How Prediction Markets Work
Prediction markets let you trade contracts on the outcome of real-world events — elections, sports, economics, and more. Prices reflect the crowd's probability estimate for each outcome.
Important: Trading fees erode returns on every trade; on Kalshi and Polymarket US they run from about 0.7% of the stake at a 90 cent price to about 6.3% at 10 cents. Most retail participants face significant information asymmetry against professional traders. Treat these as speculative instruments for civic or intellectual engagement — not an investment strategy.
What Is a Prediction Market?
A prediction market is an exchange where participants buy and sell contracts tied to the outcome of future events. Each contract resolves at $1.00 if the event occurs and $0.00 if it does not. The current price of a "Yes" contract — say, $0.65 — implies the market believes there is approximately a 65% chance the event will happen.
Unlike traditional gambling, you can exit your position before the event resolves by selling your contracts. However, most trades incur a platform fee. On Kalshi and Polymarket US the fee follows price times (1 - price), about $1.75 per 100 contracts at 50 cents, and it can apply again when you sell. That compounds into meaningful drag on any strategy.
Professional traders, hedge funds, and information-rich participants dominate these markets. Retail participation is best approached as civic engagement or entertainment with a quantifiable cost, not as a path to consistent profit.
Prices = Probabilities
A contract trading at $0.70 implies a 70% market consensus probability. The price fluctuates as new information changes expectations.
Fees Erode Returns
Fees are a guaranteed cost. At a 50 cent price a $1.75 fee on 100 contracts means you must be right more than 51.75% of the time just to break even.
Information Asymmetry
Sophisticated traders have better models and faster information. Retail participants consistently underperform market-makers on politically or financially sensitive events.
Featured Platforms
Compare all →DraftKings Predictions brings CFTC-regulated prediction markets to the DraftKings ecosystem. Available in 38 states, it focuses on sports and finance markets with a $75 first trade match for new users.
Kalshi is an exchange where users trade yes/no contracts on future events, from economic data to sports. The CFTC designated it a contract market in 2020. Its sports contracts are the subject of an ongoing legal fight with several states.
OG.com is a brand-new CFTC-regulated prediction market exchange backed by Crypto.com. It launched in 2026 and is already available in 40+ states, offering a modern interface and welcome bonuses for new users.
Polymarket is a prediction market where users trade yes/no contracts on future events. Polymarket.com serves people outside the US, and a separate app, Polymarket US, serves people in the US under CFTC oversight.
Learn the Basics
All guides →Are Prediction Markets Legal in the US? State-by-State Guide
The legal status of prediction markets in the US — which states allow them, which have banned them, and what the federal vs state regulatory battle means for traders.
How to Trade on Prediction Markets: Step-by-Step Guide
A step-by-step walkthrough of how to make your first prediction market trade, from signing up to settling your first contract.
Kalshi vs Polymarket Fees: What Each Really Costs (2026)
Kalshi and Polymarket US charge nearly the same taker fee: $1.75 versus $1.74 on 100 contracts at 50 cents. See the formulas, worked examples, maker and rebate differences, and what the fee does to your break-even odds.
Responsible Participation
Prediction markets are speculative instruments. Every trade incurs fees regardless of outcome. The house (platform) is guaranteed revenue while your returns depend entirely on being better-informed than other participants. Never trade more than you can afford to lose entirely. If speculative trading is affecting your finances or wellbeing, call the National Problem Gambling Helpline: 1-800-522-4700 (free, confidential, 24/7).