Intermediate
How prediction markets work
Order books, contract settlement, and why exchange quotes can be read more directly as probabilities.
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How this lesson runs
- 01
Contracts, not lines
- 02
Order books and liquidity
- 03
Settlement sources
Want this applied to a specific price? The Sports.co Analyst walks through the arithmetic. It explains method only — never picks.
Video walkthrough: How prediction markets work
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Contracts, not lines
An event contract settles at a fixed value if a defined condition occurs. Its trading price between 0 and 1 corresponds to the market's probability estimate for that condition.
Order books and liquidity
Prices come from resting orders of other participants. Thin books produce wide spreads, which limits how precisely a quote can be read as a probability.
Settlement sources
A well-designed contract names an explicit public settlement source. Ambiguous settlement language is a structural risk that sits alongside price risk.
Sources
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Method explained in our own words. This lesson asserts no market price, result, or statistic.
Continue
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