Prediction market glossary
The essential vocabulary of prediction markets, explained in one or two sentences each — from contracts and shares to the order book, CLOB, and settlement.
Basics
Contract
The tradeable unit of a prediction market — an agreement that pays out a fixed amount, usually $1.00, if its outcome happens and nothing if it does not.
Prediction Market
An exchange where people buy and sell contracts on the outcome of a real-world event, so the market price reflects the crowd’s implied probability of that outcome.
Resolution
The moment a market’s outcome is officially determined, fixing each contract’s value at $1.00 or $0.00. The rules state in advance what source decides the result.
Settlement
The payout process after resolution, when the venue credits winning contracts and closes losing ones. Some platforms charge a settlement fee at this step.
Share
A single unit of a contract. Buying 100 shares of a Yes outcome at 60¢ costs $60 and pays $100 if the market resolves Yes.
Yes/No Contract
A binary market with exactly two outcomes — Yes or No. The two prices sum to roughly $1.00, since one side must win.
Trading & Orders
CLOB (Central Limit Order Book)
The matching engine that pairs buy and sell limit orders by price and time priority. Polymarket and Kalshi both trade on a CLOB rather than against a house.
Limit Order
An order to buy or sell at a chosen price or better. It rests on the order book until another trader matches it, which can earn you a better price than the current market.
Liquidity
How easily you can trade size without moving the price. Deep liquidity means tight spreads and big orders fill near the quoted price; thin liquidity means the opposite.
Market Maker
A trader who continuously quotes both buy and sell prices to provide liquidity, profiting from the spread. Market makers keep popular contracts tradeable.
Market Order
An order that fills immediately at the best available price on the book. It guarantees execution but pays the spread, so it can cost more in a thin market.
Order Book
The live list of buy and sell orders for a market, ranked by price. It shows how much size is available at each price and powers price discovery.
Pricing & Probability
Bid-Ask Spread
The gap between the highest price buyers will pay and the lowest sellers will accept. A narrow spread signals a liquid market; a wide one is the main hidden cost of trading.
Contract Price
The cost to buy one share of an outcome, quoted between $0.00 and $1.00. It doubles as the market’s implied probability — 60¢ means a 60% implied chance.
Implied Probability
The chance of an outcome implied by its contract price. Because prices run from $0 to $1, the price in cents reads directly as a percentage.
Mark to Market
Valuing an open position at the current market price rather than your entry price, so unrealised profit and loss update in real time as the price moves.
Payout
What a winning contract returns at resolution, normally $1.00 per share. Your profit is that payout minus the price you paid to enter.
Platforms & Regulation
CFTC
The Commodity Futures Trading Commission, the US regulator that oversees Kalshi as a designated contract market. Its oversight is the main reason Kalshi is legal for US traders.
Self-Custody Wallet
A crypto wallet whose keys only you control, so funds live on-chain rather than in a house account. It gives you control but makes you responsible for security.
USDC
A US-dollar stablecoin used to fund and settle trades on crypto-native venues like Polymarket. One USDC is designed to always equal one US dollar.
Prediction market terms FAQ
- What is a contract in a prediction market?
- A contract is the tradeable unit of a prediction market. It pays a fixed amount — usually $1.00 — if its outcome happens and nothing if it does not, so its price between $0 and $1 reads directly as an implied probability.
- What does the price of a prediction-market contract mean?
- The price is the cost to buy one share of an outcome, quoted from $0.00 to $1.00, and it doubles as the market’s implied probability. A 60¢ price implies a 60% chance and pays $1.00 if it resolves your way.
- What is a CLOB?
- A CLOB, or central limit order book, is the engine that matches buy and sell limit orders by price and time priority. Venues like Polymarket and Kalshi trade on a CLOB, so you trade against other people rather than a house.