Making money off of world events has never been easier, and investors have prediction markets to thank. Prediction markets allow investors to buy and sell shares in the outcomes of current and future circumstances, with share values directly reflecting event probabilities. Each event must be binary, meaning it only has two possible outcomes — it happens or it doesn’t. The odds don’t always work in everyone’s favor, but more and more people are willing to try their luck anyway.
Prediction Markets, Explained
Prediction markets are platforms that let investors trade shares in the outcomes of future events, with share prices representing event probabilities. They rely on a peer-to-peer system, meaning that investors trade with each other rather than bet against the house. Investors can buy and sell shares in any event that follows a binary setup in which an outcome either happens or doesn’t within a concrete timeline.
Although they are facing some government pushback at both the state and federal levels, prediction markets are expected to reach $1 trillion in market volume by 2030. Here’s an overview of these increasingly popular platforms, including how they work, some of the top ones available and what sets them apart from traditional sportsbooks.
What Are Prediction Markets?
Prediction markets are platforms where people can trade shares on the outcomes of future events. Essentially, people place bets on whether an outcome will occur or not — “yes” and “no” scenarios. All topics are fair game as long as the question fits this binary setup and can be resolved within a concrete timeline. For example, people can buy shares in:
- Whether or not a sports team will win a game.
- Whether or not a movie will receive an award.
- Whether or not a piece of legislation will become law by a specific date.
- Whether or not inflation will exceed a given threshold by a specific date.
Each share is valued between $0.01 and $1.00, representing the probability that an event occurs. So, if someone buys shares for $0.75 each, that means there’s a 75 percent chance their predicted outcome will happen.
Shares can fluctuate in value right up until the outcome is finalized, at which point the losing shares are reduced to $0, and the winning shares are increased to $1. For those who hold their shares until the end, losses and profits are determined by the difference between the cost at which shares were initially bought and their final value.
How Do Prediction Markets Work?
When people purchase shares on a prediction market, what they’re really buying are event contracts. An event contract takes effect when a person agrees to purchase shares at a specified price and stipulates that those shares eventually default to $0 or $1 in value, depending on whether a predicted outcome occurs. But how does the contract know when an event ends and what its final result is? That’s where blockchain technology comes into play.
Prediction markets use oracles, which are bridges connecting platforms to decentralized networks that extract data from third-party, independent sources. A prediction market can then access information from the outside world, allowing it to determine when events end, what their outcomes are and how to adjust share values accordingly. In this way, event contracts function similarly to smart contracts, automatically resolving events and executing payouts to those who chose winning outcomes.
Users who buy shares in an outcome can trade those shares at any time until the outcome is confirmed. As a result, changes in share value reflect how confident investors feel that an event will happen at any given moment, providing real-time snapshots of public opinion that other users can reference before buying shares. Of course, those who wait to purchase shares in a winning outcome don’t make as much as early investors.
Types of Prediction Platforms
Prediction markets can be categorized based on several approaches, namely:
- Continuous Double Auction: A CDA is a mechanism that matches a buyer of shares with a seller of the equivalent amount of shares, or vice versa. Only when it finds a perfect match between a buyer and seller does it execute these trades.
- Automated Market Makers: An automated market maker takes the opposite side of any trade for which it can’t find a perfect match. An investor can then buy shares even if no one sells the equivalent amount of shares, and vice versa. Many prediction markets use this method since they’re smaller than traditional stock exchanges.
- Real Money and Play Money: Real money platforms are prediction markets that use actual currency, so they’re subject to regulations. Play money platforms provide an initial amount of virtual tokens when users first join, using incentives and prizes to encourage participation.
- Blockchain-based Markets: Blockchain-based markets are decentralized prediction markets, being controlled by multiple operators. Smart contracts automatically execute trades, and users can verify event outcomes via voting mechanisms.
These types of methods are deeply interrelated as well. For instance, real money platforms often use CDAs to keep trades circulating, while play money platforms typically employ an automated market maker because they don’t use actual money and can afford to take the opposite of any number of trades. Through these approaches, prediction markets can serve investors with varying levels of risk tolerance and experience.
Top Prediction Market Platforms
Here are a few prediction markets that are popular choices among investors.
Polymarket is a prediction market that acts as a sidechain to the Ethereum platform and requires transactions to be executed in USDC.e, a bridge version of the cryptocurrency called USD Coin. Once they buy shares in an outcome, users can store them in several different digital wallets. They can also become validators who review and verify other transactions after staking a certain number of coins since Polymarket uses a proof-of-stake consensus mechanism.
