Prediction Market Glossary: Every Term Explained
Prediction market jargon isn’t hard once you learn the language — most of it is just a new name for ideas you already understand from betting or investing. This glossary covers every core term you’ll run into, from contract prices to resolution sources, in plain English. New to the space entirely? Start with our prediction markets hub for reviews, guides, and our full lineup of prediction market tools.
Glossary last updated in August 2026. We add new terms as the market evolves.
Prediction market basics
Start here if you’re new to the space. These are the foundational terms that every other entry in this glossary builds on — what a prediction market actually is, how a contract is structured, and how price connects to probability.
Prediction Market
A prediction market is a marketplace where people buy and sell contracts tied to the outcome of a real-world event, rather than placing a fixed-odds bet against a bookmaker. The contract’s price moves in real time as people trade, and it reflects the crowd’s current best guess at the odds. Example: A contract on “Will the Fed cut rates in September?” trades at 62¢, implying the market sees a 62% chance it happens. Why it matters: Understanding this one concept unlocks almost every other term in this glossary — see our full prediction markets guide for the complete picture.
Event Contract
An event contract is the actual tradable product on a prediction market — a “Yes” or “No” position on a specific, resolvable question, priced between $0.01 and $0.99 (or the local equivalent). Whoever holds a winning contract at settlement gets $1; a losing contract is worth $0. Example: “Will the Lakers make the playoffs?” is an event contract you can buy or sell up until the question resolves. Why it matters: Every trade you place on a prediction market is really a trade in event contracts, whether the site calls them that or not — see how they work on our sports prediction markets page.
Binary Market
A binary market has exactly two possible outcomes — it either happens or it doesn’t, with nothing in between. Most sports, politics, and pop-culture contracts on major platforms are structured this way. Example: “Will this movie cross $1 billion at the box office?” is binary — see our pop culture prediction markets page for more like it. Why it matters: Binary markets are the simplest format to understand, which is why most beginners start there before moving into scalar or multi-outcome contracts.
Mutually Exclusive Market (Multi-Outcome Market)
A mutually exclusive market groups several outcomes under one question where only one can happen — buying a share in one outcome effectively bets against every other outcome in the same group. These are common in political prediction markets, where a primary might have eight candidates but exactly one winner. Example: “Who wins the 2028 Democratic primary?” with a separate contract for each candidate is a mutually exclusive market — only one candidate’s contract can ever settle at $1. Why it matters: Prices across all outcomes in a mutually exclusive market should add up to roughly 100%; if they don’t, that gap is sometimes an arbitrage opportunity.
Contract Price
The contract price is what you currently pay for one share of a “Yes” or “No” position, and it moves continuously as people trade. Because winning contracts settle at $1, the price itself functions as a probability. Example: A contract priced at 30¢ implies roughly a 30% chance of that outcome. Why it matters: Watching how a contract’s price moves over time tells you how the crowd’s expectations are shifting, often faster than a poll or a pundit would.
Implied Probability
Implied probability is the percentage chance an outcome will happen, as implied by its current contract price or odds. Run any price or odds figure through our free implied probability calculator to convert it instantly. Why it matters: Comparing a contract’s implied probability to your own estimate is the entire basis of value-based trading — if you think the real probability is higher than the price implies, that’s your edge.
Scalar Market
A scalar market settles somewhere along a range instead of a flat “Yes” or “No,” with your payout scaling based on where the actual result lands. Example: A contract on “How many points will the winning team score?” might settle you a fraction of a dollar for every point within a set range, rather than paying out only at the extremes. Why it matters: Scalar markets let you express a specific number, not just a direction, which is useful for economic data and statistical outcomes.
Par Value
Par value is the fixed amount a winning contract settles for — typically $1 in US-regulated prediction markets, regardless of what you originally paid for it. Example: Whether you bought a contract at 10¢ or 90¢, it’s worth the same $1 par value if it resolves “Yes.” Why it matters: Your profit is always the gap between what you paid and par value, which is why buying at extreme prices carries very different risk-to-reward math than buying near 50¢.
