The Definitive Guide to Prediction Markets

Prices in prediction markets are not mere trade outcomes but public probability signals that compress the information participants are willing to back with capital.

Because financial incentives force people to reveal their actual beliefs rather than their stated opinions, prediction markets often produce signals that outperform polls and expert commentary.

These markets operate most effectively when information updates continuously, participation is recurrent, and the event has real economic or social weight.

Unlike gambling, which generates outcomes detached from reality, prediction markets turn wagering into an information-producing mechanism whose output can be reused and analyzed.

They also separate probabilistic exposure from the complex derivative structures that traditionally embed it, offering a cleaner and more direct way to express uncertainty.

Volume, open interest, and user activity all indicate that prediction markets have achieved product–market fit, with Polymarket and Kalshi forming the core of the ecosystem’s liquidity and participation.

As large consumer platforms integrate prediction markets into their own workflows, the center of value capture is beginning to shift from venue infrastructure toward the distribution layer that controls user flow.

The path forward hinges on resolving oracle fragility, improving capital efficiency for long-dated markets, and introducing leverage primitives that expand how belief can be expressed.