A test of how a trading or forecasting method would have performed on past data. Backtesting can show whether a rule looked useful historically, but it does not prove that the same result will continue in future prediction markets.
How often an outcome has occurred historically in comparable situations, used as a starting point before adjusting for the current event’s specifics. If storms matching a given category have historically reached a certain wind speed 30% of the time, that 30% is the base rate a forecaster starts from before weighing this specific storm’s current path and conditions.
Revising a probability estimate as new evidence arrives, rather than anchoring to an initial view. A trader pricing a contract at 40% might move to 55% after a data release supports the outcome, then to 48% if a later release partly offsets it. Each new piece of evidence adjusts the estimate instead of replacing it outright.
The lowest ask price currently available in the order book. It is the cheapest listed price at which a buyer could potentially purchase the contract at that moment.
The highest bid price currently available in the order book. It represents the strongest listed price a buyer is willing to pay at that moment.
The highest price a buyer is currently offering for a contract. A seller who wants to trade immediately will usually look first at the best available bid.
The number of contracts buyers are willing to purchase at a particular bid price. A large bid size can show that more buying interest is waiting at that level, although it can change quickly.
The gap between the best bid and the best ask. A small spread usually makes it easier to enter or exit near the displayed market price, while a wider spread can increase the cost of trading.
A contract built around two possible settlement results, usually a fixed winning value and zero. Many prediction-market contracts use a Yes/No format, but not every prediction market is limited to binary contracts.
A prediction market with only two mutually exclusive outcomes. A typical example asks whether a stated event will happen, giving traders a Yes side and a No side.
An all-or-nothing derivative that pays a fixed amount when a stated condition is met and otherwise pays nothing. Some prediction-market contracts have a similar payoff shape, but their legal and product classification can be different.
A result that can end in only one of two ways, such as Yes or No. The two outcomes should be written so that one, and only one, can be correct when the market resolves.
A business that accepts bets and sets the odds offered to customers. This differs from an exchange-style prediction market, where the venue generally brings together participants taking opposite sides rather than acting as the bettor’s direct opponent.
The probability at which a trade has an expected profit of zero. For a $1 binary contract bought at $0.62, the break-even probability is 62% before fees. If you estimate the outcome’s probability above 62%, the trade has positive expected value based on your estimate; below 62%, it has negative expected value. Trading fees can raise the actual break-even point.
A scoring method for checking the accuracy of probability forecasts. It measures the squared gap between a stated probability and what actually happened across many predictions; lower scores are better, and a score of zero means perfect forecasts.
An instruction to purchase one or more contracts. The order may execute immediately or wait for a seller, depending on the order type, price, and available liquidity.
A measure of whether stated probabilities line up with real outcomes over time. If events repeatedly priced near 70% happen about seven times out of ten, those predictions would be considered well calibrated.
A way of completing a contract with a cash payment instead of delivering a physical asset. Prediction-market event contracts normally settle by crediting the winning value in money after the outcome is determined.
A market that offers several named outcomes instead of only Yes and No. Only one category normally wins, such as choosing which candidate, team, or range will finish first under the market’s rules.
A clearing entity that sits between both sides of a trade after it is matched. Instead of each trader depending directly on the other, both sides deal through the CCP, which helps manage settlement and the risk of a party failing to meet its obligation.
A central list of buy and sell orders that matches compatible orders using stated trading rules, commonly price and time priority. It is the order-book model used by several exchange-style prediction markets.
A prediction market run by a company or other central operator. The operator controls the trading venue and rules and may handle account access, compliance, market listing, and outcome determination directly or through designated sources.
The U.S. federal agency that oversees derivatives markets, including CFTC-regulated exchanges that list event contracts. Its role includes market oversight, enforcement, customer-protection rules, and supervision of registered market participants.
The process that formally handles obligations after a trade is matched so the transaction can be completed and settled. In cleared derivatives markets, a clearing organization stands between the trading sides and manages the resulting obligations.
An entity that clears and settles derivatives trades and helps manage the risk that a party does not perform as promised. A clearing organization registered with the CFTC is called a Derivatives Clearing Organization.
Ending or reducing an existing market position before settlement by making an offsetting trade. This lets a trader realize a gain or loss without waiting for the event’s final outcome, if the market is still open and liquid enough.
The final traded price, or officially designated price, at the end of a trading session or market period. It is different from the settlement result unless the contract rules specifically use that closing price to determine the outcome.
Money or other eligible value set aside to support a trading obligation. In prediction markets, collateral helps ensure that the promised payout can be covered if the position settles against the trader or platform participant.
A prediction market that lets participants trade on combinations of related events or outcomes rather than one isolated question. These markets can express more detailed views, but their pricing and resolution can become much more complex.
A charge for executing or arranging a trade. Prediction-market platforms do not all use commissions in the same way, so traders should check the specific fee schedule rather than assume every contract has the same cost.
The main U.S. federal law that provides the legal framework for regulating commodity derivatives. It is the statute under which the CFTC supervises many exchanges, intermediaries, and derivatives products relevant to U.S. event-contract markets.
Two outcomes that cover opposite sides of the same proposition, such as Yes and No. If the rules are written correctly, one must win and the other must lose, so the two sides are linked throughout the life of the market.
In a standard $1-settlement Yes/No market, the two sides are economically linked. If Yes is valued at $0.62, the corresponding No value is $0.38. The prices available to immediately buy both sides may not add to exactly $1 because of the bid-ask spread. Any trading fees are separate costs.
A bundle containing one contract for every mutually exclusive outcome in the same market. If the outcomes cover every possible result, exactly one part of the set should finish with the winning value, giving the set a known combined settlement value.
A market whose question is tied to another condition being true. Instead of asking only what will happen, it can ask what is likely to happen if a particular event, decision, or earlier result occurs.
The probability of one event given that another event or condition is assumed to have occurred. Conditional prediction markets use this idea to compare how expected outcomes change under different scenarios.
Giving more weight to information that supports a position you already hold, and less weight to information that contradicts it. A trader who bought Yes at $0.60 might keep citing the polls that back their view even as the market price drifts down to $0.45, treating the falling price as noise instead of as evidence their original read was wrong.
