

The price is the probability

If a Yes contract trades at $0.68, the market is saying roughly a 68% chance. It is not a forecast from the platform — it is the aggregation of what everyone with money at stake believes.

This is why prediction market prices get quoted in journalism. They are not opinions expressed for free; each one is backed by capital that loses if it is wrong.

Why the price moves before the event

Unlike a fixed-odds bet, you can sell a contract before settlement. Buy Yes at $0.40, sell at $0.70 once new polling lands, and you keep $0.30 without the event ever resolving. That exit is what makes the price respond to news within minutes rather than drifting until the result.

What it is not

• Not risk-free arbitrage. The spread and fees consume small edges.
• Not a poll. Prices reflect money, and money is unevenly distributed.
• Not a guarantee of accuracy. Thin markets on obscure questions can be badly mispriced for weeks.

If you want the mechanics of how those prices get made in the first place, read how prediction market prices are set.