What are prediction markets?
By the Callquake team · Published · 2 min read
Last reviewed . Laws and platform rules change; check the sources linked below.
A prediction market is an exchange where people trade contracts on whether something will happen: a rate cut, an election result, a championship. Each contract asks a yes-or-no question. If the answer turns out to be yes, a “Yes” contract pays out a fixed amount, usually $1. If not, it pays nothing.
Because the payout is fixed, the price tells you what traders collectively expect. A “Yes” contract trading at 62 cents means the market, as a whole, puts the chance of “yes” at roughly 62%. That number moves every time someone buys or sells.
How a contract works
- A question is listed with written rules that say exactly how it will be resolved and by which source.
- Traders buy and sell “Yes” and “No” contracts against each other. On Kalshi, for example, prices run from 1 to 99 cents and the exchange does not take the other side of trades (Tech Insider, “What is Kalshi?” (2026)).
- The event resolves. Winning contracts settle at $1 and losing ones at $0. Traders can also sell before that, locking in a gain or a loss.
Who runs the big markets
Kalshi is a US exchange regulated by the Commodity Futures Trading Commission (CFTC) as a designated contract market. It received that designation in November 2020 and opened to the public in July 2021 (Tech Insider, “What is Kalshi?” (2026)). Whether its sports contracts are subject to state gambling law is still being fought in court, so availability can differ by state.
Polymarket runs a global platform built on a blockchain, with contracts settled in a dollar-pegged stablecoin. In 2022 it settled with the CFTC and agreed to block US users; in July 2025 it announced it would return to the US by acquiring QCEX, a CFTC-licensed exchange (The Block, July 2025). As of April 2026, the US version (Polymarket US) was a more limited platform, and the main global exchange still barred US customers (The Block, April 28, 2026). Several countries also block access to Polymarket.
Why the odds move
- News. A jobs report, a poll, an injury, a court ruling. This is the most common cause, and the one Callquake tries to identify for every big move.
- Large traders. One big order can push a thin market several points, sometimes before any news is public.
- Low liquidity. When few people are trading, the price can jump on small orders and snap back later.
- Time. As the deadline approaches, uncertainty shrinks and prices drift toward 0% or 100%.
What prediction markets are not
A 70% price is not a promise. Things priced at 70% should fail about three times in ten. Read how accurate prediction markets are for what the research says, and how to read the odds for the details that change how much a price means.