A combined view of what a group expects to happen. In a prediction market, the current price can act as a continuously updated market-based forecast built from the trading decisions of many participants.
A price that reflects the market’s current combined view after buyers and sellers interact. It can be interpreted as a market-implied probability in many event contracts, but it is not an objective guarantee of the event’s true chance.
A market design in which buyers and sellers can submit orders throughout the trading period, and trades occur whenever compatible bids and asks meet. Many electronic order-book markets work this way.
The tradable unit that gives a holder a financial result based on how a defined event or outcome is resolved. The contract’s rules state what is being measured, when it ends, and what payout applies.
The amount at which an event contract is currently bought or sold. In common $1-settlement markets, a price such as $0.62 is often read as roughly a 62% market-implied probability, not as a certainty.
The exact proposition a prediction-market contract asks traders to take a view on. Clear wording matters because the final outcome must be judged against this question and the accompanying rules.
The instructions that explain how a prediction-market contract will be judged and settled. They usually identify the event, timing, measurement method, acceptable result, and source used to determine the outcome.
The specific conditions attached to a contract, such as its question, threshold, expiration, payout, trading limits, and resolution method. Reading these terms is essential because similar-looking markets can settle differently.
The number of contracts traded in a market during a stated period. Higher volume shows more trading activity, but it does not by itself mean the market has deep liquidity or a narrow bid-ask spread.
The other economic side of a contract or transaction. On an exchange, you may trade against another participant while a clearing structure sits between both sides for settlement and risk management.
The risk that the other side of a financial obligation cannot or does not perform as required. Central clearing is designed to reduce this direct risk by placing the clearing organization between trading parties.
A forecasting approach that combines many people’s independent views instead of relying on a single expert. Prediction markets turn those views into tradable prices, which can create a continuously changing estimate of an event’s likelihood.
An informal term for a market with little or no recent trading activity. Its displayed price may be stale, and entering or exiting can be difficult because few orders are available.
A group of independent data providers or nodes used by some blockchain prediction markets to bring real-world information on-chain. The network helps smart contracts determine whether the conditions for settlement were met.
A prediction market that operates through blockchain-based software rather than a single central trading operator. Trading and settlement may rely on smart contracts and on-chain data systems, although design and governance vary by platform.
A prediction market designed to improve a decision, not just forecast an outcome. It often compares conditional probabilities, such as how likely a result would be under one choice versus another.
A financial contract whose value comes from something else, such as an asset, rate, index, or event outcome. Event contracts are derivatives because their value depends on what happens in the underlying event.
A clearing organization registered with the CFTC to provide clearing services for derivatives. It helps stand between trading parties, manage settlement obligations, and reduce the credit risk that would otherwise sit directly between counterparties.
A U.S. derivatives exchange that has been designated by the CFTC to operate under the Commodity Exchange Act and CFTC rules. Some regulated prediction markets list event contracts on DCMs that are accessible to eligible retail traders.
The point at which the market operator can officially decide the result using the contract’s stated rules and data source. It may come after trading has already closed if the necessary information is not immediately available.
A resolution method based on an objective, verifiable condition rather than human opinion. For example, a market tied to a published official number can resolve by checking whether that number crossed the stated threshold.
The process used when participants or the platform disagree about how a market should resolve. Depending on the venue, it may involve a formal review, appeal, committee, oracle process, or another rule-based method.
Spreading risk across different positions rather than depending heavily on a single event or outcome. Diversification works best when the underlying risks are not strongly related.
The decline in the value of a trading account or portfolio from a previous high to a later low. It shows the size of a losing period, not simply whether the portfolio is currently profitable.
A set of prices that, combined, guarantee a loss no matter what happens. If a Yes contract trades at $0.55 and its matching No contract trades at $0.50 at the same time, buying both locks in a $1.05 cost for a position that can only ever pay out $1.00, a built-in loss regardless of the outcome.
Pricing that changes as orders, information, and trader expectations change. Prediction-market prices are not fixed in advance; they can move throughout trading as the market’s view of the event shifts.
Selling or offsetting a contract before the event is finally resolved. An early exit lets a trader lock in a gain, limit a loss, or change exposure without holding the position until settlement.
When a market can be settled before its scheduled end because the outcome has already become certain under the contract rules. The venue must still follow its stated resolution process before paying winning positions.
A perceived advantage between your own probability estimate and the market price. If you believe an event is more likely than the price implies, that difference may be your edge, although your estimate can still be wrong.
The idea that prices already reflect publicly available information, which makes it hard to consistently profit from information everyone else can also see. Under EMH, once a jobs report is public, a related contract’s price should move to reflect it within seconds, not leave a gap that’s still tradeable an hour later.
A prediction market used inside a company or organization to forecast business outcomes such as launch dates, sales targets, or project completion. These markets may use points or play money rather than real-money contracts.
The price at which you open a position. It becomes an important reference point for calculating your later gain or loss if you sell before settlement or hold the contract until it resolves.
An arrangement in which funds are held aside until specified conditions are completed. Some prediction-market systems use escrow-like structures or smart contracts so money is available when winning positions need to be paid.
The real-world occurrence or measurable result that a prediction market is built around. A single event can support several different contract questions or thresholds.
A derivative whose payout depends on the outcome of a defined event. Many event contracts use Yes/No questions with a fixed winning payout, but contracts can also use multiple choices, ranges, or other structures.
A derivatives market whose contracts pay according to a specified event or occurrence. The term can describe markets linked to subjects such as economic data, elections, weather, company results, or other measurable events.
The process of deciding which stated outcome actually occurred after applying the market’s rules and approved information source. Resolution determines which side is treated as the winner before or as settlement is completed.
The financial risk created by an uncertain real-world event. Traders may use event contracts to take on that risk for speculation or to offset an exposure they already face elsewhere.
A regulated or organized marketplace that brings buyers and sellers together under a common set of trading rules. In exchange-style prediction markets, the venue facilitates trading rather than simply setting a wager against each customer.
The completion of a trade when a buy order and a compatible sell order are matched. Until an order is executed, it may remain open, be partly filled, or be cancelled depending on its instructions.
