Prediction Markets

Prediction market Kalshi's CEO Tarek Mansour ​​has said that prediction markets are similar to the stock market—except instead of buying and selling shares of companies, users buy and sell "yes" or "no" on whether an event is going to happen or not.

The prices on prediction markets reflect how the collective forecasts future outcomes

On prediction markets, bettors bid up or down the price of contracts based on what they expect an event's outcome to be. Bettors bid up prices when they think an event is more likely to occur than the current contract price shows, so they buy the contracts, pushing the price higher. They bid down prices by selling these contracts when they believe an event is less likely to occur, driving the price down due to supply and demand.

Modern prediction markets started in Iowa in 1988

The University of Iowa's Iowa Electronic Markets were introduced during the 1988 US presidential election. The beginning of their origin story almost sounds like a joke: Three economists walked into a bar.

A prediction market was more accurate than most polls about the 2024 US presidential election

The idea that the median estimate of a group can be more accurate than individual expert estimates is called the "wisdom of the crowd," and dates back to the early 1900s. This theory can help explain the perceived value of prediction markets when it comes to polling and more.

Contract prices on prediction markets are generally interpreted as implied probabilities

For example, if a contract trading is at $0.65, that could be read as the market assigning a 65% probability to that event occurring. The most common format for prediction markets is winner-take-all: The contract settles at $1 if the event occurs, or $0 if it doesn't.

Prediction market Polymarket's CEO dropped out of New York University

Polymarket CEO Shayne Coplan started building Polymarket when he was 21. Polymarket has been backed by billionaire investors such as Peter Thiel and Vitalik Buterin.

The FBI once raided Polymarket CEO Shayne Coplan's home

In 2024, after Polymarket markets favored what turned out to be the winning outcome of the US presidential election, agents raided Coplan's New York City apartment. Coplan, who was only 26 years old at the time, was home during the raid and turned over his devices to authorities.

Prediction markets—the platforms where users can trade bets that pay out depending on certain event outcomes—have faced questions about insider trading.

Prediction markets help people bet on almost anything—which can be controversial

Critics point to incidents such as traders placing bets on the Venezuelan President Nicolás Maduro's capture and the two people in Israel who were charged on suspicion of using classified information to place bets about military actions.

The CEOs of the two top prediction markets have a fierce rivalry

Kalshi CEO Tarek Mansour and Polymarket CEO Shayne Coplan are both billionaire CEOs of the top two prediction markets—but they don't exactly get along. For instance, Mansour reportedly does not say the word "Polymarket" out loud, referring to it as the "non-American, unregulated platform."