Welcome to our guide telling you all you need to know about the costs of event trading at prediction markets sites. Plus, we share how those contracts are priced and how your potential payouts are determined.
We’ll give you a speedy guide detailing how prediction markets work so that you can see how those commission fees cannot be avoided. You'll also learn how this impacts the potential returns that you can get from your trades, while discovering some real-life examples so that you don’t get tangled up in the theory.
- Understanding the pricing of these event contracts
- How to read prediction market prices as percentages
- Determining how much you’ll earn from your winning event contracts
- Understanding the fee structures at prediction market sites
- A closer look at prediction market trading fees
- A walkthrough guide of how prediction markets sites work
- Pros and cons of using prediction markets sites
- Final thoughts: Nothing to worry about with the costs of event trading
- Event trading costs FAQ
If you have read our guide that asks, ‘What is a prediction market?’ you will know that these are sites and apps that let you buy and sell contracts that mirror your predictions for real-world events.
Each of these contracts will initially have its price set by the prediction market site to reflect what it believes will happen. But from here, it is the trading activity of people on the site that sets the price, and you’ll see it fluctuate to reflect real-time changes in traders’ perceptions.
The fact that it's customers' aggregated trading behavior that is changing the price means that prediction markets are being used as an accurate bellwether for future trends. So if you’ve ever heard the phrase, ‘put your money where your mouth is,’ you’ll understand how this accurately reflects what’s going on at prediction market sites.
Understanding the pricing of these event contracts
You’ll find that the price of all event contracts is set between $0.01 and $0.99, and again, this reflects prior trading activity for this prediction. Here’s what you need to know about these prices:
- Cheaper event contracts will be for those predictions that are less likely to end up being correct
- The more expensive contracts are those for predictions that are more likely to happen
How to read prediction market prices as percentages
What’s interesting about this is that the price of the contract indicates the perceived percentage chance of what’s expected to happen in the event in question. Let’s take an example of an NFL game between the Los Angeles Rams and the New York Giants.
- The Rams are the favorites to win, and their event contract price of $0.73 indicates a perceived 73% chance of winning, according to traders on the platform.
- Conversely, the Giants are the underdogs, as reflected in the event contract price of $0.27 for them to win. This indicates that customers believe the Giants have only a 27% chance of winning the game.
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Determining how much you’ll earn from your winning event contracts
It’s not enough just to know what event trading is, as you will also want to know how much you’ll get back if your prediction proves successful. So, the key thing to understand here is that all event contracts that prove correct can then be redeemed for $1.
This means you will get more back from winning with a riskier, cheaper contract than from a more expensive contract that is more likely to succeed. So in the example of the above NFL game, we’d see that:
- If you backed the Rams to win and they won, your contract would be worth $1, and you would have made a $0.27 profit.
- However, if you had predicted the Giants to win and they won, your contract would also be worth $1, and you’d have made a profit of $0.73.
Just note that there will be commission fees for trading that’ll affect your potential returns, but we’ll discuss those further down in this guide.
How much you’ll get from a losing event contract
OK, this is easy. If your prediction is wrong, then your event contract would be worthless, resolving at $0, and you’d get nothing in return.
Understanding the fee structures at prediction market sites
One of the key reasons prediction markets are legal in the U.S. is that these sites host peer-to-peer trading of contracts, rather than trading against the site itself.
So, how do these sites stay in business? Well, they will apply various fees to things like the trades you make, and you might even find fees applied to your deposits and withdrawals.
Check the following table to see what kinds of costs you may be up against:
| Type of Fee | What You Can Expect to Pay |
| Trading fees | Variable between $0.005 and $0.02 per trade, although some sites have fixed rates |
| Deposit fees | Some card deposits might carry fees of between 1% and 3% of your payment |
| Withdrawal fees | A withdrawal charge of up to 5% might be in place at some prediction markets sites |
A closer look at prediction market trading fees
It’s fair to say that many prediction markets sites don’t make a big deal out of the fees that they enclose, and you might have to do a little detective work to find out the fee structure. So here are the key things to understand about the commission fees that you’ll be up against:
Fixed vs. variable fees
Some prediction markets sites will apply commission fees that are the same regardless of what kind of contract you trade, and it will also be the same whether you win or lose your prediction. Other brands will take a more flexible approach and apply fees that vary according to the contract type, your predictive success, and so on.
