beginner
7 min readWhat Are Prediction Markets?
Polymarket, Kalshi, and how event betting works.
BonusBell Team
Prediction markets are a new frontier in gambling where you bet on real-world events beyond sports. Elections, economic data, tech launches, court rulings—if an outcome can be verified, someone has probably created a market for it.
How Prediction Markets Work
Instead of fixed odds, prediction markets use a share/contract model:
- You buy shares in an outcome (e.g., "Will X happen?")
- Shares are priced $0.01 to $0.99
- If the outcome happens, shares pay $1.00
- If it doesn't happen, shares are worth $0.00
Share Pricing Example
Shares at $0.65 = 65% implied probability=Buy 100 shares for $65, win $100 if correct (+$35 profit)
The share price reflects the market's collective probability estimate.
Major Platforms
Popular Prediction Markets
| Platform | Focus | Currency |
|---|---|---|
| Polymarket | Politics, crypto, current events | USDC (crypto) |
| Kalshi | Economics, events, weather | USD (regulated) |
| Predictit | US politics | USD (limited stakes) |
| Manifold | Anything (play money/mana) | Virtual currency |
Good to Know
Regulatory status varies. Kalshi is CFTC-regulated in the US. Polymarket operates offshore with crypto. Know your jurisdiction's rules.
Types of Markets
Binary (Yes/No)
"Will [event] happen?" Shares resolve to $1 or $0.
Multiple Choice
"Which candidate will win?" Winning choice pays $1, others $0.
Scalar/Range
"What will be the value of X?" Payout based on final number.
Linked Series
Related markets that span time (e.g., monthly inflation)
Why People Trade
Prediction markets attract traders for different reasons:
- Profit from information edge – You know something the market doesn't
- Hedging – Offset real-world risks tied to outcomes
- Entertainment – Stake in events you follow closely
- Research – Markets often predict better than polls
Strategy Insight
The best opportunities come when markets overreact to news. A probability jumping from 30% to 50% on a rumor might be mispriced if you have reason to doubt the news source.
Key Differences from Sports Betting
Prediction Markets vs Sports Betting
| Aspect | Prediction Markets | Sportsbooks |
|---|---|---|
| Pricing | Exchange (bid/ask) | Fixed by book |
| Exit | Sell before resolution | Usually stuck with bet |
| Vig | Spread between buy/sell | Built into odds |
| Liquidity | Varies by market | Usually high |
| Events | Anything verifiable | Sports focused |
Risks to Understand
Warning
- Liquidity risk – Thin markets may not let you exit at fair prices
- Resolution disputes – What happens if outcome is ambiguous?
- Regulatory risk – Platforms may face legal challenges
- Counterparty risk – Especially on unregulated platforms
Key Takeaways
- 1Prediction markets let you buy shares in real-world outcomes
- 2Share prices reflect implied probability (e.g., $0.65 = 65%)
- 3You can sell before resolution—unlike traditional betting
- 4Markets often predict outcomes better than polls or experts
- 5Understand liquidity and platform risks before trading