The actual price at which a trade is completed. It can differ from the price you first saw or expected, especially when liquidity is limited or a large order consumes several price levels.
The probability-weighted average result of a trade. A trader compares possible payouts and losses with the probabilities they assign to each outcome to estimate whether the position appears favorable before costs.
The point when a contract reaches the end of its term under the market rules. A venue may stop trading before or at that point, while official resolution and payout can occur later once the required result is available.
The amount of financial risk you currently have tied to a market or group of markets. It depends on the size and direction of your positions and on how much you could gain or lose if outcomes move against you.
The amount a winning contract is designed to pay at settlement. In many binary prediction markets the face value is $1 per contract, although the rules of a particular product can use another amount.
A trader’s estimate of what a contract should be worth based on their own view of the event’s probability and payout. It is an estimate, not an official market value, and different traders can arrive at different fair values.
A charge connected with trading, clearing, withdrawal, or another platform service. Fee structures differ by venue, so a profitable-looking price difference can become much smaller after costs are included.
The part of an order that actually executes. An order can receive a full fill when all requested contracts trade or a partial fill when only some of the requested quantity finds a matching order.
An order instruction, where offered, that requires the entire requested quantity to execute immediately or not trade at all. It is useful when a trader does not want to be left with only part of the intended position.
A trader who reacts to new information before most of the market. Acting early can capture a favorable price before others adjust, but it also carries the risk of trading on incomplete or misunderstood information.
Odds that are set when a bet is placed and do not change afterward for that wager. Prediction markets work differently because contract prices can keep moving and a position may often be traded before settlement.
A contract design in which the winning amount is known in advance. Many binary event contracts have a fixed settlement value, so the trader’s potential profit depends largely on the price paid to enter.
A sudden and unusually steep drop in price that happens within a very short period and may reverse soon afterward. In a prediction market, limited liquidity or a large order can sometimes contribute to this type of temporary price movement.
The lowest price a venue allows a contract to trade at before settlement. The minimum is set by the product or exchange rules, so there is no single floor price that applies to every prediction market.
A reasoned view of what may happen in the future based on information available at the time. In prediction markets, a contract’s current price can act as a market-based forecast because it reflects how participants are collectively pricing the outcome.
A term used for event-based contracts that pay according to whether a defined future condition is met. Depending on the venue, the product may use a Yes/No format and a fixed settlement amount.
A person or system that estimates the probability of future outcomes. A forecaster may participate in prediction markets, but forecasting accuracy and trading profitability are not exactly the same skill.
The process of estimating future events or values using information available today. Prediction markets are one forecasting method because trading converts many participants’ views into changing market prices.
Trading ahead of someone else’s pending order using advance, nonpublic knowledge of that order, to profit from the price move it’s about to cause. Someone who sees a large buy order about to hit the book and buys first, planning to sell into the price increase that order will trigger, is front-running. Doing so with order information they weren’t supposed to act on can violate market rules or law.
A contract structure in which enough funds are set aside to cover the maximum possible loss or payout obligation. This limits the need to borrow against the position and helps reduce default risk in event-contract markets.
Estimating an event’s probability by studying the underlying facts rather than only the price chart. Depending on the market, this can include economic data, polling, weather models, company information, rules, schedules, or other event-specific evidence.
A CFTC-regulated intermediary that can accept customer orders for certain derivatives and hold customer funds connected with those trades. Some prediction-market customers may access regulated event contracts through an FCM or similar intermediary.
A standardized exchange-traded derivative with terms set for a future date or settlement condition. Traditional futures create an obligation tied to an underlying asset, rate, or index, while certain event contracts can also be listed within the U.S. derivatives framework as futures.
Assuming that a string of past outcomes changes the odds of the next independent event. A trader who watches five straight unrelated markets resolve Yes and starts pricing the sixth market’s No side higher “because it’s due” is applying the gambler’s fallacy. The sixth market’s outcome doesn’t depend on the first five.
A charge paid to execute a transaction or smart-contract action on a blockchain that uses a gas-based fee system. It is mainly relevant to decentralized prediction markets and is separate from any trading fee charged by the platform.
An order instruction, where supported, that keeps the order active until it trades, you cancel it, or the contract expires. It is useful when you are willing to wait for your chosen price instead of requiring immediate execution.
An order that stays open only until a date or time you specify. If it has not been filled by that point, the remaining order is automatically removed.
A digital token that some decentralized prediction-market protocols use to give holders a role in protocol decisions. Depending on the platform, voting may cover upgrades, fees, incentives, or parts of the market-resolution process.
An older name for prediction markets that use tradable claims to express views about future events. The term appears mainly in early academic and historical discussions of prediction-market design.
A market with too little active buying and selling to trade easily at the displayed price. In an illiquid prediction market, spreads may be wider and even a modest order can move the execution price noticeably.
An order instruction, where available, that tries to trade immediately and then cancels any quantity that could not be filled at once. Unlike a fill-or-kill order, an IOC order can complete only part of the requested trade.
The probability suggested by a contract’s current market price. In a common $1 binary contract, a price of $0.64 can be read as roughly a 64% market-implied probability, but it reflects trader pricing rather than an objective certainty.
A market-design idea in which the rewards and costs encourage participants to provide useful prices, information, or liquidity. Good alignment makes it more beneficial to contribute honestly to the market than to create noise or misleading signals.
A property of a forecasting or market mechanism where, under its stated assumptions, participants are best served by revealing or acting on their actual beliefs rather than deliberately misreporting them. It is an important concept in the design of prediction markets and scoring rules.
Two events are independent when the result of one does not change the probability of the other. Understanding independence helps explain why a streak of past outcomes does not necessarily make the opposite result more likely next.
The process by which many participants’ separate information and beliefs become reflected in market prices. In a prediction market, one price or a set of outcome prices can summarize the market’s current collective view.
A situation where some traders have better, faster, or more detailed information than others. This can affect who trades, how quickly prices move, and how much risk liquidity providers face when quoting against better-informed participants.
