Glossary

A market with exactly two outcomes, Yes and No, where one pays out in full and the other pays nothing. Most prediction market contracts are binary, which is why prices can be read directly as probabilities.

A market with more than two mutually exclusive outcomes — which candidate wins, which film takes the award. Exactly one outcome pays out, so the prices of all outcomes should sum to roughly the full payout.

The tradable instrument itself: an agreement that pays a fixed amount if a specified event occurs and nothing if it does not. US regulators use this term rather than "bet", and the distinction is legal rather than cosmetic.

A market where people trade contracts that pay out based on whether a stated event happens. The price a contract trades at is the market’s collective estimate of how likely that event is.

A market on a number rather than an event — a temperature, a vote share, a jobs figure. The payout scales with where the final value lands inside a stated range, so its price is not a probability.

Removing the built-in margin from quoted prices to recover the probability the market actually implies, usually by dividing the Yes price by the sum of Yes and No. Comparing two venues without doing this compares their fee structures as much as their forecasts.

The chance of an outcome as read off its contract price. A contract that pays $1 and trades at 62c implies a 62% chance — before fees and before the spread, both of which make the real break-even higher.

The gap between the best price to buy and the best price to sell. It is a real cost: you cross it the moment you trade, and a wide spread means the midpoint price is a weaker signal than it looks.

The margin built into a two-sided market, visible when the Yes and No prices add up to more than the full payout. It is the venue’s edge, and it is why a market quoted at 50/50 is not a fair coin flip for the person taking either side.

Buying the same outcome cheaply on one venue and selling it dearer on another to capture the difference. It only works when both prices are in the same currency and both sides are actually tradable — a play-money price cannot be arbitraged against a real-money one.

A formula that always quotes a price, moving it as people trade, instead of matching buyers against sellers. Manifold uses one, which is why its markets publish a single probability and no spread — the cost shows up as slippage instead.

How much can be traded before the price moves against you. A market can show a tight spread and still be thin, so the quoted price only tells you what a small order would get.

A maker posts an order and waits; a taker accepts one that is already there. Venues usually charge the two differently, so the same trade can cost different amounts depending on how you place it.

A live list of the prices people are willing to buy and sell at, matched against each other as they overlap. Kalshi and Polymarket both work this way, which is why they quote a separate bid and ask.

How many contracts you hold in one market, and therefore how much you lose if it resolves against you. On a binary contract the maximum loss is what you paid, which makes size the only lever that controls risk.

The difference between the price you saw and the average price you actually paid, caused by your own order moving the market. It grows with order size and is the main cost on an automated market maker, where there is no spread to pay.

When trading stops, which is not the same moment the outcome is known or the market is settled. A market can sit closed and unresolved for weeks, and a price shown during that gap has stopped meaning anything.

Whoever or whatever decides the outcome — a named data source, a committee, or a token-holder vote. On-chain venues often use the last of these, which means resolution can be disputed and re-run rather than simply announced.

What a winning contract is worth at settlement — one dollar on most US venues, one unit of the platform’s currency elsewhere. Your profit is the payout minus what you paid, minus fees, which is a smaller number than the price move suggests.

The moment a market is declared settled and one outcome is judged to have happened. Until then a price is an opinion; after it, contracts are worth their full payout or nothing.

The written rule that decides which way a market settles, including the source it will be judged against. Two markets with identical titles and different criteria are different bets, which is why we do not compare prices across venues without reading both.

The US Commodity Futures Trading Commission, which regulates derivatives including event contracts. It is the agency that decides whether a venue may offer these to Americans, and under what conditions.

A venue the CFTC has formally approved to list contracts to US customers. The status is a matter of public record, and being on the register as an applicant is not the same as holding it.

A venue blocking access from particular countries or states, enforced by location rather than by who you are. The block can differ by product: some venues allow reading prices everywhere and trading only in some places.

The identity checks a venue runs before letting you trade or withdraw — commonly a document and a photograph. Where it applies, it usually applies at withdrawal even if signing up did not require it.

A written undertaking from regulator staff not to pursue enforcement against a specific venue within stated limits. It is narrower than a licence, it can be withdrawn, and it does not make the activity generally lawful for anyone else.

A platform that holds your deposit on its own books rather than settling on a public chain or through a regulated broker. If it fails or refuses a withdrawal, recovering the money depends entirely on that company.

Payments a venue makes to traders who post resting orders, to keep spreads tight on markets that would otherwise be thin. They are a subsidy for liquidity, not a return on being right.

An arrangement where funds stay in a wallet you control and the venue never holds them. It removes the risk of the platform not paying out, and replaces it with sole responsibility for your own keys.

A platform currency that cannot be converted to cash, used to trade without financial risk. Prices on play-money venues are real forecasts but not real trades, so they cannot be arbitraged against a cash market.

What a market actually pays out in — US dollars, a stablecoin, or a platform token. It determines what your winnings are worth and how hard they are to move off the venue.