Crypto glossary
Prediction market
A prediction market is a platform where people trade shares on the outcome of future events, and share prices reflect the crowd's estimated probability.
Each question, such as who will win an election, becomes a market with outcome shares that pay a fixed amount, typically $1, if that outcome happens and nothing if it does not. A Yes share trading at $0.62 implies the market sees roughly a 62% chance. Traders buy when they think the price is too low and sell when they think it is too high.
Crypto-based prediction markets such as Polymarket settle trades in stablecoins on a blockchain and use oracles or dispute systems to report results. Their volumes grew sharply around the 2024 US presidential election, and media now cite their odds alongside polls. Regulated venues such as Kalshi in the US offer similar contracts under CFTC oversight.
Prices can be distorted by thin liquidity or large single traders, and ambiguous questions can lead to disputed settlements. Legal status differs by country, and several jurisdictions restrict or block access.
Example
A trader buys 1,000 Yes shares at $0.40 on whether a bill will pass by year-end; if it passes, the shares pay $1,000, a $600 profit, and if not, the $400 is lost.
Related terms
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