Intermediate

How prediction markets work

Order books, contract settlement, and why exchange quotes can be read more directly as probabilities.

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.

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.

A well-designed contract names an explicit public settlement source. Ambiguous settlement language is a structural risk that sits alongside price risk.

Want this applied to a specific market? The SportsWager Analyst will walk through the arithmetic. It explains method only — never picks.

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