A question with a price
A prediction market is a place where people buy and sell shares in the answer to a yes-or-no question. “Will the Fed cut rates in December?” “Will the Chiefs beat the Raiders?” “Will it rain in Houston on Saturday?”
Each question needs a clear answer, by a set date, from a source everyone accepts. That’s why “Is the economy doing well?” can’t be a market and “Will the jobs report show more than 150,000 new jobs?” can.
Every share pays $1 or nothing
A Yes share pays $1 if the answer is yes. A No share pays $1 if it’s no. The losing side gets nothing. Because a share can never be worth more than $1, it always trades between 1¢ and 99¢.
Buy one Yes share at 62¢ and one of two things happens: the answer is yes and you collect $1, a profit of 38¢, or it’s no and you lose the 62¢. The most you can ever lose is what you paid.
The price is the probability
If Yes trades at 62¢, the people trading it think it happens about 62 times out of 100. That’s why news channels show these prices as “62% chance.” It is not a prediction that it will happen. A 62% event fails 38 times in 100, and that’s the market working, not breaking.
Who’s on the other side
At a sportsbook, the book sets the price and takes your bet. In a prediction market, another trader does. The platform runs an order book: a list of everyone waiting to buy (bids) and sell (asks). The gap between the best bid and the best ask is the spread, and it’s a cost every time you trade right away.
Shares come in pairs. When one trader pays 62¢ for Yes and another pays 38¢ for No, the platform holds the $1 and creates one of each. When the answer comes in, the whole dollar goes to the winner.
How the platform makes money
With a fee on trades. On Kalshi and Polymarket US it’s about 7% of price × (1 − price) per share, so it’s biggest in dollars at 50¢ and biggest as a share of your cost on cheap shares. The fee raises the probability you need to break even: at 62¢ on Kalshi, Yes only pays if it happens more than 63.65% of the time. Try any trade in the Kalshi fee calculator.
The big platforms
- Kalshi is a US exchange regulated by the CFTC. You deposit dollars by bank transfer or card, and it lists sports, economics, weather, politics and more. Some states have blocked its sports markets (see the map).
- Polymarket US is Polymarket’s separate, CFTC-regulated app for US residents, in dollars.
- Polymarket.com is the international site. It runs on crypto, holds no money for you, and isn’t open to US residents.
Why most people lose
Studies of millions of trades agree on the direction. Cheap long shots cost too much: on Kalshi, contracts at 10¢ or less lost over 60% of the money put into them. Traders who take the posted price lose far more than traders who post limit orders and wait. And news moves prices within minutes, faster than anyone reading a headline on a phone.
None of that means no one can win. It means the honest starting point is a number of your own, written down before you look at the price, compared with the price after the fee, and sized small enough to survive being wrong. That’s what the book teaches.