Trading and order types
Once you understand what a contract is, the next step is learning how to actually buy and sell one. These terms cover the mechanics of placing a trade — order types, pricing, and the liquidity that determines how easily you can get in or out of a position.
Order Book
The order book is the live list of every buy and sell order waiting to be matched at a given price, on platforms that show one. Reading it tells you how much volume sits at each price level. Example: An order book might show 500 contracts for sale at 55¢ and 300 wanting to buy at 54¢ — a one-cent spread with real depth behind it. Why it matters: A visible order book lets you judge a market’s liquidity before you trade; not every platform shows one, which is a real difference between operators we cover in our sports prediction markets reviews.
Market Maker (Maker–Taker)
A market maker places limit orders that sit on the order book waiting to be filled, adding liquidity. A “taker” instead accepts an existing order immediately, removing liquidity. Some exchanges charge takers a higher fee than makers to reward the people providing depth. Example: If you set a limit order at 40¢ and wait for someone to trade against it, you’re the maker; if you instead buy instantly at the best available ask, you’re the taker. Why it matters: Knowing which role you’re playing helps you understand why the same trade can cost different fees on different platforms.
Market Order
A market order buys or sells immediately at the best price currently available, prioritizing speed over price control. Example: Placing a market order on a thin contract might fill part of your order at 50¢ and the rest at 53¢ as it eats through the available supply. Why it matters: Market orders are simple but can cost you more on illiquid contracts — that’s the tradeoff against a limit order.
Limit Order
A limit order only executes at your specified price or better, and sits on the order book until it’s matched or you cancel it. Example: Setting a limit buy order at 45¢ means you’ll never pay more than that, even if the price is currently sitting at 48¢. Why it matters: Limit orders give you price control that a market order doesn’t, though there’s no guarantee they’ll ever fill — not every platform supports them, which is worth checking before you commit to one.
Bid Price
The bid is the highest price any buyer is currently willing to pay for a contract. Example: If the best bid is 48¢, that’s the most you could sell your shares for right now without waiting for a better offer. Why it matters: The bid, paired with the ask, is what defines the spread — and the spread is a real, often-overlooked cost of trading.
Ask Price
The ask (sometimes “offer”) is the lowest price any seller is currently willing to accept for a contract. Example: If the best ask is 52¢, that’s the cheapest price you could buy shares at right now. Why it matters: You always buy at the ask and sell at the bid when trading immediately, which is exactly why the spread between them eats into your returns.
Spread
The spread is the gap between the best bid and the best ask, and it’s effectively the cost of trading immediately rather than waiting for a better price. Example: A market with a 48¢ bid and 52¢ ask has a 4-cent spread — wide for a $1 contract. Why it matters: Tighter spreads generally mean a healthier, more liquid market; wide spreads are a warning sign on thin contracts.
Liquidity
Liquidity describes how easily you can buy or sell a contract without moving its price significantly. High-volume markets on major events tend to be far more liquid than a niche, user-created question. Example: A presidential-election contract is usually liquid enough to trade thousands of dollars with barely a price change; a small local-election contract might not be. Why it matters: Low liquidity means your own trade can move the price against you — check volume and order-book depth before committing a large amount.
Market Depth
Market depth is the total volume of buy and sell orders stacked at various price levels, visible in a full order book. Deep markets can absorb large trades with minimal price movement. Example: A market with $50,000 in orders within a penny of the current price has much more depth than one with only $500. Why it matters: Depth is a more precise read on liquidity than total daily volume alone, since volume can be misleading if it’s concentrated at just one price point.
Slippage
Slippage is the difference between the price you expected to pay and the price you actually got, usually because your order was large enough to move through multiple price levels. Example: You try to buy $1,000 of a contract at 50¢, but thin liquidity means your average fill price ends up at 54¢. Why it matters: Slippage is the real, often-invisible cost of trading illiquid markets — it’s not a fee the platform charges, but it comes out of your pocket just the same.
