What Are Prediction Markets? A Beginner's Guide (2026)
Prediction markets let people trade on the outcome of real-world events—elections, Fed decisions, crypto prices, and more. This guide explains how they work, why they matter, and how platforms like Polymarket fit in.
Definition: What is a prediction market?
A prediction market is a market where you buy or sell contracts that pay out depending on whether a specific event happens (e.g. “Will the Fed cut rates in March?”). Prices are set by traders and are often interpreted as implied probabilities: a YES price of 0.70 suggests the crowd thinks ~70% chance the event occurs.
How do they work?
Most prediction markets use binary outcomes: YES (event happens) and NO (event doesn’t). You buy YES or NO shares. When the event is resolved, one side pays out (e.g. $1 per share) and the other is worthless. Before resolution, prices move as new information and opinions enter the market.
- YES 0.65, NO 0.35 → implied ~65% probability; YES + NO often sum to ~1 (minus fees).
- Volume shows how much money is trading; high volume usually means more consensus and tighter spreads.
Polymarket and other platforms
Polymarket is one of the largest crypto-native prediction markets. Markets cover politics, macro, crypto, sports, and culture. You can use it to trade outcomes or simply to read sentiment—what the crowd currently believes—without placing a bet.
Other examples include traditional prediction markets (e.g. Iowa Electronic Markets), regulated exchanges, and regional platforms. Polymarket stands out for breadth, liquidity, and relevance to crypto and macro.
Why prediction markets matter for crypto
- Macro: Fed, elections, regulation—events that move risk-on/risk-off and often BTC/ETH.
- Narrative: Where attention and conviction sit can precede volatility.
- Cross-check: Compare market-implied odds with news and on-chain data.
Next step: explore hot markets
We surface the highest-volume Polymarket events so you can see where the crowd is focused—useful for sentiment, not as a crystal ball.
See live spreads on our dashboard and hot Polymarket events on our prediction markets page.