Quick answer
A prediction market is an exchange where people buy and sell contracts whose payout depends on whether a future event happens. On real-money venues a “Yes” share typically pays $1 if the event happens and $0 if not, so a price of $0.62 can be read as a crowd-implied probability of roughly 62% (before fees and spread) [1].
- Polymarket (international) matches orders off-chain and settles on the Polygon blockchain; it is close-only or blocked in dozens of countries, including the US, UK and Taiwan [2] [3]. A separate, CFTC-regulated Polymarket US exchange (QCX LLC) serves US users [4].
- Kalshi has been a CFTC-designated contract market since November 2020, but its sports contracts are being fought over in state and federal courts [5] [6].
- bet365 is a traditional fixed-odds sportsbook, not a prediction market; as of November 2026 it has not launched one [7].
- Klash is an early-stage Web3 project for betting on social-media controversies, showing a waitlist rather than a live product [8].
Legality depends on where you live. The UK Gambling Commission, for example, treats current prediction-market products as betting intermediaries that need a gambling licence [9].
Platforms covered in this guide
What is a prediction market?
A prediction market lists questions with a clear, verifiable outcome — “Will X win the election?”, “Will the Fed cut rates in December?”, “Will Team A win tonight?” — and lets participants trade shares in each possible answer. Prices move as traders buy and sell, so the market price becomes a live, money-weighted estimate of how likely each outcome is.
Unlike a bookmaker, the operator of an exchange-style prediction market does not set the price. On Polymarket, for example, “prices aren't set by Polymarket — they emerge from supply and demand as users trade with each other” [2]. In the United States these instruments are regulated as event contracts by the Commodity Futures Trading Commission (CFTC) when they are listed on a designated contract market (DCM) [5].
What can you trade?
Typical categories include politics and elections, economics (inflation, interest rates), sports, crypto prices, weather, culture and technology. Polymarket's own fee schedule lists categories such as Crypto, Sports, Finance, Politics, Economics, Culture, Weather, Tech and Geopolitics [10].
How do prediction market prices work?
Most real-money prediction markets use binary contracts. Each market has a “Yes” and a “No” share; exactly one of them is redeemable for $1.00 after resolution and the other becomes worthless [1]. Because a Yes share and a No share together are always worth $1, on Polymarket a $0.60 Yes bid and a $0.40 No bid can be matched to create a new pair of shares from $1 of collateral [2].
Worked example: reading a price as a probability
- Yes trades at $0.62 → the market implies about a 62% chance.
- If you buy 100 Yes shares at $0.62 you pay $62 (plus any fee). If the event happens you receive $100; if not, you receive $0.
- The implied probability is only an estimate: spreads, fees, thin liquidity and trader biases mean it is not a guarantee.
How fees affect the price
Both major venues use fee formulas that peak at a 50% price and shrink towards 0% or 100%:
- Kalshi: standard taker fee = round up(0.07 × contracts × P × (1 − P)), giving $0.07–$1.75 per 100 contracts on most markets; some series also carry maker fees or different multipliers [11].
- Polymarket (international): fee = contracts × feeRate × p × (1 − p), charged to takers only, with category rates from 0 (Geopolitics) to 0.07 (Crypto) as of 2 Nov 2026; makers pay no fees and part of the fees fund maker rebates [10].
Order books vs automated market makers (AMMs)
There are two main ways to match buyers and sellers:
- Central limit order book (CLOB). Traders post bids and asks at chosen prices; a trade happens when they cross. Polymarket runs a “hybrid-decentralized” CLOB: an operator matches signed orders off-chain, and matched trades settle atomically through smart contracts on Polygon, so users keep custody until settlement [2] [12]. Since 28 April 2026 Polymarket's CLOB V2 uses pUSD, a USDC-backed token on Polygon, as collateral [13]. Kalshi is also an order-book exchange, with separate taker and maker fees [11].
- Automated market maker (AMM). A pricing algorithm always quotes a price and adjusts it after each trade, so there is always a counterparty even in thin markets. Manifold, for example, uses “a combination of limit orders and an automated market maker”: trades fill against limit orders first, then against the AMM [14].