Fill (Partial Fill)
A fill is when your order is matched and executed. A partial fill means only some of your order was matched, leaving the rest still open on the book (or canceled, depending on the order type). Example: You place an order for 100 shares, but only 60 are available at your price — you get a partial fill of 60, with 40 left unfilled. Why it matters: Understanding partial fills matters most on thin markets, where a large order rarely executes all at once at a single price.
Volume
Volume is the total dollar amount (or number of contracts) traded in a market over a given period, usually shown as total or 24-hour volume. Example: A contract with $2 million in volume has attracted far more trading interest than one with $200. Why it matters: Volume is a quick, imperfect proxy for liquidity — high volume usually (but not always) means tighter spreads and easier entry and exit.
Position
Your position is whatever contracts you currently hold in a given market, long (YES) or short (effectively NO), and how much you have riding on the outcome. Example: Holding 200 YES shares at an average price of 40¢ is a $80 position with a maximum possible payout of $200. Why it matters: Tracking your position size relative to your total bankroll is the foundation of basic risk management.
Resolution and settlement
Every prediction market eventually has to answer its own question. This section covers how contracts actually resolve, who decides the outcome, and what happens to your money once they do — arguably the part of prediction markets that differs most from a typical sportsbook bet.
Resolution
Resolution is the process of determining a contract’s final outcome once the underlying event has actually happened, based on rules the market laid out in advance. What does “resolve” mean in practice? It’s the moment a contract stops trading and gets marked “Yes” or “No” for good. Example: A market on “Will it rain in Chicago on August 15?” resolves the moment official weather data for that date is available. Why it matters: How clearly a market defines its resolution rules upfront determines how much room there is for disputes later — see our prediction markets guide for more on how event contracts are structured.
Resolution Source (Oracle)
The resolution source (sometimes called an oracle) is the specific, named authority a market relies on to determine the true outcome — a government agency, a sports league’s official record, or a news wire, for example. Example: A market on the June jobs report might name the Bureau of Labor Statistics’ official release as its resolution source, leaving no room for a different number from a private estimate. Why it matters: Always check the resolution source before trading a market — a vague or disputed source is a real risk on user-generated platforms in particular.
Settlement
Settlement is what happens after resolution: winning contracts are paid out at par value (typically $1) and losing contracts are marked worthless, with balances updated in your account. Example: Once a market resolves “Yes,” every YES share you held settles for $1 and every NO share settles for $0. Why it matters: Settlement is usually near-instant on regulated exchanges, but some platforms take longer to finalize payouts — worth knowing before you trade a time-sensitive event.
Expiry (Expiration)
Expiry is the date and time a contract stops trading and moves toward resolution, whether or not the underlying event has technically finished. Example: A weekly economic-data contract might expire the moment the government report is officially released, even if trading was open right up until that instant. Why it matters: Knowing a contract’s expiry helps you plan whether you want to hold to resolution or exit your position early instead.
Payout
The payout is the amount you actually receive once a contract settles, based on how many shares you held and their par value. Example: 100 winning YES shares at $1 par value pay out $100, regardless of what you originally paid for them. Why it matters: Your real return is the payout minus your original cost — easy to overlook when you’re focused on the headline win.
Early Exit
An early exit means selling your position before the market resolves, locking in a gain or loss based on the current price instead of waiting for the final outcome. Example: If you bought a contract at 30¢ and it’s now trading at 70¢ with the event still a week out, selling now locks in your profit without the risk of a late reversal. Why it matters: The ability to exit early is one of the biggest structural differences between prediction markets and a typical fixed bet, which locks you in until the result is final.
Dispute Window
The dispute window is a set period after a market appears to have resolved during which traders can flag an incorrect or ambiguous resolution before it’s made final. Example: A user-generated market might allow 24 hours for the community to challenge a resolution before it locks in permanently. Why it matters: Platforms with a clear, enforced dispute window generally handle resolution disagreements more fairly than ones without any review process at all.