A pattern where traders start copying earlier trades or visible price moves instead of acting on their own information. If a contract price ticks up and each subsequent buyer assumes the move reflects something the earlier buyers knew, the price can climb on imitation alone, with no new fact behind it.
Another term sometimes used for a prediction market, emphasizing its role in collecting and combining information about uncertain future outcomes. The market price acts as the shared signal produced by that process.
A participant whose research, data, timing, or subject knowledge gives them a potentially better view of an event than the broader market. Their trades can help move prices toward information that was not fully reflected before.
In U.S. CFTC-regulated markets, using certain material nonpublic information can violate federal law or exchange rules, especially when the information is obtained or used through fraud, misappropriation, a breach of duty, or prohibited access. The exact restriction depends on the source of the information and the applicable market rules.
A market that cannot be resolved normally because its listed outcomes, wording, or evidence do not support a valid result. Some decentralized platforms have specific invalid-market rules that determine how positions are handled instead of declaring a normal winner.
The risk a market maker takes when its trades leave it holding more exposure to one outcome than the other. If the price moves or the contract settles against that accumulated position, the market maker can lose money.
The probability that two or more events are all true at the same time. It becomes important in combinatorial and conditional prediction markets, where the value of one contract can depend on several related outcomes.
A way of resolving a market that requires some human interpretation rather than relying only on an automatic numerical rule. Because judgment is involved, clear contract wording and a defined decision process are especially important.
The country, state, or other legal territory whose rules apply to a market, platform, or user. Prediction-market availability and regulatory treatment can differ by jurisdiction, so access to the same type of contract may not be identical everywhere.
The price at which the most recent completed trade occurred. It can differ from the prices currently available to buy or sell, especially when the market is moving quickly or has limited liquidity.
Placing multiple visible orders at different price levels to fake buying or selling interest, with no intent to let most of them fill. Someone who stacks five sell orders above the current price to make the market look like it’s about to drop, then cancels all five once other traders sell into the pressure, is layering.
Using a smaller amount of capital to create a larger market exposure. Many event contracts are structured on a fully collateralized basis, so leverage is not a universal feature of prediction markets and availability depends on the product and venue.
The regulatory authorization a market operator or intermediary may need before offering certain services in a jurisdiction. In the U.S. derivatives framework, an exchange serving retail traders may need CFTC designation as a Designated Contract Market rather than a generic prediction-market license.
An instruction to buy or sell only at a price you choose or at a better one. It gives you control over the execution price, but the trade may remain unfilled if the market never reaches your limit.
A list of open limit orders arranged by side and price. It shows where traders are waiting to buy or sell and helps you see how much trading interest is available at different price levels.
The price boundary attached to a limit order. For a buyer, it is the most they are willing to pay; for a seller, it is the lowest price they are willing to accept.
How easily a contract can be bought or sold in the desired size without causing a large price change. A more liquid prediction market usually has more available orders, tighter spreads, and smoother execution.
A reward, fee reduction, or similar benefit designed to encourage traders to leave useful orders in the market. The goal is to make it easier for other participants to trade by increasing available two-sided liquidity.
A reserve of assets used by some decentralized prediction markets so an automated market maker can quote prices and process trades. Users trade against the pool rather than waiting for a specific person to submit the opposite order.
A trader, firm, or automated system that makes a market easier to trade by maintaining buy and sell interest. Liquidity providers take trading risk in exchange for possible spreads, fees, rebates, or other incentives.
The risk that you cannot enter or exit a position at the price or size you expected because there is not enough opposing trading interest. In thin prediction markets, this can turn a small planned trade into a more expensive execution.
A nonstandard way of looking at a trade’s return after considering liquidity-related costs such as the bid-ask spread, slippage, and price impact. Prediction-market platforms do not use one universal liquidity-adjusted return formula, so the calculation can vary.
An automated pricing mechanism created for prediction markets that continuously offers prices and changes them as traders buy or sell outcomes. It can provide liquidity even when there is no matching trader waiting on the other side.
A position that benefits when the contract or outcome you bought gains value or settles as the winner. In a Yes/No market, buying Yes gives you a long position in Yes, while buying No gives you a long position in No.
A relatively uncommon, niche, or low-probability event outside the most heavily followed markets. Contracts on these events can be useful for specialized forecasting, but they often attract fewer traders and thinner liquidity.
An outcome the market currently treats as unlikely, usually reflected in a relatively low contract price. A winning longshot can produce a large gain relative to its purchase price, but the chance of losing the full amount paid is correspondingly high.
A negative financial result from a position. For a contract you buy, a loss can occur if you sell it for less than you paid or if it settles against your outcome. In a fully paid binary contract, the amount spent on a losing contract can be lost in full.
A trader whose order adds liquidity by resting on the order book before another order matches with it. Whether an executed trade is treated as a maker trade depends on the venue’s matching and fee rules.
A fee that some venues charge when an order first rests on the book and is later executed as a liquidity-adding order. Maker fees are not universal, and the amount can vary by market or platform.
A credit or payment that some trading venues give for executed orders that add liquidity to the order book. Prediction-market platforms do not all offer maker rebates, and some may charge maker fees instead.
A tradable prediction question with defined outcomes, rules, and a method for determining the result. One real-world event can support several separate markets if traders are asked different questions about it.
The point when a market stops accepting new trades. Closing the market does not necessarily mean the result has already been determined; resolution and settlement may happen later.
Information produced by trading activity, such as bids, asks, prices, order sizes, volume, and recent trades. Traders use market data to understand current pricing and liquidity rather than to determine the event’s actual outcome.
The amount of buying and selling interest available at different price levels in the order book. Deeper markets can usually absorb larger orders with less price movement than markets with only a small amount of resting liquidity.
The degree to which prices incorporate available information and respond to new information. An efficient prediction market can still be wrong about the final event, because efficiency does not mean perfect forecasting.
A participant that regularly posts buy and sell prices to help other traders enter or exit positions. By maintaining two-sided quotes, a market maker can improve liquidity but also takes inventory and settlement risk.
Conduct intended to create an artificial price, misleading trading signal, or distorted settlement result rather than a genuine market view. Manipulative activity is prohibited on CFTC-regulated markets and can take different forms depending on the market structure.
