What are prediction markets?
A prediction market lets people trade contracts whose payout depends on the outcome of an event. Its prices can be read as aggregated forecasts. To read them, it helps to identify which outcome the contract covers and under what rules its payout will be decided.
In this guide
What defines a prediction market
The category brings together products with different designs and rules. Polymarket serves here as a concrete example for explaining prices, execution and resolution; its international mechanics do not automatically describe every platform.
How a binary contract works
In Polymarket's ordinary binary example, a winning share can be redeemed for 1 USD and a losing one pays out 0 USD. Each market's rules specify the resolution source, the date from which it can be resolved and ambiguous cases. It is worth reading them alongside the question in the title.
What the price expresses
On Polymarket, buy and sell orders form prices between 0 and 1 USD per share. The price is read as an implied probability of the outcome and expresses a market valuation with uncertainty.
The on-screen quote is usually the midpoint between the best buy and the best sell. If the spread is greater than 0.10 USD, it shows the last trade. Your order executes against the available offers, so the price you pay may differ from the one shown. A large order can also move through several price levels.
A poll, a model and a market measure different things
A poll collects responses to questions asked of a sample of people. To interpret its results, the population studied, the selection method and the wording of the questions matter. A share of voting intention describes responses to that question; turning it into a probability of victory requires further analysis.
A model produces an estimated probability of an event from data and assumptions. A market provides the price of a contract, formed by orders. Poll, model and market produce different quantities: observed responses, an estimate and a trading price.
When you compare an estimate with a market price, it helps to check that both refer to the same event and the same outcome rules. After that, evaluation against results allows the quality of forecasts to be examined.
Poll
Responses from a sample to a question.
Sample selection and wording affect interpretation.
Model
Estimated probability from data and assumptions.
Evaluation compares the forecast with outcomes.
Market
A contract price formed by orders.
Rules, available orders and costs affect its interpretation.
Liquidity, costs and limits
The available offers and the difference between buy and sell prices affect execution. The size of an order matters for the price you get. A visible price can be a useful reference even if your particular trade executes differently.
On Polymarket, some markets charge taker fees and their parameters depend on the market. Intermediaries may add their own charges. A gross result before costs needs to incorporate those charges to become a net result.
How to go deeper
The Polymarket guide shows a reproducible example of profit and loss. The explanation of expected value helps compare an estimated probability with a price, and the material on AI and forecasting examines the role of models. The Brier score serves as a follow-up for evaluating forecasts against results.
Sources & verification
Sources checked
Sources checked
Sources checked
Sources checked
Sources checked
PolyZeno. Automated review with DeepSeek V4.1 Flash.