Invalid Market (Void Market)
A market gets voided or ruled invalid when its question turns out to be unanswerable, ambiguous, or based on an event that never happened as described — trades are typically unwound and money returned rather than settled “Yes” or “No.” Example: A market asking about a specific policy vote might be voided if the vote is indefinitely postponed rather than held or rejected. Why it matters: Void markets are rare on well-run platforms with clear rules, but they’re worth understanding before you trade a question with any real ambiguity in how it’s worded.
To see resolution rules in action, take a real example: Kalshi’s monthly CPI (inflation) contracts resolve directly against the official Consumer Price Index figure published by the Bureau of Labor Statistics (BLS) — not a media report or a private estimate. The exact release date and number are set by the government in advance, which is exactly the kind of clean, verifiable resolution source that makes a market easy to trust. You’ll find contracts like this, along with jobs reports and Fed decisions, on our economy prediction markets page.
Risk, strategy and pricing terms
Once you’re comfortable with the mechanics, these are the terms that actually shape how good traders think — how to size a position, spot mispriced contracts, and manage the risk that comes with any form of trading. Our prediction market strategies guide goes deeper on most of these.
Arbitrage
Arbitrage means locking in a guaranteed profit by exploiting a pricing gap, usually by buying the same outcome cheaper on one platform than you can sell it on another, or by buying all outcomes in a mutually exclusive market for less than $1 combined. Example: If a “Yes” contract trades at 45¢ on one exchange and the matching “No” contract trades at 50¢ on another, buying both locks in a 5-cent profit no matter what happens. Why it matters: True arbitrage opportunities are rare and close quickly once spotted, but understanding the concept helps you recognize when a market is genuinely mispriced.
Hedging
Hedging means taking an offsetting position to reduce your risk on a trade you already hold, even if it caps your potential upside. Example: If you hold a big YES position on a market that’s since moved heavily in your favor, buying some NO shares locks in part of your gain regardless of the final outcome. Why it matters: Hedging trades away some profit for certainty — a reasonable move when a position has grown larger than you’re comfortable holding to the end.
Expected Value (EV)
Expected value is the average outcome you’d expect if you made the same trade many times, calculated by weighing each possible result by its probability. A trade is “+EV” if your true win probability is higher than the price implies. Example: If you believe a 40¢ contract actually has a 55% chance of hitting, that’s a positive expected value trade even though it could still lose this one time. Why it matters: Chasing positive EV over a large number of trades, rather than any single result, is the closest thing prediction markets have to a long-term winning strategy — our odds calculator can help you work the math.
Kelly Criterion
The Kelly Criterion is a formula for sizing a bet based on your edge and the odds, aiming to grow your bankroll as fast as possible while avoiding the risk of going bust. Example: A trader with a modest edge might size a position at 2-3% of their bankroll rather than betting everything on one favorable-looking contract. Why it matters: Most traders don’t use full Kelly sizing since it can still feel aggressive — try our Kelly Criterion calculator to see recommended position sizes based on your own edge.
Odds
Odds express the same information as a contract price, just in a different format — how much you’d win relative to your stake if you’re right. Sportsbooks typically quote American or decimal odds, while prediction markets usually just quote the price directly. Example: A contract priced at 25¢ is roughly equivalent to +300 American odds. Why it matters: Being able to translate between odds and price format makes it much easier to compare a prediction market contract against a traditional sportsbook line — our odds calculator converts between formats instantly.
Bankroll
Your bankroll is the total amount of money you’ve set aside specifically for trading, separate from money you need for anything else. Example: A trader with a $1,000 bankroll who risks 2% per position is putting $20 on the line at a time, not $200. Why it matters: Every serious risk-management concept — position sizing, Kelly sizing, drawdown limits — is measured as a percentage of your bankroll, not a flat dollar amount.
