Prediction Market
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In Brief
A prediction market is a marketplace where users buy and sell shares tied to the outcomes of future events, with prices that map directly to the crowd's implied probability of those outcomes occurring.
What Is a Prediction Market?
A prediction market is a marketplace where users buy and sell shares whose value depends on the outcome of a future event — for example, "Will candidate X win the election?" or
"Will Bitcoin close above $100K on December 31?" Each share pays out a fixed amount (typically $1) if the event resolves in its favor, and zero if it doesn't.
The price of a share — between $0 and $1 — can be read directly as the market's implied probability of that outcome. If a "Yes" share trades at $0.65, the market is collectively pricing the event at a 65% chance of happening.
Prediction markets have been studied for decades as information aggregation mechanisms. They often outperform polls and expert forecasts because they incentivize traders to back their views with capital. Onchain prediction markets extend this model to crypto rails — replacing centralized operators with smart contracts and self-custody wallets.
How Does a Prediction Market Work?
A market is created around a clearly-defined future event with a resolution date.
Traders buy "Yes" or "No" shares at the prevailing price.
As new information arrives, prices update through trading activity.
When the event resolves, "Yes" shares pay $1 if the event happened, $0 if not (or vice versa for "No").
Winning shareholders redeem their shares for the payout in the underlying collateral asset (usually a stablecoin).
Key Features of Prediction Markets
Probability-as-Price
Share prices map directly to implied probabilities, making prediction markets a transparent forecasting tool.
Crowd-Sourced Information
Aggregates the views of every participant, weighted by how much capital they're willing to commit.
Defined Payouts
Outcomes are binary or categorical with known payoffs, removing pricing ambiguity.
Resolution Source
Every market specifies how it will be settled — typically a public data feed, a decentralized oracle, or a designated authority.
Onchain or Off-Chain
Crypto-native venues like Polymarket, Predict.fun, and Hyperliquid (HIP-4) settle onchain; traditional event-contract exchanges like Kalshi settle through centralized infrastructure.
Prediction Markets vs Sportsbooks
| Feature | Prediction Market | Sportsbook |
|---|---|---|
| Price formation | Trader-driven order book | House-set odds |
| Tradable mid-event | Yes — prices move continuously | Limited |
| Counterparty | Other traders | The book |
| Crypto-native version | Onchain self-custody | Rare |
| Coverage | Politics, macro, sports, science | Mostly sports |
Use Cases
Forecasting elections, economic data, and macro events
Hedging real-world risk (e.g., a campaign hedging against an electoral outcome)
Information discovery — extracting probability estimates from a market
Trading on conviction — taking a directional view on news events
Availability
Prediction markets are regulated differently across jurisdictions. Some countries treat them as event contracts, others as gambling, and access may be restricted in the United States,
United Kingdom, and certain other regions depending on the platform. Always check the terms of service of the specific venue before trading.
Prediction Markets and Trust Wallet
Trust Wallet offers native in-app access to leading prediction-market venues — including Polymarket, Predict.fun, and Hyperliquid (HIP-4) — directly from your self-custody wallet, with no exchange account, no KYC at the wallet level, and no bridging required. Availability of individual markets and platforms varies by region.