- What are prediction markets?
- Prediction markets explained with a quick example
- How do prediction markets work according to US regulation?
- Understanding the commission fees for prediction markets
- Pros and cons of using prediction markets sites
- Step-by-step guide on how to use a prediction markets site
- What to look for in a prediction markets platform
- Simple tips to make your first prediction market trades
- Final thoughts: Start trading now that you understand how prediction markets work
- The only prediction market platforms you'll ever need
- Prediction market guides FAQ
What are prediction markets?
Unless you’ve been living under a rock, you will have seen that prediction markets are everywhere in the U.S. right now. They are a form of trading that lets you buy and sell event contracts for a variety of different real-world events. Here are a few examples:
- Who will win the next Super Bowl?
- Who will be the next U.S. president?
- What will be the highest temperature in New York today?
How it works is that you purchase a contract at a price between $0.01 and $0.99. This price will constantly adjust based on the trading activity of other users on the site. Hence, prediction markets use the aggregated trading activity to provide a good guide for what the public thinks will happen next. The phrase ‘put your money where your mouth is’ applies to this.
The cheaper contracts represent predictions that are less likely to be correct, whereas the more expensive contracts are more likely to be correct. If your event contract is valid, it can be redeemed for $1, and you will have made a profit. However, if your event contract proves to be wrong, you will simply lose your money.
Prediction markets explained with a quick example
So if you are still asking, ‘What is event trading?’ it’s perhaps best we give you an example so you can see how it works in practice. For this, we are taking the example of an NFL game between the Kansas City Chiefs and the Denver Broncos. Here’s what might happen:
- You go to a prediction markets site and see that it has event contracts for a Chiefs win at $0.60, which reflects that customers think Kansas City has a 60% chance of winning.
- Then you see that the event contracts for a Broncos win are priced at $0.40, indicating a 40% chance of a Broncos win.
- You decide to back the Chiefs to win and buy the event contract for $0.60.
- Now you watch the game, and the Chiefs go on to win 23-17. This means your contract is now worth $1, and you will have made a profit of $0.40 after commission fees.
- Note that if you had bought a Broncos contract and they had won, it would also have been worth $1 and would have made a larger profit of $0.60.
Just remember that you are free to buy or sell your event contracts at any time, and that is part of the appeal of prediction markets. So, if you bought a Chiefs contract and then felt that they weren’t going to win, you could attempt to sell it early to avoid making a total loss of your investment.
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How do prediction markets work according to US regulation?
While we’ve got this entire guide that answers the question, ‘Are prediction markets legal?’ we thought that we should give you a quick overview right here.
The key thing to understand is that prediction markets are regulated at the federal level rather than the state level. While certain states have been issuing cease-and-desist orders against specific prediction market brands, there is little they can do to stop those brands from operating within their state borders.
The federal regulation is imposed by the Commodity Futures Trading Commission (CFTC), and all legitimate prediction market sites must be regulated by the CFTC. Such regulation exists to provide you with a safe and fair way to make your predictions, with protections against fraud, insider trading, and price manipulation.
Understanding the commission fees for prediction markets
It’s important to understand that there will be various costs of event trading that’ll need to be factored in before you get started. After all, you will be making your trades against other customers at the site, and the prediction markets brand has to make its money somehow. So check out the following table to see what kinds of fees you might be up against:
| Fee type | What to expect |
| Trading fees | Either a fixed or variable amount of between $0.005 and $0.02 per trade. Note that some markets might be free |
| Deposit fees | Most deposits should be free but some card payments may carry a processing charge of between 1% and 3% |
| Withdrawal fees | Some brands charge a 5% withdrawal fee for every time you withdraw your winnings |
Pros and cons of using prediction markets sites
So now you know what prediction markets are all about; it’s time to give them a try yourself. If you aren’t sure, please consider the following pros and cons of jumping on the prediction markets bandwagon:
- Usually available in all U.S. states
- Massive range of predictions to make
- Relatively simple trading format
- Responsible trading tools available
- Potential to lose your money
Step-by-step guide on how to use a prediction markets site
So if you are ready to make your first predictions, you’ll just need to take the following steps to get straight into the trading action:
- 1
Select any of the approved prediction markets brands in the banners of this page and then click on the link to be taken to their site
- 2
Register your account by filling in the registration form with the required personal details such as your name, email, mobile number, date of birth, and home address
- 3
Submit your application and then verify your identity by uploading the necessary documentation
- 4
Navigate to the cashier section and then make an opening deposit with one of the accepted payment methods
- 5
Go to the prediction markets lobby and browse the currently available event contracts
- 6
Click on the event contract that matches your prediction and select how many of that contract you wish to purchase
- 7
Execute your trade and then either keep your contract until the event has settled or aim to sell it early for a profit
What to look for in a prediction markets platform
Any guide to prediction markets should also indicate what to look for in these kinds of sites. The good news is that you’ll see the best prediction markets sites listed in the banners of this guide, and this is the criteria that we used to judge these brands:
- CFTC regulation: First, we verify that each brand is authorized to operate in the U.S., meaning it has the all-important CFTC registration.
