An exchange where participants trade contracts based on the outcome of future events, with prices reflecting collective probability estimates.
A prediction market is a financial exchange where participants buy and sell event contracts — binary instruments that pay $1 if an event occurs and $0 otherwise. The market price represents the crowd's aggregated probability estimate.
Prediction markets have been shown to outperform polls, expert panels, and most models at forecasting elections, economic indicators, and other events. This 'wisdom of crowds' effect works because traders have financial incentives to be accurate.
Major US platforms include Kalshi (CFTC-regulated), Polymarket, Robinhood, DraftKings, and ForecastEx.
A contract that pays $1 if an event occurs and $0 if it doesn't. The price reflects the market's implied probability.
CFTCThe US federal agency that regulates prediction markets. CFTC-regulated platforms offer legal event contracts in all 50 states.
Order BookA list of all pending buy and sell orders at different prices. Platforms with order books offer better price transparency.