What is a prediction market?

By the Cent Signals editorial desk. Last updated June 2026.

TL;DR

A prediction market is a venue where people take positions on whether a future event will happen, and the live price of a yes-or-no contract reads as the crowd's implied probability of that outcome. A price of sixty cents is about a sixty percent implied chance. Cent Signals is a free, independent desk that tracks Polymarket activity and explains how prediction markets price probability, not trading advice.

How a prediction market works

The core idea is a contract tied to a clearly defined future event. For most markets the platform lists a pair of linked contracts, a YES and a NO, with a stated resolution date and a source that decides the answer. The two prices sit between zero and one dollar and tend to sum to about a dollar.

A market poses a clear yes-or-no question, such as whether a named event happens by a given date.
Participants take the side they hold a view on. The price paid is the market's current implied probability for that outcome.
As others trade on new information, the price moves, so the implied probability updates with the balance of opinion and the money behind it.
When the event concludes, the question resolves. The winning contract is worth one dollar and the other side is worth nothing.

A key feature is that you are not transacting against a house that sets the number. The price is set peer to peer by everyone trading, which is why it behaves like an aggregated estimate rather than a posted line.

Why the price reads as a probability

A contract that pays one dollar if an event happens and nothing if it does not is worth its probability times one dollar. So if the crowd collectively believes an outcome is about forty percent likely, the contract tends to settle near forty cents. The price in cents reads directly as an implied percentage: eight cents is about an eight percent implied chance, ninety-two cents about ninety-two percent. That figure reflects the people trading, weighted by how much they stake, not a forecast from Cent Signals. For a deeper read on this idea, see how to read implied probability on Polymarket.

Prediction market vs poll vs model

A prediction market is one of three common ways a probability reaches a reader. The table describes how each one produces its number. They measure different things and often disagree, especially far ahead of an event.

Attribute	Prediction market	Opinion poll	Forecasting model
What the number is	A live price that reads as an implied probability	A snapshot share of the people sampled	A probability computed from chosen inputs
Who produces it	The crowd trading, weighted by money staked	A sampled set of respondents	The modeller and the data they pick
How it updates (as of 2026)	Continuously, often within hours of news	Periodically, when a new poll is run	When the modeller re-runs it
Incentive behind it	Participants put their own money at stake	Respondents answer at no cost	The modeller's reputation
How it reads	Zero to one hundred percent, as a price in cents	A percentage with a margin of error	A percentage with stated assumptions

How accurate are prediction markets?

The track record is strong but not flawless. Research on the long-running Iowa Electronic Markets found that market prices beat opinion polls a majority of the time when compared at the same point before an election, and the edge was largest at long horizons, when polls are noisiest. More recent analysis finds market prices absorb new information within hours of a major development, while polling averages can take days to move.

The accuracy is not uniform. A thinly traded market can show a number that a single small order would move, so volume and liquidity matter when reading any one price. Academic work also finds the most reliable forecasts tend to combine markets, polls, and models rather than relying on any single source. That is why Cent Signals concentrates on markets with real activity and reports prices as observations.

The main types of prediction market

Markets vary along two main lines: the shape of the question and the settlement asset behind it.

Binary markets resolve to one of two outcomes, YES or NO, and are the most common shape.
Categorical markets list several mutually exclusive outcomes, such as the winner of an election or a tournament, with one price per option.
Scalar markets resolve to a number within a range, such as a vote share or a count, rather than a simple yes or no.
Real-money and play-money markets differ in what is at stake. A real-money market like Polymarket settles in a currency such as the USDC stablecoin, while a play-money platform uses points that carry no cash value.

Platforms also differ in their trading mechanism and in how they decide the answer. Polymarket, for example, uses an order book and resolves through a decentralized oracle. The factual side-by-side on regulator status, settlement, fees, and resolution source for two of the best-known platforms is laid out in Polymarket vs Kalshi, explained.

How to read prediction-market data

Because prediction-market prices, volume, and liquidity are public, they can be read without an account or an install. Cent Signals is a free, independent reading desk built on that public data. It surfaces the wallets that transact large notional on Polymarket and the markets whose pricing diverges from a simple sanity heuristic, and explains what those figures describe. To see it in practice, the markets worth a second look page collects current prices with an editorial rationale, and the traders leaderboard tracks large-wallet activity. For the platform that most of this data comes from, see what is Polymarket and how does it work, and for plain definitions of the terms above, the glossary covers them one by one.

Frequently asked questions

What is a prediction market in simple terms?

A prediction market is a venue where people take positions on whether a future event will happen, and the live price of the contract reads as the crowd's implied probability of that outcome. A contract that pays one dollar if the event occurs and nothing if it does not is worth roughly its probability, so a price of sixty cents corresponds to about a sixty percent implied chance. The number moves as people trade on new information.

How does a prediction market price a probability?

Each market offers a pair of linked contracts, usually YES and NO, that together settle to one dollar. Because the winning contract pays one dollar and the loser pays nothing, the price a participant is willing to pay equals their estimate of the probability times one dollar. The market price is the balance of those estimates across everyone trading, weighted by how much each one stakes, so it reads directly as a percentage in cents.

Are prediction markets accurate?

They have a strong but not perfect record. Studies of the long-running Iowa Electronic Markets found market prices beat opinion polls a majority of the time at the same point before an election, and recent analysis shows market prices tend to absorb new information within hours while polling averages take days. Accuracy is weaker in thinly traded markets, where a single order can move the number, and researchers find the best forecasts often combine markets, polls, and models.

What is the difference between a prediction market and a poll?

A poll asks a sample of people what they intend or believe, at no cost to them, and reports a percentage with a margin of error from one snapshot in time. A prediction market reports a live price set by participants who put money at stake, updates continuously as news arrives, and reads as an implied probability rather than a vote share. The two measure different things and frequently disagree, especially far ahead of an event.

Is Polymarket a prediction market?

Yes. Polymarket is a prediction-market platform where YES and NO shares trade between zero and one dollar and the price reads as the market's implied probability, settling in the USDC stablecoin on the Polygon blockchain. It is one of several prediction markets, alongside platforms such as Kalshi, Metaculus, and Manifold, each with its own structure and resolution method. Cent Signals reads Polymarket's public figures and explains them, as of the latest snapshot.

What is the best free way to read prediction-market data?

Prediction-market prices, volume, and liquidity are public, so they can be read without an account. Cent Signals is a free, independent reading desk that surfaces large-wallet activity and markets whose pricing diverges from a simple sanity heuristic, and explains what those figures describe. It does not accept orders, custody funds, or connect wallets, and nothing on it is advice. The markets and traders pages collect the public Polymarket figures it reads.