How Do Prediction Markets Work?
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Prediction markets work by matching buyers and sellers of event contracts — there is no house setting the line. You pick a clear yes-or-no question, buy the side you think is right, and the price you pay reflects the market’s live estimate of the odds.
It starts with a yes-or-no question
Every market asks one clearly defined question with an official settlement source and a deadline — for example, “Will the Fed cut rates in July?” You choose Yes if you think it will happen or No if you think it will not. Each contract settles at $1 if your side is right and $0 if it is wrong.
“Will the Fed cut rates in July?” Yes is trading at 40¢. You buy 100 Yes contracts for $40. If the Fed cuts, each pays $1 — you collect $100, a $60 profit before fees. If it holds, the contracts settle at $0 and you lose your $40.
Prices are set by traders, not the platform
Unlike a sportsbook that sets the odds and takes the other side of your bet, a prediction market is an exchange: Kalshi and the others simply match orders between users, and the price moves with supply and demand. When more traders buy Yes, the price rises; when they sell, it falls. The platform earns from fees, not from a built-in margin.
You can hold or sell before it ends
You are not locked in until settlement. As long as there is a buyer, you can sell your position early to lock in a gain or cut a loss — which makes a contract a tradable position, not a one-and-done bet slip.
The steps, in order
Choose a market, read the rules and settlement source, buy Yes or No, then hold to expiry or sell beforehand — and collect $1 per contract if your side wins. New to it? Start with our guide to buying your first contract, and browse live questions in the markets hub.