We’ve put together a simple guide on how prediction markets work. You can try and predict the outcome of a certain event, choosing from yes or no possibilities.
Prediction market sites cover multiple markets including sports and politics.
Every prediction market is based on two possibilities – you must choose either yes or no to the particular question to participate.
We’ll explain how that works here and provide some examples. You’ll see that the yes-no options always total 100% in implied probability, so it’s easier to work out what you’d get if your chosen prediction was correct.
The first thing to remember is that every prediction market you come across is based on a binary outcome.
Either the event will happen or it won’t. While sports betting provides you with multiple possibilities, prediction markets keep things simple – and the best prediction market sites cover many more potential scenarios than sporting occasions, too.
To begin with, every market must be answered with a yes or no:
We’ve written a full guide asking the question, what are prediction markets, elsewhere here, so that will provide you with some more information. You can see, however, that you will always have the yes-no possibilities for each question.
Let’s say you are a fan of tennis. Rather than choosing the player you think might win the next US Open Grand Slam tournament, you would find a specific question based on that.
Will Carlos Alcaraz meet Jannik Sinner in the next US Open final? You would then see yes or no options with percentages next to each. Notice that it doesn’t matter who wins – only if they both reach the final.
Participants may believe there is an 80% chance of this happening. So, you would see these options:
If you think that yes, this will happen, you would buy an event contract based on that. This would work out at 80 cents per share. If you are correct and both men reach the final, you would receive $1 for each 80-cent share you purchased.
Conversely, if you went for the no option and bought shares at 20 cents each, and one or both did not reach the final, you would receive $1 for each 20-cent share you purchased, giving a bigger return because that event was deemed far less likely to occur.
Make sure you check whether you will need to pay any applicable event trading fees prior to participating on any prediction markets website.
We have seen many political prediction markets based on major events such as elections. However, you will also see much smaller markets – will Donald Trump say the word China in a specific speech, for example.
As with the above example, it boils down to a yes-no answer. If you think he will say it, and lots of other participants think the same, the yes option is likely to be high, as it was with the tennis example.
This would garner a $1 payout per share, but the yes option may have been given an 87% probability of happening, thereby providing you with an 87-cent share to participate.
You’ll soon begin to recognize how the prediction markets work at a range of sites. We’ve reviewed plenty of those sites here, including weighing up Kalshi vs Robinhood and which app is better; you may find app access more convenient.
You might find prediction market websites a little overwhelming to start with. With that in mind, we have given you a step-by-step guide on how to participate in this table.
Make sure you read the rules and terms for individual sites, which you can learn more about in our individual site reviews here.
| Choose a prediction market | Sports, politics, currency, and many other random events |
| Decide whether to choose yes or no | Consider whether you think the event is most likely to happen or not |
| Buy shares in your chosen prediction | Each share is priced at the yes-no figure (i.e., yes 70%, no 30% – a no share would be 30 cents |
| Wait for the result | If you are correct, each share will pay $1; if you are incorrect, you won’t receive anything |
Once you understand the basics, you’ll find that you can make predictions on a wide variety of markets in all kinds of areas. This means you can use your knowledge and experience to help increase the chances of making correct predictions. We’ve gathered some pros and cons to keep in mind.
Some people make the mistake of thinking that prediction markets are identical to sports betting, when in fact they are anything but.
Prediction markets are a type of financial trading, regulated by the Commodity Futures Trading Commission (CFTC) in the US. While you might be generally unfamiliar with trading, you can see the yes-no nature of prediction markets makes them easier to understand. You can read our other guides here about prediction markets and how to take part, along with reviews of specific sites.
This should help you work out whether you’d like to try some prediction markets for sports, politics, the economy, and all manner of other topics.
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