An instruction, where offered, to trade immediately against the best available prices. It prioritizes execution over price control, so the final fill can differ from the price first displayed when liquidity is thin.
The current price used to describe what a contract or outcome is worth in the market. Depending on the venue, the displayed price may be based on the latest trade, the midpoint, or another stated pricing method.
The formal terms that explain what a market measures, when trading ends, which outcomes can win, and how the result will be determined. Traders should read them before entering because similar questions can resolve differently under different rules.
The market’s overall directional view or mood toward an outcome at a given time. Traders may infer sentiment from prices and trading behavior, but sentiment is not the same as verified information or the final result.
A label showing where a market is in its lifecycle, such as open, closed, awaiting resolution, resolved, or canceled. The exact status names and transitions vary by platform.
The monitoring of trading activity for signs of manipulation, fraud, disruptive trading, or other rule violations. CFTC-regulated exchanges have surveillance responsibilities designed to support fair and orderly markets.
The system that pairs compatible buy and sell orders according to the venue’s matching rules. In an order-book market, it determines which orders trade and at what price when bids and asks can be matched.
The greatest amount a position can lose under its contract structure. For a fully paid binary contract that you buy, the maximum loss is generally limited to the amount paid, while other structures can have different risk limits.
The highest settlement amount a contract can pay if the required outcome occurs. It is not the same as maximum profit, because profit also depends on what you paid to enter the position and any applicable costs.
A simple estimate found by averaging the best available bid and the best available ask. It can indicate the center of the quoted market, but no trader may actually be offering to transact at that exact price.
A situation where a market price appears inconsistent with available information, related markets, or a trader’s own probability estimate. Calling something mispriced is a judgment, not proof that the market is objectively wrong.
A prediction market with more than two possible outcomes, such as several candidates or several numerical ranges. The market rules determine whether exactly one outcome can win and how each contract settles.
Outcomes that cannot both be correct at the same time. If the listed outcomes are also collectively exhaustive, one and only one of them must be the final result.
A trade has negative expected value when its probability-weighted expected result is below zero based on the assumptions and costs used in the calculation. Negative EV does not mean every individual trade will lose, only that the average expected result is unfavorable.
The remaining risk after offsetting positions are considered together. A trader can hold several contracts whose risks partly cancel, so net exposure may be smaller than the sum of the individual position sizes.
The balance remaining after a trader’s open long and short positions are offset within the same contract or under the venue’s permitted netting rules. A positive net position is net long, while a negative net position is net short.
A contract or outcome position that benefits if the market’s stated proposition resolves false. In a standard Yes/No market, the No side is the complement of the Yes side under the market’s rules.
A written statement from regulatory staff saying they do not intend to recommend enforcement action under the specific facts and conditions described. It is not the same as a law, rule, or broad regulatory approval, and it can be limited or withdrawn.
A market structure in which users keep control of their own wallet or assets instead of transferring custody to the trading platform. This model is most commonly associated with decentralized prediction markets.
A reference amount used to describe the size of a contract or position, rather than the cash actually paid to enter it. In fixed-payout event contracts, notional exposure can be based on the contract’s face value multiplied by the number of contracts.
A clearing process that replaces the original trading relationship with new obligations involving a central counterparty. After novation, each side relies on the clearing organization rather than directly on the other trader for performance.
A way of expressing how likely an outcome is considered and how the potential payoff compares with the amount risked. Prediction markets often show prices or implied probabilities instead, so quoted odds and contract prices should not be treated as identical formats.
A market where meaningful buying or selling interest is concentrated mainly on one side of the order book. A one-sided market can make it harder to trade in the opposite direction without accepting a worse price.
The number of contracts that remain outstanding rather than having been closed, offset, or settled. It measures existing positions, while trading volume measures how many contracts changed hands during a period.
An order that has been submitted but has not yet been fully executed, canceled, or expired. An open order may remain visible in the order book if it is resting at a price that has not been matched.
A market position that is still active because it has not been fully closed or settled. Its value can continue to change as the contract price moves before resolution.
Entering a trade that creates new exposure to an outcome or increases an existing exposure. A position can later be reduced, closed before resolution, or held through settlement.
A mechanism that provides real-world information to a blockchain-based prediction market so the smart contract can determine how the market should resolve. Oracles are mainly relevant to decentralized markets.
A formal challenge to a proposed outcome supplied through an oracle system. In decentralized markets that allow disputes, the challenge can trigger an additional review or voting process before the result becomes final.
An attempt to influence, corrupt, or exploit the data or decision process an oracle uses to resolve a decentralized prediction market. A successful attack could cause a market to settle using an incorrect result.
An instruction to buy or sell a specified quantity of contracts under stated conditions. The order type and price determine whether it trades immediately or waits for a compatible order.
The list of currently available buy and sell orders for a market, organized by price and quantity. It shows where traders are willing to transact but does not guarantee that those orders will remain available.
The removal of an unfilled or partially unfilled order before the remaining quantity trades. Canceling an order changes the available liquidity in the order book but does not reverse any portion that already executed.
The stream of buy orders, sell orders, cancellations, and completed trades reaching a market over time. Traders sometimes study order flow to understand short-term demand, supply, and liquidity conditions.
The process of pairing compatible buy and sell orders so a trade can occur. The venue’s matching rules determine which eligible orders receive priority when several orders can trade at the same price.
The number of contracts a trader wants to buy or sell in a single order. Larger order sizes can create more price impact when there is not enough liquidity available near the best quoted price.
The instruction that tells a trading venue how an order should behave, such as whether price control or immediate execution matters more. Available order types vary by platform.
One possible result defined by a prediction market. The contract rules explain what must happen for that outcome to be treated as correct at resolution.
The full group of outcomes a market makes available for trading. A well-specified set should make clear whether the outcomes are mutually exclusive and whether they cover every possible valid result.
A tradable unit linked to one specified outcome of a prediction market. Depending on the venue, the same basic interest may be called a share, contract, or position rather than an outcome share.
A blockchain token representing a position in one outcome of a decentralized prediction market. After resolution, winning outcome tokens can become redeemable for the stated payout while losing tokens can become worthless.