Favorite–Longshot Bias
Favorite-longshot bias is a well-documented pattern where bettors and traders systematically overpay for longshots (low-probability outcomes) and underpay for favorites, relative to their true odds. Example: A 5% true-probability outcome might consistently trade at prices implying 8-9%, because it “feels” more exciting to back the underdog. Why it matters: If this bias holds in a given market, it suggests a small, repeatable edge in consistently fading overpriced longshots — though it’s never guaranteed to hold in every market.
Vig (No-Vig)
The vig (short for “vigorish”) is the built-in margin a sportsbook bakes into its odds so that both sides of a bet can’t be true winners at once. Prediction markets are often described as “no-vig” or low-vig by comparison, since prices are set by trader supply and demand rather than a house margin. Example: A sportsbook’s two-way line might imply a combined 105% probability across both outcomes — that extra 5% is the vig. Why it matters: Lower vig generally means a better long-run price for traders, which is one of the more commonly cited advantages of prediction markets over traditional sportsbooks — see our full breakdown on prediction markets vs. sports betting.
Line Shopping
Line shopping means comparing the same contract or bet across multiple platforms before trading, to make sure you’re getting the best available price. Example: Checking a contract’s price on two or three operators before committing can be the difference between a fair price and an overpriced one on a less liquid platform. Why it matters: Since prediction markets aren’t centralized the way a single stock exchange is, the same event can genuinely trade at different prices on different platforms at the same time.
Copy Trading
Copy trading means automatically or manually mirroring another trader’s positions, usually someone with a public track record you’re trying to learn from or piggyback on. Example: Some platforms let you follow a top-ranked trader and get notified (or auto-copy) every time they open a new position. Why it matters: Copy trading can be a useful way to learn patterns from experienced traders, but a good track record on one type of market doesn’t guarantee it’ll transfer to a different category.
Edge
Your edge is the gap between your own estimate of an outcome’s true probability and what the market’s current price implies. Example: If you believe a contract’s true probability is 60% but it’s priced at 50¢, you have a 10-point edge. Why it matters: Consistently finding and acting on real edge, not just confidence, is what separates profitable traders from ones who are just guessing.
Overround
The overround is how much a market’s combined prices across all outcomes exceed 100%, a sign of built-in margin similar to vig. Example: If YES and NO prices add up to $1.06 instead of $1.00, that market has a 6% overround. Why it matters: A lower overround generally means a fairer, more competitively priced market — worth checking when you’re deciding which platform to trade a given event on.
Platforms and regulation terms
Not every platform calling itself a “prediction market” operates the same way or answers to the same rules. These terms cover the regulatory and structural labels that actually determine what protections you have as a trader, and how to tell one type of platform from another.
Exchange (Designated Contract Market)
A Designated Contract Market (DCM) is an exchange formally licensed by the CFTC to list and trade futures or event contracts. It’s the core piece of infrastructure that makes a US real-money prediction market legal. Example: Kalshi operates its own CFTC-registered exchange, while some competitors route their contracts through a partner exchange instead of building their own. Why it matters: Trading on a real DCM is what separates a regulated event-contract platform from an unregulated one — always worth confirming before you fund an account.
CFTC
The Commodity Futures Trading Commission (CFTC) is the federal agency that regulates US derivatives markets, including event contracts, giving prediction markets a path to operate legally nationwide under one consistent federal framework rather than state-by-state gambling law. Example: A CFTC-regulated platform can typically offer sports event contracts in states where traditional sports betting is otherwise illegal. Why it matters: CFTC oversight is the main argument regulated prediction markets make for why they aren’t gambling in the legal sense — though the question isn’t fully settled, as our prediction markets vs. sports betting breakdown covers.
FCM (Futures Commission Merchant)
A Futures Commission Merchant is an entity registered with the CFTC to solicit or accept orders for futures and event contracts, and to hold customer funds. Many prediction market apps operate through an FCM rather than the exchange itself. Example: A trading app might route your order through its own registered FCM, which then executes on a separate DCM exchange behind the scenes. Why it matters: Knowing whether a platform is a registered FCM (or works with one) is a quick way to gauge how seriously it takes regulatory compliance.
