General information, not financial, investment, legal, tax or betting advice · Prediction markets carry risk of loss · 18+ or the legal age in your region
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How prediction markets actually work

An education pillar on how prediction markets work: what an event contract is, how a price reads as an implied probability, the exchange model with no house, how markets resolve, the kinds of platform, and the real risks. Information, not advice.

Last reviewed 23 June 2026 · Educational, not advice

The one idea that matters

A price is a probability.

A contract that settles to one dollar if an event happens trades between 1 and 99 cents. That price is the market's estimate of the chance. Drag the slider to see the implied probability and what a 100 dollar stake would return if it resolves yes. It is an estimate, not a forecast, and not advice.

Price
50ยข
Implied chance
50%
Stake $100 if YES returns $200 · if NO you lose your stake.

Illustrative; excludes fees and spread, which reduce real returns.

FAQ

Common questions.

What is a prediction market?

A prediction market is a venue where people trade contracts tied to the outcome of a defined future event. The contract pays a fixed amount if the event happens and nothing if it does not, so its price moves between those two values and can be read as the market's implied probability of the event.

How does the price work as a probability?

A yes contract that settles at one dollar trades between one cent and ninety nine cents before resolution. A price of sixty cents implies the market thinks there is roughly a sixty percent chance the event happens. It is an estimate set by traders, not a guarantee, and it changes as people trade.

Is a prediction market the same as a sportsbook or a bookmaker?

No. On an exchange style prediction market there is no house setting odds and taking the other side of your position. You trade with other participants and the venue earns from fees. That structural difference is central to how these markets are regulated and debated.

How does a market settle?

Each market has defined resolution criteria and a stated source of truth. When the event is decided, the winning contracts are redeemed for their full value and the losing contracts expire worthless. On decentralized venues an oracle reports the outcome and a dispute process can resolve contested results.

Are prediction markets a safe way to make money?

No. Prediction markets carry a real risk of losing money, and an informative price is not a promise. Fees, thin liquidity, settlement risk, and contested legality all matter. This page is general information, not financial, legal, or tax advice.