Pricing more certainty into a forecast than the underlying evidence actually supports. A trader who prices a contract at $0.90 based on a single favorable data point, when comparable past situations only resolved Yes about 65% of the time, is overconfident relative to the historical evidence.
A market structure in which participant funds are collected into a common pool and the final payout to winners depends on how that pool is divided. Unlike a fixed-price contract, the eventual return is not fully known when the position is entered.
An execution where only part of the quantity requested in an order trades. The unfilled portion may remain open or be canceled depending on the order instructions.
The amount a contract pays after the market resolves according to its rules. In many binary event contracts, the winning side pays a fixed amount and the losing side pays zero.
A market where participants trade positions with other participants rather than placing a wager directly against a house. The exchange or protocol provides the trading mechanism, while opposing traders supply the economic counterparties.
The risk that problems with the venue itself affect your ability to trade, access funds, or receive the expected settlement. Examples can include operational failures, cybersecurity events, legal restrictions, or financial problems at the platform.
A prediction market that uses points, virtual currency, or another non-cash unit instead of real money. Organizations sometimes use play-money markets for internal forecasting when real-money trading is unnecessary or restricted.
The amount and direction of exposure a trader currently holds in a market. A position can gain or lose value before resolution and can often be reduced or closed while trading remains open.
An exchange threshold that can trigger reporting, consultation, or instructions when a trader’s position becomes large. Exceeding an accountability level is not automatically the same as violating a hard position limit.
The degree to which a trader’s risk is focused in one event, outcome, or group of closely related markets. High concentration can make the portfolio more sensitive to a single result.
A cap set by a regulator or exchange on the position or loss exposure a trader may hold in a contract or group of related contracts. The exact measure can be based on contract quantity, notional exposure, maximum loss, or another rule-defined basis.
The process of deciding how much capital or how many contracts to put into a trade. Good position sizing considers potential loss, confidence in the forecast, portfolio exposure, and the trader’s overall risk limits.
A market where participants trade contracts whose value depends on the outcome of uncertain events. Trading prices can provide a market-based estimate of how participants collectively assess those outcomes.
The highest price a venue allows a contract to trade at before settlement. The ceiling depends on the product design and exchange rules, so it should not be assumed to be identical across all prediction markets.
The process through which trading between buyers and sellers establishes a market price. In prediction markets, that price can change as participants react to new information and revise their expectations.
The change in market price caused by an order consuming available liquidity. Larger orders usually have more impact when the order book is thin.
A change in a contract’s trading price over time. In prediction markets, price movement can reflect new information, changing expectations, liquidity conditions, or trading pressure.
A trader who accepts prices already available in the market instead of posting a new price and waiting for someone else to trade against it. Price takers generally remove liquidity from the order book.
A matching rule, where used, that gives better-priced orders priority and then favors earlier orders among those at the same price. It helps determine where a resting order sits in the execution queue.
A way of expressing a prediction-market price in an odds format instead of as a probability. For example, a 25% market-implied probability corresponds to odds of roughly 3-to-1 against. Prediction markets more commonly display contract prices or implied probabilities directly.
A numerical expression of how likely an event is, usually stated from 0% to 100%. Prediction-market prices can be interpreted as market-implied probabilities in common contract structures, but they are not guaranteed estimates of the true probability.
A set of probabilities assigned across all possible outcomes of an uncertain event. If the outcomes are mutually exclusive and collectively exhaustive, their probabilities should add to 100%, even though displayed market prices may not do so exactly because of spreads or market structure.
A forecast that states how likely an outcome is rather than simply saying whether it will happen. For example, assigning a 65% chance to an event is a probability forecast.
A positive financial result from a position after comparing what was received with what was paid and any applicable costs. A winning contract can still produce a small profit if the entry price was already close to the maximum payout.
A measure of how much money a position or group of positions has gained or lost. P&L can be unrealized while a position is still open and realized once the relevant gain or loss is locked in.
A method for rewarding probability forecasts so that, under its assumptions, a forecaster maximizes expected score by reporting their actual belief. Proper scoring rules are widely used to evaluate and design forecasting systems.
A prediction market whose outcomes are numerical intervals rather than a simple Yes/No result. One range can be designated the winner when the final measured value falls inside it, depending on the market design.
A prediction market in which positions involve actual money or assets with monetary value rather than points or play currency. Real-money markets generally involve greater regulatory and financial-risk considerations.
Profit or loss that has been locked in because a position was closed, reduced through an offsetting trade, or settled. It is different from unrealized P&L, which can still change while a position remains open.
Overweighting the most recent information while underweighting older but still relevant evidence. A trader who jumps their probability estimate from 40% to 70% after one favorable headline, while brushing off weeks of mixed data that came before it, is showing recency bias.
The process of exchanging a winning outcome token for its settlement value after a decentralized prediction market resolves. Centralized event-contract platforms may handle settlement automatically instead of requiring a separate redemption step.
A benchmark price used for a specific purpose under a contract or venue’s rules. In some event contracts, it can be an external price used to measure or settle an outcome; on some platforms, the same term is used for other functions such as liquidity calculations. The market rules determine what the reference price means.
The laws, rules, and regulatory oversight that govern how a prediction market, exchange, intermediary, or contract can operate. In the U.S., CFTC-regulated event-contract markets operate within the federal derivatives framework, while the treatment of particular contracts can involve additional legal questions.
The risk that changes in laws, rules, enforcement, or regulatory interpretation affect a market or position. It can influence which contracts are available, who can trade them, and whether a platform can continue offering a product.
The process of determining which outcome of a prediction market is correct under the contract rules. Resolution identifies the winning result; settlement or redemption then applies the financial payout.
A group designated by some exchanges or platforms to review evidence and determine or confirm a market outcome. Not every prediction market uses a committee; other venues may rely on a stated data source, oracle, or automated rule.
The conditions that must be satisfied for a market to resolve to a particular outcome. Clear criteria reduce ambiguity by specifying exactly what evidence or event counts.
The date or expected period when a market’s result can be determined under its rules. It can differ from the last trading date if the official evidence becomes available later.