Kalshi
Kalshi was the first CFTC-licensed event contract exchange in the US and remains one of the largest and most established platforms in the space, spanning politics, economics, sports, culture, and weather. Why it matters: Kalshi’s infrastructure underpins a chunk of the broader industry, with several other apps routing a portion of their own contracts through its exchange. Read our full Kalshi review for details on fees, markets, and how to get started.
Polymarket
Polymarket is one of the largest prediction markets in the world by volume, historically crypto-funded and now expanding into CFTC-regulated access for US traders through Polymarket US. Why it matters: Polymarket’s scale and live, trader-driven pricing make it a common reference point for “what the market thinks” on major political and current-events questions. Read our full Polymarket review for how funding and access actually work.
Sweepstakes Model
The sweepstakes model lets a platform offer prize-based contests using free entry currency alongside optional purchased currency, structured to avoid being classified as real-money gambling in states that restrict it. Example: A sweepstakes-style platform might give away entries for free while also selling bundles, with prizes redeemable under sweepstakes law rather than gambling law. Why it matters: Sweepstakes-model platforms can sometimes operate in states where CFTC-regulated event contracts or traditional sports betting are restricted, but the legal footing varies more by state than the federal DCM model does.
KYC/AML
KYC (“know your customer”) and AML (anti-money laundering) are identity-verification and compliance requirements that regulated platforms must follow before letting you deposit, withdraw, or trade above certain limits. Example: Opening an account on a regulated exchange typically means submitting your name, date of birth, and sometimes a government ID before you can fund it. Why it matters: A platform with real KYC/AML checks is a signal it’s operating under genuine regulatory oversight, not just calling itself “regulated” with nothing behind it.
Self-Certification
Self-certification is a CFTC process that lets an already-registered exchange list a new type of contract without waiting for the CFTC to individually pre-approve every single one, provided it meets existing rules. Example: An exchange might self-certify a new category of sports contracts, allowing it to go live faster than if each one required a full separate CFTC review. Why it matters: Self-certification is part of why new contract categories can appear on regulated exchanges fairly quickly — it doesn’t mean the CFTC has no oversight, just that the review happens on a different timeline.
Prediction Market Terms FAQ
A prediction market is a marketplace where people buy and sell contracts tied to whether a real-world event happens, instead of placing a fixed bet against a bookmaker. Contract prices move as people trade, and those prices reflect the crowd’s current best guess at the odds — see our full prediction markets guide for more.
An event contract is the tradable product on a prediction market: a “Yes” or “No” position on a specific question, priced between $0.01 and $0.99. A winning contract settles at $1; a losing one settles at $0. Every trade you place on a prediction market is really a trade in event contracts.
Resolution is the moment a contract’s outcome is officially determined and it stops trading for good, marked “Yes” or “No” based on rules the market set in advance. A clear, named resolution source — like an official government report — is what keeps resolution fair and disputable claims to a minimum.
Mutually exclusive markets group several outcomes under one question where only one can actually happen, so buying a share in one outcome is effectively betting against every other outcome in the group. A primary election with eight separate candidate contracts is a common example — only one can ever settle at $1.
Implied probability is the percentage chance an outcome will happen, based on its current contract price or odds. A 30¢ contract implies roughly a 30% chance. Comparing implied probability to your own estimate is the basis of value trading — run any number through our implied probability calculator.
An order book is the live list of buy and sell orders waiting to be matched at each price. A market maker places orders that sit on that book adding liquidity, while a “taker” accepts an existing order immediately. Not every platform shows a visible order book, which is worth checking before you trade.
A market order buys or sells immediately at the best available price, prioritizing speed over price control. A limit order only executes at your specified price or better and waits on the order book until it’s matched. Limit orders give you more control; market orders guarantee a fill but not the price.
Many overlap in spirit but not in name. “Implied probability” and “vig” carry over directly, but sportsbooks talk in fixed odds and point spreads, while prediction markets talk in contract prices, order books, and resolution sources. See our full prediction markets vs. sports betting comparison for the complete rundown.
