Prediction Markets Explained
A prediction market turns opinions about the future into prices. By letting people trade contracts on whether an event will happen, the market produces a live, crowd-sourced probability that often beats pundits and polls. Here is how they work, where they stand legally, and what your alternatives are.
How prediction markets work
Each market is a contract that pays out if an event occurs and pays nothing if it does not. Traders buy and sell these contracts, and the price — between 0% and 100% — reflects the collective estimate of the outcome's probability. Because being wrong costs money, participants have a real incentive to be honest, which is what makes the prices informative.
Are they legal?
It depends entirely on jurisdiction. In the US, Kalshi operates under CFTC regulation; in the UK, the Gambling Commission treats event trading as gambling, so a UKGC licence is required and several offshore markets geoblock UK users. Always check whether a platform is licensed where you live before funding an account.
Alternatives and how to choose
- Real-money exchanges (Smarkets, Betfair) — if licensed in your country.
- Reputation forecasting (Metaculus, Good Judgment Open) — accuracy without cash risk.
- Owner-linked option (PolyGram) — disclosed below; weigh it on the same criteria as the rest.
See a disclosed-owned alternative: PolyGram
FAQ
What is a prediction market in simple terms?
It is a marketplace where people trade contracts on whether something will happen. The contract's price acts as the crowd's estimate of how likely the event is.
Are prediction markets accurate?
Often surprisingly so. Because traders risk money on their views, market prices tend to aggregate information well and have a solid track record on elections and economic events — though they are not infallible.
Are prediction markets legal?
It varies by country. They are CFTC-regulated in parts of the US and treated as gambling under a UKGC licence in the UK. Many offshore markets geoblock jurisdictions where they are not licensed.
What are good alternatives to crypto prediction markets?
Regulated betting exchanges where licensed, and no-money forecasting platforms like Metaculus for those who want the analytical challenge without financial risk.