A period in which a market cannot be finalized as expected because the required result, source data, or dispute process is still pending. A delay can leave positions unsettled even after trading has stopped.
A formal disagreement over the proposed outcome of a market. Depending on the platform, a dispute may trigger additional evidence review, an exchange process, or an oracle-based challenge before the result becomes final.
The method a prediction market uses to determine the official outcome. Examples include a named public data source, an exchange decision process, or a decentralized oracle.
The risk that ambiguity, delayed data, a disputed result, or an unexpected interpretation of the rules affects how a market resolves. This risk can matter even when a trader correctly anticipates the real-world event.
The part of the market terms that explains how the outcome will be judged, including the relevant event, timing, evidence, and any special conditions. These rules control the final determination even if traders expected a different result.
The information source named in a market’s rules for deciding the outcome, such as an official agency release, election authority, or league record. A decentralized market may use an oracle to report or validate that information during resolution, but the oracle is the resolution mechanism rather than necessarily the underlying source itself.
An order that remains on the order book because it was not matched immediately. It provides available liquidity until it trades, is canceled, or expires under the venue’s rules.
A percentage measure comparing the gain or loss from a trade with the amount of capital committed. ROI helps compare results across positions of different sizes, but it does not show the probability or risk taken to earn that return.
A preference for a more certain outcome over a riskier one when the expected payoff is otherwise similar. Differences in traders’ risk preferences can affect prediction-market prices and are one reason price does not always equal an objective real-world probability.
Money a trader can afford to put at risk without depending on it for essential expenses or financial obligations. Event contracts can lose the full amount paid, so capital committed to them should be sized with that possibility in mind.
The process of identifying, limiting, and monitoring potential losses. In prediction markets, this can include position sizing, diversification, checking liquidity, understanding resolution rules, and avoiding excessive exposure to related outcomes.
Extra expected compensation that a market participant may require for bearing risk. In prediction markets, risk preferences and capital constraints can cause trading prices to differ from a simple estimate of the event’s real-world probability.
A probability measure used in no-arbitrage derivative-pricing models so that discounted expected payoffs are consistent with current market prices. It is a mathematical pricing measure, not necessarily an estimate of an event’s actual real-world likelihood.
A comparison between the amount a trader could lose and the amount they could gain on a position. It describes the payoff tradeoff, but it does not tell you whether the predicted outcome is likely enough to make the trade attractive.
A prediction market for a numerical result where the payout changes according to the final value, usually within a defined minimum and maximum. Unlike a Yes/No or range-bin market, it can represent many values along a continuous scale.
The practice of comparing how different possible events could affect a decision, portfolio, or forecast. Prediction-market prices can be used as one input when assigning likelihoods to those scenarios.
A U.S. regulatory process that allows a Designated Contract Market to submit a new product or rule to the CFTC with a certification that it complies with the Commodity Exchange Act and applicable regulations. Self-certification is not the same as the CFTC individually approving every contract before listing.
An arrangement in which users control the private keys or wallet that holds their assets instead of giving custody to the prediction-market platform. This is mainly associated with decentralized, blockchain-based markets.
An instruction to sell a specified quantity of contracts under stated price or execution conditions. Depending on the order type, it may trade immediately or remain open until a buyer matches it.
The financial completion of a contract after the market outcome has been determined. Settlement applies the contract’s final value and pays or credits positions according to the market rules.
The date on which the financial obligations of a resolved contract are completed or scheduled to be completed. It can come after trading closes and after the outcome is officially determined.
A period between expected resolution and final payment because the required data, review, dispute process, or operational step is still incomplete. During the delay, positions may remain unresolved or unpaid.
A price or benchmark used under a contract’s rules to determine or calculate settlement. In some event contracts the final result may instead be a fixed binary value, so the meaning of settlement price depends on the product design.
The risk that the financial completion of a contract is delayed or fails after the outcome is ready to be settled, for example because of operational, clearing, payment, or counterparty problems. Uncertainty about which outcome should win is better treated as resolution risk.
The final value assigned to a contract once its outcome is determined. A common binary event contract settles at $1 for the winning side and $0 for the losing side, although other payout structures can exist.
A position structured to benefit if the price or value of a particular contract falls. In prediction markets, traders often express the opposite event view by buying the complementary outcome instead, so ‘short’ terminology is not used identically on every platform.
The difference between the price a trader expected and the average or actual price received when the order executes. Slippage is more likely when liquidity is thin, prices are moving quickly, or the order is large.
Blockchain-based code that automatically carries out predefined actions when its conditions are met. Decentralized prediction markets can use smart contracts for trading, custody, payout logic, or resolution-related functions.
A third party identified in some event-contract rules as the provider or publisher of information used to determine the contract’s outcome. Because the market may depend on that data, accuracy, timing, security, and independence of the source agency can matter.
Taking a market position mainly to profit from your view of how an uncertain event will resolve or how the contract price will move. Unlike hedging, speculation intentionally takes on event risk rather than offsetting an existing exposure.
Placing orders you don’t intend to let execute, to create a false signal about supply or demand, then canceling before they fill. Entering a large buy order to make the market look like it’s about to rise, then pulling it the moment other traders react and prices tick up, is spoofing. It’s prohibited on regulated U.S. derivatives markets.
The difference between the best available bid and best available ask. A narrower spread generally means a trader can enter or exit with a smaller gap between buying and selling prices.
A digital asset designed to maintain a value tied to another asset, commonly a fiat currency such as the U.S. dollar. Some decentralized prediction markets use stablecoins for deposits, trading collateral, or payouts, but they are not required for prediction markets generally.
Locking or committing digital assets to support a blockchain protocol, oracle, governance process, or dispute mechanism in return for rewards or subject to penalties. Staking is relevant to some decentralized prediction markets but not to conventional exchange-based event contracts.
The numerical level or condition a contract compares the final result against. A market might ask whether inflation will be above 3%, for example, making 3% the threshold used to determine the outcome.
A resolution process that requires interpretation or judgment because the outcome cannot be determined solely from a simple objective measurement. Clear rules and a defined decision process are especially important in these markets.
