If you need some help on how to read market prices as probabilities when using prediction markets, we are happy to help. We have compiled this guide to explain how market prices work and how to interpret the outcomes.
It is essential to have a solid understanding of prediction market prices; otherwise, you may make mistakes when buying and selling contracts.
Get a comprehensive breakdown of prediction markets, including the legal framework of these exchanges and how to read the market prices for several future events, such as sports and election outcomes.
If you have read our prediction markets vs sportsbooks: what’s the difference guide, you will be familiar with how prediction markets work. Prediction markets provide you with a platform to trade on the outcome of future events. All trades are in the form of binary outcomes (yes or no), and contracts range from $0 to $1.
Unlike sportsbooks, where the house sets the markets and odds, prediction markets do not set the value of contracts.
Instead, contract values are determined by the number of trades by other individuals. A prediction market works in pairs and requires an equal number of traders for both outcomes of an event.
If there is sufficient market volume or liquidity, you can buy and sell contracts on future events, such as sports outcomes and pop culture award shows.
There is always much debate on the legality of prediction markets, and when we compiled our Kalshi vs Polymarket – which app is better comparison guide, we mentioned that you should only trade at regulated prediction markets.
At the time of writing this guide, prediction markets are legal if the exchange is regulated by the Commodity Futures Trading Commission (CFTC).
The CFTC regulates the commodity futures, options, derivatives and prediction markets. As long as a prediction market is CFTC-regulated, you can buy and sell contracts on various future events.
Just like traditional sports betting, when trading at prediction markets, your prediction must be correct for you to win a payout. Also, as with traditional sports betting, there is always a winner and a loser.
Therefore, it is important to understand how to read market prices. Since prediction markets contract values are determined by the trades of other individuals on the likelihood of an event occurring, these probabilities determine whether you want to buy or sell contracts.
For example, if you look at a sports future event, let’s say the NBA playoffs, and the Los Angeles Lakers are $0.75 to make the playoffs.
This does not mean that for your $1, you will receive $0.75 in profit should the Lakers make the playoffs. Instead, the $0.75 implies that the traders believe there is a 75% likelihood that the Lakers reach the playoffs.
If you also think that the Lakers can make the playoffs, you can buy a ‘Yes’ contract for $0.75. If you buy a ‘Yes’ position for $100, you will receive 133.33 contracts ($100/0.75).
If the Lakers do make the playoffs, your trade will win, and you will receive $133.33 ($33.33 in profit). If the Lakers do not make the playoffs, your trade is a loss, and you will lose your initial investment.
Depending on which prediction market site you use, there may also be event trading fees to factor in when buying and selling contracts.
Prediction markets provide you with a platform to trade on the outcome of future events. All trades are in the form of binary outcomes and contracts range from $0 to $1.
No. The value of each contract is based on the trades made by other individuals as a group on the likelihood of an event occurring. The higher the price, the more traders think an event will occur. Contract values can adjust in real-time to reflect the updated thoughts and opinions of traders.
If there is sufficient market volume for your contract and other traders are willing to buy it, you can sell your contracts to lock in profits or mitigate losses before the future event concludes.
Now that you understand how to read market prices as probabilities, let’s now focus on what is event betting.
As we shared earlier, prediction markets do not set the value of contracts; this is determined by the number of trades made by other individuals. So, while there may not be event betting, you can instead trade on events.
When trading at these exchanges, all outcomes of specific leagues, awards shows, and other real-world activities are referred to as events.
There are diverse future event contracts on most real-world activities. By trading on these future events, you can buy and sell shares on both domestic and global events, such as sports outcomes, election results, entertainment award shows and even economic forecasts.
The table below details some of the main future event contract options:
| Future event | Example |
|---|---|
| Sports | Will Brazil win the 2026 FIFA World Cup |
| Elections | Who will be the US presidential election winner in 2028 |
| Economy | What will the Fed’s decision be in March |
| Culture | Will Taylor Swift top the Spotify list for 2025 |
By now, you should have a better understanding of how prediction markets work and how to read market prices. When using these prediction sites, you can buy and sell contracts on several real-world events, including sports and election outcomes.
However, before you can jump into trading, you should understand the market prices and volumes.
As long as there is sufficient liquidity for a contract, you will be able to buy and sell your positions, to take out profits or mitigate losses.
If you want to trade on these exchanges, click the banners on this page to sign up with CFTC-regulated platforms.
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