Prediction Market Glossary

The practice of simultaneously buying and selling related contracts to profit from price discrepancies with no directional risk.

A smart contract-based liquidity mechanism that sets prices algorithmically without requiring a traditional order book.

A financial derivative that pays a fixed amount if a condition is met at expiration and zero otherwise.

A measure of how well a forecaster's probability estimates match the actual frequency of events.

The Commodity Futures Trading Commission, the US federal agency that regulates derivatives markets including certain prediction markets.

A financial instrument that pays a fixed amount if a specified real-world event occurs and zero if it does not.

A CFTC-regulated prediction market exchange focused on economic and financial event contracts.

The practice of making probabilistic predictions about future events, often formalized through scoring rules.

Using prediction market contracts to reduce financial exposure to uncertain real-world outcomes.

The probability of an outcome as expressed by the current market price of a prediction contract.

The first CFTC-regulated US prediction market exchange, offering legally compliant event contracts to American traders.

The ease with which a market participant can buy or sell a position without significantly affecting the contract's price.

A play-money prediction market platform that uses a proprietary currency to enable trading on virtually any question.

A participant who continuously quotes both buy and sell prices in a market to provide liquidity to other traders.

A reputation-based forecasting platform where users make probabilistic predictions on science, policy, and geopolitical questions.

The total number of outstanding prediction market contracts that have not yet been resolved or closed.

A real-time list of outstanding buy and sell orders for a prediction market contract at various prices.

The largest crypto-based prediction market platform, operating on the Polygon blockchain with USDC settlement.

A market where participants trade contracts based on the outcomes of future events.

A US political prediction market that operated under an academic exemption from the CFTC, capped at $850 per contract.

The process by which a prediction market contract is settled based on the actual outcome of the event.

The specific conditions and data sources that determine how a prediction market contract is settled.

A US dollar-pegged stablecoin used as collateral and settlement currency on crypto-based prediction markets like Polymarket.

Short for vigorish — the commission or built-in edge that a bookmaker or exchange takes on trades.

The phenomenon by which aggregated judgments from many independent individuals are often more accurate than individual expert predictions.