The interaction between buying and selling interest that helps determine a contract’s market price. When demand for an outcome rises relative to available supply, its price can increase, and the reverse can happen when selling interest dominates.
A market in which trading has been temporarily stopped by the venue or regulator. A suspension can occur for operational, regulatory, integrity, or other rule-based reasons and does not necessarily mean the contract has been canceled.
A derivative contract in which counterparties exchange payments or economic exposure according to agreed terms. Under the U.S. derivatives framework, many event contracts can be structured as swaps, although event contracts can also have other classifications such as futures.
The risk of a low-probability event producing an unusually large loss. In prediction markets, tail risk can arise when a trader assigns too little probability to an unlikely outcome but takes a position with meaningful downside if it occurs.
A trader whose order immediately matches an order already resting on the book, thereby removing available liquidity. The maker/taker label is determined by how the order executes, not simply by whether the trader is buying or selling.
A fee that some venues charge when an order removes liquidity by immediately matching against an existing resting order. Fee schedules vary, so not every prediction market charges taker fees in the same way.
The study of market prices, volume, and trading patterns to make decisions without relying only on the underlying event fundamentals. It can be used by some prediction-market traders, but chart patterns do not determine how the event itself will resolve.
An event contract that resolves according to whether a measured value finishes above, below, reaches, or otherwise satisfies a stated numerical level. The exact comparison and data source are defined in the contract rules.
The smallest price increment in which a contract is allowed to trade. A tick size of $0.01, for example, means valid prices move in one-cent steps rather than fractions smaller than a cent.
An instruction that controls how long an order remains active or what must happen for it to execute. Examples can include good-til-canceled, good-til-date, and immediate-or-cancel orders where supported.
A digital unit recorded on a blockchain that can represent an asset, right, or position. In decentralized prediction markets, outcome positions may be represented by tokens, while regulated centralized event-contract markets do not require tokenization.
A completed transaction in which a buyer and seller exchange a prediction-market contract at an agreed execution price. A submitted order does not become a trade until it is matched and executed.
The completion of an order, or part of an order, when it is matched with compatible trading interest. Execution establishes the actual quantity and price at which the trade occurred.
The price at which a specific transaction actually executes. It can differ from the last displayed price or midpoint if the market moves or the order trades across several price levels.
A market participant who buys, sells, or otherwise takes positions in prediction-market contracts. Traders can participate for speculation, hedging, market making, forecasting, or other permitted purposes.
A charge associated with executing a trade on a prediction-market venue. The fee can depend on the platform, contract, price, order type, or whether the order adds or removes liquidity.
A temporary stop in trading imposed by an exchange or regulator. A halt can be used to address operational problems, market-integrity concerns, regulatory review, or other conditions specified in the venue’s rules.
The times during which a market accepts orders and trades. Some prediction-market venues operate extended or round-the-clock schedules, while others use specific hours or maintenance windows.
The total number of contracts traded during a stated period. It shows how much trading activity occurred, but high volume does not automatically mean the market has tight spreads or deep liquidity.
Any cost that reduces the economic result of entering, holding, or exiting a trade. In prediction markets this can include trading fees, bid-ask spread, slippage, blockchain fees, or other venue-specific charges.
The underlying likelihood an event would have if it could be known objectively. For many one-time events, that value cannot be observed directly, so a prediction-market price is better treated as a market-implied estimate rather than the true probability.
A market with meaningful buy and sell interest available on both sides of the order book. Two-sided quoting generally makes it easier for participants to enter or exit without waiting for the opposite side to appear.
The condition of not knowing with certainty which future outcome will occur. Prediction markets exist because participants can hold different views about that uncertainty and express those views through prices and trades.
The commodity or other underlying interest from which a derivative contract gets its value under U.S. commodities law. For an event contract, the underlying can be the occurrence, non-occurrence, or outcome of a specified event.
The real-world event or condition on which an event contract depends. The contract question and rules convert that underlying event into a specific tradable outcome.
The portion of an order that has not executed because no compatible trading interest has matched it. Depending on its time-in-force instructions, it may remain open or be canceled.
The gain or loss shown on an open position based on its current value rather than a completed exit or settlement. It can change as the market price moves and becomes realized only when the relevant position is closed or settled.
A contract whose financial settlement has not yet been completed. It may still be awaiting outcome determination, final review, a dispute process, or the actual payment step.
A prediction market created by a platform user rather than selected and listed solely by a central exchange operator. This feature is mainly associated with decentralized or open market-creation platforms and is not available on every venue.
A market that can be resolved according to its stated question, outcomes, and resolution rules. The term is most common in decentralized systems that also define an ‘invalid’ outcome for markets that cannot be resolved properly.
The pricing margin or commission built into a bookmaker’s odds. It is a betting-market concept rather than a standard exchange-style prediction-market mechanism, where costs are more commonly expressed through spreads and trading fees.
A market that is canceled or treated as having no valid winning outcome under the venue’s rules. How positions are refunded, settled, or otherwise handled after a voiding event depends on the platform and contract terms.
The degree to which a contract’s market price changes over time. Prediction-market volatility can rise when important new information appears, liquidity thins, or traders sharply revise their views of the outcome.
A resolution method used by some decentralized prediction markets in which token holders, designated participants, or an oracle community vote on the correct outcome. The exact voting and dispute rules vary by protocol.
A contract or position that pays according to the market’s rules if the stated proposition resolves true. In a standard binary market, the Yes side is paired with a complementary No side.
A binary prediction market built around two opposite outcomes: the stated event occurs or it does not. Only one side can be the winning outcome when the market is correctly specified and resolved.
Disclosure: This content is provided and paid for by Public for general informational and educational purposes only. It is not intended to constitute investment advice or any other kind of professional advice and should not be relied upon as such.
Trading event contracts involves significant risk and is not appropriate for all investors. Before trading, please read our Event Contracts Risk Disclosure and carefully consider your financial situation, investment objectives, and risk tolerance. Market information and live data are provided for informational purposes only and may be delayed, incomplete, or incorrect. There is a possibility of loss.
Event contracts are offered by Open to the Public Investing, Inc. and Apex Clearing Corp. through KalshiEX LLC.