A prediction market is an exchange where people buy and sell contracts on whether an event will happen, and the price of each contract is the market’s view of the chance that it does. A contract pays $1 if the event happens and nothing if it does not, so a contract trading at $0.62 says the market rates the event at about 62%.
The rest of this page follows one contract from purchase to payout, turns its price into the odds a sportsbook shows, and sets the market beside a sportsbook and a betting exchange. The prices below are round illustrations, not quotes from a live market.
How an event contract works
The Commodity Futures Trading Commission, the federal agency that regulates US derivatives markets, describes an event contract as often a yes-or-no question with a fixed payout, usually $1, and an end point: a set time or the natural end of the event. The question can be a game, an election, an interest rate decision or tomorrow’s weather. The CFTC dates the first modern prediction market to 1988, at the University of Iowa, and says it has regulated them since 2004.
Take a contract on “Will Team A win?” with Yes at $0.62 and No at $0.38. A buyer of Yes and a buyer of No each pay their side, and together they put up the $1 that goes to whoever is right. Kalshi and Polymarket both describe their trades being matched this way.
| Contract (illustration) | You pay | If Team A wins | If Team A does not win |
|---|---|---|---|
| Yes at $0.62 | $0.62 | Paid $1, a profit of $0.38 | Paid nothing, a loss of $0.62 |
| No at $0.38 | $0.38 | Paid nothing, a loss of $0.38 | Paid $1, a profit of $0.62 |
Buy 100 Yes contracts at $0.62 and you pay $62. If Team A wins they pay $100, a $38 profit before fees; if not, the $62 is gone. Holding to the end is optional. The CFTC notes that customers can trade out of a position before settlement at the current market price, which only works when someone is there to take the other side.
What a prediction market price means
The price in cents reads as a percentage. Kalshi’s help centre gives the example of a 70% chance priced at 70 cents for Yes and 30 cents for No, and Polymarket’s says its prices “represent the current probability of an event occurring.” That is the view of the traders in the market at that moment, set by what they will pay. It is not a guarantee: if a 62-cent price is right, the event still fails to happen 38 times in 100.
To compare a contract with a sportsbook price, divide 1 by the contract price for decimal odds, then convert to American odds if that is what your book shows. Our guide to how betting odds work runs the same conversion from the other direction.
| Contract price | Market view | Decimal odds | American odds |
|---|---|---|---|
| $0.62 | 62% | 1.61 | -163 |
| $0.50 | 50% | 2.00 | +100 |
| $0.38 | 38% | 2.63 | +163 |
The number on screen is not always a price you can trade at. Polymarket’s help centre says the figure it shows is the midpoint between the best bid and the best offer, or the last traded price when that gap is wider than 10 cents. Its own example shows 37% from a 34-cent bid and a 40-cent ask, so a buyer who wanted Yes straight away would pay 40 cents, not 37.
Prediction market vs betting exchange vs sportsbook
A prediction market is closest to a betting exchange. In both, you trade with other customers and the platform does not take the other side; the CFTC says the exchanges it regulates “do not take a side of the trade.” A sportsbook is the other side of every bet it accepts, and it is paid through its prices.
| Prediction market | Betting exchange | Sportsbook | |
|---|---|---|---|
| What you buy | A contract that pays $1 if the event happens | A bet at odds, backed or laid | A bet at odds |
| Who is on the other side | Another trader | Another customer | The sportsbook |
| How the price reads | Cents, which read as a percentage | Odds | Odds |
| How the platform is paid | A trading fee | Commission on net winnings | A margin built into the prices |
| Betting against a result | Buy No | Lay it | Back the other side |
| Getting out early | Sell at the market price, if there is a buyer | Lay at the new price | Hedge, or a cash-out where the book offers one |
Buying No is the same position as laying Yes. No at $0.38 risks 38 cents to win 62, which is about 61 cents risked for every $1 that can be won. Laying Yes at 1.61 on an exchange risks 61 cents for every $1 the layer can win. The difference is the wrapping: one quotes cents and settles at $1, the other quotes odds and settles at stake times price. Our betting exchange guide covers backing, laying and commission.
At a sportsbook the cost sits inside the price. An even game at -110 on both sides implies 52.38% for each, 104.76% together, and the extra 4.76 points are the book’s; our guide to what a bookie is works through that margin. A matched Yes and No add up to exactly $1, or 100%, so in a prediction market the cost turns up elsewhere: in the fee, and in the gap between the price to buy and the price to sell.
What it costs
Kalshi’s help centre says it “makes money by charging a transaction fee on the expected earnings of the contract,” and that its full fee schedule is published on its site.
Polymarket’s help centre, read on October 16, 2026, gives its taker fee as contracts traded x fee rate x price x (1 – price), with a rate of 0.05 on sports markets. Takers are traders who accept a price already in the book; makers, whose orders wait in the book, pay no fee. On 100 contracts at $0.62, the formula gives 100 x 0.05 x 0.62 x 0.38 = $1.18. The page also says the fee is the same either side of 50 cents, so 100 contracts at $0.38 cost the same $1.18.
The spread is the other cost. A contract bought at the ask and sold straight back at the bid loses the gap between them: 6 cents a contract in Polymarket’s 34-to-40-cent example. Fees and rates change, so the platform’s own fee page on the day is the one to read.
Prediction market platforms: Kalshi and Polymarket
Both entries below are what each platform says about itself and what the CFTC’s public list shows, read on October 16, 2026. Neither is reviewed or recommended here.
Kalshi. The CFTC’s list of designated contract markets shows Kalshi designated on November 3, 2020. Kalshi’s help centre says it is regulated by the CFTC as a designated contract market, that each contract is worth $1 if you are right, and that it pairs a buyer of Yes with a buyer of No whose prices add up to $1. The markets it describes run from elections and interest rates to awards shows, music charts and the weather.
Polymarket. The same CFTC list shows QCX LLC, doing business as Polymarket US, designated on July 9, 2025. Polymarket’s help centre says traders deal with each other and not with Polymarket, that prices come from what traders will pay in its order book, and that each share in the correct outcome pays $1.00 in USDC, a digital token tied to the dollar, when the market resolves.
Whatever the platform, the reading stays the same: the price in cents is the market’s percentage, 1 divided by that price is the decimal price, and the fee and the spread are what a trade costs.