- Safety: We’ll also check the prediction markets site has all of the required SSL-level encryption to safeguard your data and deposits, and we’ll see what responsible trading tools are available.
- Payments: You should have safe, efficient ways to make deposits and withdrawals through a range of payment methods, including cards, bank transfers, e-wallets, and even cryptocurrencies.
- Clear fee structure: The prediction markets brand should have a clear fee structure so that you can quickly understand what fees you might be up against in terms of your trading, deposits, and withdrawals.
- Responsive customer support: All good prediction market brands should offer friendly, professional customer service that you can access 24/7 via email, live chat, phone, or even social media. Plus, a good FAQ never hurt anyone.
- Broad range of prediction markets: You should be able to make your trades on sports, politics, elections, finance, cryptocurrencies, technology, science, culture, and even the climate.
- Large customer base: There will need to be an active community of traders at the prediction markets site to ensure that there is plenty of liquidity for you to actually be able to make your trades.
- User-friendliness: The prediction markets site should be easy to use and navigate around, and there should also be user-friendly apps available for iOS and Android devices
Simple tips to make your first prediction market trades
We thought that we should probably give you a few handy tips to get you started with your first prediction market trades. Worth a look to avoid making too many newbie errors:
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The first thing you need to do is to apply whatever limits are available on your deposits and trading activity. This means spending only what you don’t mind losing, so any losses don’t hurt too much.
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Following on from the above, it’s best to play it safe when making your predictions. Sure, an event contract priced at $0.01 will yield bigger profits than one priced at $0.99, but it is far less likely to be correct. Plus some returns are always better than none at all.
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Each of our recommended prediction market brands will give you a vast range of ways that you can make your predictions. So put your expertise in anything from sports to politics to the test and try to make sharper predictions than your rivals.
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There can often be something of a herd mentality at prediction markets sites, and this becomes very apparent at those sites where you can see how other people are trading and so on. So best put your blinkers on, do your own research into the various price analytics and make your own trades with confidence.
Final thoughts: Start trading now that you understand how prediction markets work
This guide has shown you that prediction markets offer a pretty simple and safe way to make predictions about a wide range of real-world events. You should be able to enjoy this in most states, and we’ve given you a few pointers to help you get started with a fair amount of confidence.
Just remember that prediction markets are, by their nature, risky, so you should take the necessary steps to keep your trades under control. But as long as you don’t forget that, you should be good to hit any of the links for the approved prediction markets sites in the banners of this guide to sign up and start trading.
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Prediction market guides FAQ
You will usually have to be at least 18 years old to sign up to most prediction markets sites. This means you will be required to verify your identity before you can make deposits and start trading.
Yes, although they are few and far between. Besides the occasional referral offer, you’ll see any relevant deals listed in the banners of this guide.
It depends on what you are looking for, as Kalshi is a good all-rounder, Polymarket has some seriously entertaining markets, and Crypto.com is great for predicting crypto price movements. Read our expert reviews and find your perfect prediction markets site.
It’s usually a matter of clicking the verification link sent to your email or mobile, and then completing the KYC procedure. This usually involves submitting a government-issued photo ID, such as your driver’s license or passport.
Kalshi is probably the largest prediction market site in the U.S. right now. However, rival brands such as Polymarket, Crypto.com, and Robinhood aren’t too far behind.
