What prediction markets actually are

The contract, in one paragraph

Most event contracts are binary. You buy YES if you think the stated outcome occurs by the resolution date. You buy NO if you think it does not. If YES is 62¢, the market is treating the event as roughly 62% likely — not because a committee voted, but because that is where buyers and sellers last agreed. If you are right, the contract settles at $1. If you are wrong, it is worth nothing. Your gross profit on a winning YES is $1 minus the price you paid, times the number of contracts, minus the venue's fee.

That is the whole product. Sports, elections, Fed meetings, and “will this company ship” questions are the same instrument with different underlying facts. The rules matter more than the theme: what counts as “happened,” who the resolution source is, and when the book stops trading.

Price is not a forecast with a byline

Journalists like to write “the market thinks.” Traders should hear “the market cleared.” A 72¢ Fed-cut contract is a two-sided book, not an economist. Thin markets move on one clip. Thick markets still reprice on a print. If your true number is 80% and the screen is 72¢, you might have an edge. If you cannot name why the screen is wrong, you are cheering with a debit card.

Convert units before you argue with a sportsbook. 68¢ is not “-150” until you do the math. Use an odds converter so you are not mixing implied probability, decimal odds, and American odds in the same sentence.

Where this differs from a sportsbook

A sportsbook is a dealer. It sets a line, takes the other side, and bakes in vig. A prediction market — when it is actually an exchange — matches customer with customer. You can often join as a maker and earn a fee discount. You can also get run over by a market order in a quiet book. There is no kindly trader on the other side “giving you a number.” There is the last print and the size behind it.

In the United States, fully legal event-contract venues sit under the CFTC as designated contract markets. That is why identity checks exist, why some states still fight sports listings, and why “just use a VPN” is how accounts get frozen. Offshore platforms may skip KYC and settle in stablecoins. They are a different legal object, not a skin on the same app. The Kalshi vs Polymarket guide is the passport split, not a UI review.

Fees eat small edges

Venue fees are not a rounding error when you are trading 2-point disagreements. On a CFTC book the taker formula often peaks around 50¢ and caps per 100 contracts. A 2% debit-card deposit is a fee before you even have a position. Idle cash yield (when a venue pays any) is real and still smaller than one sloppy loser. Run the numbers on the fee calculator and the fees guide before you size up.

Who this is for — and who it is not

Prediction markets are useful if you already have a view that can be written as a yes/no with a date, and if you can wait for a price that is wrong by more than the fee. They are a poor substitute for a savings account, a sports-betting hobby with no closing line value, or a way to “invest in the election.” If you need the product because you live in the US and want a regulated book, start with how to sign up, then deposits, then a first limit order. If your country is blocked, stop. Do not spoof the geo.

This page is an explainer, not a recommendation to trade. Check the live contract spec, your local law, and the venue's member agreement. Start Kalshi is an independent guide. We may earn a commission if you later sign up through a sponsored link. We still will not tell you the 62¢ contract is cheap.