predictionmarket

Prediction markets are exchange-based platforms where participants buy and sell contracts whose payoff depends on the outcome of uncertain future events. Each contract represents a possible result and has a price that fluctuates with trading and information. In binary markets, a contract pays one unit of currency if the event occurs and nothing otherwise; the price is commonly interpreted as the market’s probability assessment under risk-neutral assumptions.

Trading in prediction markets aggregates dispersed information into prices. Market makers provide liquidity, while participants include individuals, firms, and researchers seeking to hedge, speculate, or signal information. Prices move as new information arrives, and arbitrage can arise across related markets. Some designs employ scoring rules or automated market makers to maintain liquidity and constrain prices within plausible ranges.

Markets cover binary, multi-outcome, and continuous variables, forecasting political events, policy timetables, economic indicators, product launches, and other future phenomena. Supporters argue they produce accurate probability estimates and inform strategic decisions; critics warn of manipulation, information asymmetries, and varying regulatory treatment about gambling or securities.

Notable examples include the Iowa Electronic Markets, PredictIt, and Kalshi, as well as blockchain-based platforms such as Augur and Polymarket. The legal status and settlement mechanisms of prediction markets vary by jurisdiction and platform, shaping what events can be traded and how outcomes are verified.