Order books give tighter prices when liquidity is deep; AMMs guarantee liquidity but large trades move the price more.
How are prediction markets resolved?
Every market has written rules that define the resolution source, the end date and edge cases. Polymarket warns that “the market title describes the question, but the rules define how it resolves” [1].
Polymarket and the UMA optimistic oracle
- Proposal: anyone can propose an outcome by posting a bond (typically $750 in pUSD).
- Challenge period: 2 hours. If nobody disputes, the market resolves (~2 hours in total).
- Dispute: a disputer posts an equal bond. The first dispute triggers a fresh proposal; a second dispute escalates to UMA's Data Verification Mechanism (DVM), where UMA token holders vote after a 24–48 hour debate. Disputed resolutions take roughly 4–6 days.
- Payout: winning shares redeem for $1.00, losing shares for $0; in rare “Unknown/50-50” cases each share redeems for $0.50 [1].
UMA describes its DVM as a Schelling-point vote that needs a 65% majority of staked UMA, with non-voters and minority voters slashed [15]. Polymarket's short-term crypto “up/down” markets instead resolve from a Chainlink price feed (TWAP) [1].
Regulated exchanges
On CFTC-regulated venues such as Kalshi and Polymarket US, the exchange itself determines outcomes under each contract's published rules and its regulatory obligations as a DCM [5] [16]. Always read the contract terms for the exact source used.
Are prediction markets legal? (US, UK, EU and Asia)
Status as of 2 November 2026. This changes fast — check the platform and your local regulator before using any service.
United States
- Federal: the CFTC regulates event contracts listed on DCMs. Kalshi was designated in November 2020 [5]; QCX LLC, now Polymarket US, was designated on 9 July 2025, and in November 2025 the CFTC amended its order to allow intermediated (broker/FCM) access [4] [16].
- Polymarket's history: in January 2022 the CFTC fined Polymarket's operator $1.4 million for offering unregistered event-based binary options and required non-compliant markets to be wound down [17]. The international polymarket.com is still close-only for US users [3].
- States vs. sports contracts: several states argue sports event contracts are unlicensed gambling. Courts are split: a divided Third Circuit panel sided with Kalshi on federal pre-emption in New Jersey [18], while on 25 September 2026 the Sixth Circuit (Ohio and Tennessee) held that state gambling laws were not pre-empted [6].
- New CFTC rules: on 19 October 2026 the CFTC issued an interim final rule keeping state- or tribal-licensed casino-style gambling products outside the definition of a “swap”, and proposed a separate rule to include specified event contracts in that definition; comments close on 18 November 2026 [19] [20].
- PredictIt operates under CFTC staff no-action relief (Letter 14-130, amended by Letter 25-20 in July 2025, which moved operations to the not-for-profit Prediction Market Research Consortium) rather than as a DCM [21].
United Kingdom
The Gambling Commission says current prediction-market products would appear to be “betting intermediaries” — akin to betting exchanges — and that operators “would not be able to classify themselves as non-gambling products”. Unlicensed operators should not target or transact with consumers in Great Britain, and operating without a licence is a criminal offence [9].
European Union example: Spain
Spain's consumer ministry opened sanction proceedings and ordered precautionary blocking of Polymarket and Kalshi, treating them as gambling that needs a Spanish licence [22]. Polymarket also lists France, Germany, Italy, Belgium and Poland, among others, as restricted [3].
Asia-Pacific
- Polymarket lists Taiwan, Singapore, Thailand and Australia as close-only, and restricts its website for Japan and South Korea [3].
- Taiwan: Criminal Code Art. 266 makes gambling via the internet or other electronic means an offence; operating a gambling venue for profit is punished more severely [23].
- Hong Kong: betting with an unlicensed bookmaker is an offence, and knowingly promoting or facilitating such betting carries heavy penalties [24].
- Mainland China: operating gambling (including via websites or apps) and organising Chinese citizens to gamble abroad are criminal offences [25].