Founded by a pair of MIT graduates, Kalshi is a federally regulated prediction market that operates like traditional financial exchanges. Traders can buy an event contract at its current market price or place a limit order that takes effect only if the contract drops to a certain price. Kalshi’s central limit order book pairs corresponding trades, and a clearinghouse approved by the Commodity Futures Trading Commission (CFTC) verifies the trades.
Crypto.com is a crypto and financial platform that claims it is the first to secure a “full stack of CFTC derivatives licenses” following its 2021 acquisition of Nadex and the Small Exchange. Users can purchase event contracts for as low as $10, buy multiple event contracts for the same outcome and use either cash or crypto when trading.
Robinhood may be best known for its commission-free, mobile-first approach to investing that expanded accessibility and shook up the trading landscape, and has since followed that up with new prediction market products. In 2025, the company partnered with Kalshi to launch prediction markets in professional and college football. It has also begun offering event contracts through Rothera — its internal, CFTC-licensed clearinghouse — for those looking to trade on the outcomes of 2026 World Cup matches.
Underdog is a fantasy sports and gaming platform that lets investors buy event contracts in the outcomes of sporting events. The company made headlines in March 2026 when it acquired Aristotle’s CFTC-regulated exchange and clearinghouse licenses, meaning it now operates its own “federally-compliant prediction market exchange.” Aristotle will continue to run PredictIt, one of the original betting markets in the political arena.
Fanatics is another digital sports platform that owns a prediction market platform, Fanatics Markets. Fanatics Markets launched in December 2025, giving users in 24 states the ability to buy event contracts for outcomes in sports, politics, finance and economics. The prediction market continues to be upgraded, with users now able to convert 10 percent of their trades into FanCash that they can apply toward other contracts or Fanatics products.
Prediction Markets vs. Sportsbooks
Prediction markets are often compared to traditional sportsbooks, but there are several key distinctions between the two:
- Scope: Sportsbooks typically focus exclusively on sporting events, while prediction markets cover a variety of topics in addition to sports, including pop culture, politics and the economy.
- Structure: Prediction markets use a peer-to-peer system in which users trade with one another, so public sentiment influences share values. Sportsbooks use a centralized system where users bet against the house.
- Pricing: Sportsbooks use statistical models to set odds and prices. Meanwhile, prediction markets rely on investor behavior to determine share value, so prices mirror investors’ confidence in real time and more closely reflect actual probabilities.
- Odds: Sportsbooks often come with a built-in advantage that favors them over individual investors. On the other hand, prediction markets’ peer-to-peer trading is designed to favor those who simply make accurate predictions, foregoing a house advantage.
- Profit: Investors can trade shares until an event is finalized in a prediction market, impacting how much they win or lose. Sportsbooks usually don’t offer this same option, so investors make or lose money based on their initial bets.
Since they’re considered to be two separate categories, prediction markets are regulated differently from sportsbooks. Investors may want to research state and federal laws that could affect them before visiting prediction markets and other similar platforms.
Frequently Asked Questions
What are prediction markets?
Prediction markets are platforms that enable investors to buy and sell shares in the outcomes of future events that fit a yes/no binary — either they happen or they don’t. Shares are valued between $0.01 and $1.00, representing the probability that an event occurs. So, shares trading at $0.65 each means there’s a 65 percent chance that a certain outcome will happen. These platforms also use a peer-to-peer model in which investors trade with each other rather than betting against the house.
What are the biggest prediction markets?
Kalshi and Polymarket dominate this space as some of the largest and most popular prediction markets available. Other notable platforms include Crypto.com, Robinhood and PredictIt.
How do prediction markets determine probabilities?
After buying shares in an event outcome, investors can trade away those shares at any time up until the event ends and the outcome is finalized. As a result, probabilities on prediction markets reflect the general public’s confidence that an outcome will occur, providing real-time snapshots of investor sentiment. These probabilities then determine share values, which other investors can reference when deciding whether to buy or sell shares in an outcome.
Are prediction markets legal in the U.S?
Prediction markets are currently legal in the United States and regulated by the Commodity Futures Trading Commission. That said, some states are fighting the federal government to enforce their own regulations. Investors should research local and federal laws that may impact them before joining prediction markets.