Prediction market vs sportsbook vs betting exchange: what's the difference?
| Feature | Prediction market (e.g. Kalshi, Polymarket) | Sportsbook (e.g. bet365) | Betting exchange (e.g. Betfair Exchange) |
|---|---|---|---|
| Who sets the price? | Traders, via order book or AMM | The bookmaker sets fixed odds | Users back and lay each other |
| Your counterparty | Other traders (via the exchange) | The bookmaker | Other users |
| Can you sell before the event? | Yes, at the current market price | Only through a cash-out offer, if available | Yes, by laying/trading out |
| How the operator earns | Trading fees | Margin built into the odds | Commission on net winnings |
| Typical regulator | CFTC in the US; gambling regulators in many other countries | Gambling regulators | Gambling regulators |
A lay bet on an exchange is a bet that something will not happen, and Betfair charges commission on net winnings in a market [26] [27]. The UK Gambling Commission explicitly compares prediction markets to betting exchanges [9].
Where does bet365 fit?
bet365 is a UK-based, digital-first online sportsbook. As of 2026 it does not offer prediction markets; reporting in 2026 found no public CFTC or NFA filings linked to it, and a source told DeFi Rate it had no current plans to offer US event contracts, though it is watching the space [7] [28]. Several US sportsbook brands — Fanatics, DraftKings and FanDuel — have launched prediction-market products [28].
Which prediction market platforms exist? (profiles)
Polymarket (international)
Crypto-native exchange with a hybrid CLOB and on-chain settlement on Polygon, collateral in pUSD [2] [13]. Resolves most markets through the UMA optimistic oracle [1]. Fully blocked in OFAC-sanctioned regions and close-only in many others; Polymarket prohibits using VPNs to bypass restrictions [3] [29].
Polymarket US
A separate exchange operated by QCX LLC, a CFTC-designated contract market (designated 9 July 2025), with intermediated access approved in November 2025 [4] [16]. Availability and listed markets vary by state.
Kalshi
The CFTC designated KalshiEX LLC as a contract market in November 2020 (announced 4 November 2020) [5]. US-dollar order book with published taker/maker fee formulas [11] and REST, WebSocket and FIX APIs [30]. Its sports contracts face litigation in multiple states [6].
PredictIt
Not-for-profit, research-oriented US market operating under CFTC no-action relief, now run by the Prediction Market Research Consortium [21].
Manifold
Play-money market: its currency, mana, “cannot be converted to cash”, and anyone can create questions [14]. Manifold ended its real-money “sweepcash” sweepstakes in March 2025 [31].
Augur
One of the earliest decentralized prediction-market protocols. As of November 2026 its FAQ says a market application “has not yet relaunched”; current work centres on a new oracle architecture [32].
Klash
Klash describes itself as “a sentiment-driven Web3 prediction market where users bet on real-time Twitter controversies, on-chain”, built on Aptos. Its website currently shows a waitlist; we could not verify a public launch, its regulatory status or its fees, so treat it as an early-stage project [8]. (Do not confuse it with similarly named projects such as Kash or ClashPicks.)
bet365
Licensed fixed-odds sportsbook; not a prediction market as of 2 Nov 2026 [7].
Prediction market platforms compared (table, Nov 2026)
| Platform | Type | Regulation | Regions | Fee model | Settles in |
|---|---|---|---|---|---|
| Polymarket | Crypto prediction market, hybrid CLOB | Not US-registered (US access via Polymarket US) | Global except blocked/close-only list (incl. US, UK, FR, DE, TW, SG) | Taker fee C × rate × p(1−p), rate 0–0.07 by category; makers free | pUSD (USDC-backed) on Polygon |
| Polymarket US | Regulated event-contract exchange | CFTC DCM (QCX LLC) | United States (state restrictions apply) | See official fee schedule | USD |
| Kalshi | Regulated event-contract exchange | CFTC DCM since 2020 | United States (state litigation ongoing) | Taker 0.07 × C × P(1−P), rounded up; some maker fees | USD |
| PredictIt | Not-for-profit research market | CFTC staff no-action relief | United States | See official site | USD |
| Manifold | Play-money market (limit orders + AMM) | Not a real-money venue | Broadly available | No cash trading | Mana (no cash value) |
| Augur | Decentralized protocol (rebuilding) | — | No live market app | — | — |
| Klash | Early-stage Web3 sentiment market (Aptos) | Unverified | Waitlist | Not published | On-chain (details unpublished) |
| bet365 | Fixed-odds sportsbook (not a prediction market) | Gambling licences per jurisdiction | Licensed markets only | Margin in the odds | Local currency |
Sources: [10] [3] [13] [4] [5] [11] [21] [14] [32] [8] [7]. Links in this table are plain links to official sites, not affiliate links.
Where do odds and prediction-market data come from?
Price data is the raw material for analysis. Polymarket and Kalshi publish official APIs for their own markets [33] [30]. For sportsbook and exchange odds, our recommended option is Odds-API.io Partner link: it says it covers 450+ bookmakers including bet365 and Betfair Exchange, offers REST and WebSocket feeds, and has an official MCP server for AI assistants [34]. An alternative is SportsGameOdds Partner link, which includes Kalshi and Polymarket lines alongside sportsbooks [35]. Full comparison in our AI & agents guide.
Try Odds-API.io → Partner link
Full guide: Odds-API.io — endpoints, coverage, pricing and code examples.
Worked example: Odds-API.io case study: API key, plans, AI agents, market analysis and placing bets.
Partner link — we may earn a commission. See our affiliate disclosure.
What are the risks of trading on prediction markets?
- Total loss: a share can expire worthless.
- Resolution risk: outcomes follow the written rules and oracle/exchange process, which may differ from what the title suggests [1].
- Liquidity and fees: thin books and fees widen the gap between price and true probability [11] [10].
- Legal risk: using a platform where it is not authorised — or bypassing geo-blocks — can breach terms and local law [29] [9].
- Market abuse: the CFTC says it can police insider trading and manipulation on event contracts, and has already settled an insider-trading case [36] [37].
- Crypto risk (Polymarket): wallet security, smart-contract and stablecoin risks.
Want to see how AI is changing all of this? Read how AI tools and agents affect prediction markets.
Frequently asked questions
Is Polymarket legal in the US?
The international polymarket.com is close-only for US users. US residents can use Polymarket US, a separate exchange run by QCX LLC, which the CFTC designated as a contract market on 9 July 2025; state-level availability varies.
Is bet365 a prediction market?
No. bet365 is a fixed-odds sportsbook: it sets the odds and is your counterparty. As of 2 November 2026 it has not launched a prediction-market product.
What is Klash?
Klash describes itself as a sentiment-driven Web3 prediction market on Aptos for betting on Twitter/X controversies. Its site shows a waitlist; we could not verify a public launch, regulation or fees.
How does a prediction market price become a probability?
A Yes share pays $1 if the event happens. If it trades at $0.62, the market implies about a 62% chance, before fees and the bid-ask spread.
How does Polymarket decide the outcome?
Most markets use the UMA optimistic oracle: someone proposes an outcome with a bond, there is a 2-hour challenge window, and disputed cases can escalate to a UMA token-holder vote. Undisputed markets resolve in about 2 hours; disputed ones in roughly 4–6 days.
What is the difference between Kalshi and Polymarket?
Kalshi is a CFTC-regulated US exchange trading in US dollars. Polymarket's international platform is crypto-based, settles in pUSD on Polygon and restricts US users; Polymarket US is its separate CFTC-regulated US exchange.
Are prediction markets legal in the UK?
The UK Gambling Commission says current prediction-market products would be treated as betting intermediaries (like betting exchanges) that need a GB gambling licence; unlicensed operators must not target GB consumers.
Can I use a VPN to access Polymarket?
No. Polymarket's terms prohibit using VPNs to bypass geographic restrictions, and doing so may also break local law.
About this guide
Pred-Data publishes independent, source-linked explainers about prediction markets and the AI tools used around them. Every factual claim on this page links to a primary or reputable secondary source, checked on the date shown above. We do not run a trading venue, take bets, or give personal advice.
Author: Ken Lin · Corrections: if you spot an error, we review it and date-stamp the fix.
Affiliate disclosure
Some links on this site (marked “Partner link”) may be affiliate links: if you sign up through them we may earn a commission at no extra cost to you. Partner links use rel="sponsored nofollow" and never change our assessment. Platform links in our comparison tables are plain, non-affiliate links to official sites.
Sources
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