Fees for different prediction market types
You might find that certain market types tend to carry higher fees than others. For example, some sites will charge much higher fees to predict cryptocurrency price movements than for other markets, such as sports. Plus, it’s worth noting that some markets, such as geopolitics, won’t charge any fees at all — probably because the brand won’t want to be seen as profiting from the political issue.
Probability-based fees
You might also find that the riskier predictions won't carry as high a fee as those trades that are more likely to succeed. This basically means that you shouldn't get too put off making your low-probability predictions.
Maker vs. taker fees
Some big prediction market brands will operate very differently by adding 'taker' fees while offering rebates to the 'makers' who provide liquidity for the trade.
A walkthrough guide of how prediction markets sites work
So let’s put all of this together and walk you through how you can sign up to a prediction markets site, make your deposits, execute your trades, pay your commission fees, and then make a withdrawal of whatever you’ve won.
This is just a rough example, but it should be broadly applicable to most prediction markets sites. Here’s what might go down:
- 1
First of all, you’d click on any of the links to the approved prediction markets brands in the banners of this page to launch their site from the browser of your computer or mobile
- 2
Next, you would register your account, which is usually a pretty simple process involving adding a few basic personal details such as your email and date of birth into the registration form
- 3
From here, you should be able to log into your newly created account and then verify your identity by submitting some government-issued photo ID such as your passport or driver’s license
- 4
Now you should be ready to make a deposit. Expect to be able to do this via various payment methods, including cards, bank transfers, e-wallets, and even cryptocurrencies. Just note that certain prediction markets brands will charge a small fee for deposits made with certain payment methods, so be sure to check the small print.
- 5
Once the funds have landed in your account, you should be good to go to the prediction markets lobby and start browsing all of those event contracts.
- 6
After finding an event contract that matches the prediction you want to make, you can tap on the tab for that event contract and select how many contracts you wish to purchase
- 7
Now you can buy the contract and then sit back and wait until the event has settled, or aim to try and sell your contract early before the event has concluded. Note that the value of your event contracts will change in real-time to reflect market conditions.
- 8
Once you have done this, you should note that any commission fees will have been taken out of any profits that you’ve made. Note that if your prediction is wrong, you won’t be hit with any charges on your failed trades.
- 9
If you have managed to make some profits from your trading, you should be ready to make a withdrawal of your winnings. Just double-check the terms of the prediction markets site in question, as there might be withdrawal fees and a minimum withdrawal threshold.
Pros and cons of using prediction markets sites
While the costs of event trading might prove off-putting for some, they haven’t been enough to stop prediction markets from becoming a massive trend in the U.S. over the past few years. So here’s a quick look at the main pros and cons of using prediction markets:
- Available all over the U.S.
- Massive range of ways to trade
- Simple trading mechanic
- User-friendly sites and apps
- Potential to lose your money
Final thoughts: Nothing to worry about with the costs of event trading
We’ve shown you how the fee structures of prediction markets sites are usually clearly displayed so that you know what you are up against, and the actual charges shouldn’t be too severe either. Plus, it’s actually pretty easy to understand how the prices for the event contracts are calculated, and you shouldn’t have too much of a problem in figuring out your potential payouts.
Just note that such clarity and ease of use shouldn’t lull you into a false sense of security; you should always be on your guard to trade responsibly. But as long as you remember that, you should be good to tap on any of the links for our featured prediction markets sites to register your account and execute your trades.
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Event trading costs FAQ
Most prediction markets sites will usually have a tab called something like Fee Structure or Fee Schedule in their site footers. This should clearly indicate exactly what kinds of costs you might be up against, from executing your trades to making deposits and withdrawals.
You will find that any commission fees are automatically included in the cost of every trade you make. This should always be clearly indicated before you execute the trade so that you know exactly which fees are involved.
Yes, the costs of using all the prediction market sites featured in the banners on this page are in line with the competition. After all, they have been checked by the Commodity Futures Trading Commission (CFTC) to ensure they are transparent and fair.
We have found that market-leading brands like Kalshi and Polymarket tend to have among the lowest event trading fees. Just note that costs tend to vary depending on what you are trading, so be sure to read through the fee structure first.
This can only really be done by trading those event contracts for prediction markets that don’t carry any fees. These tend to be geopolitical events, such as topics related to the U.S. vs. Iran war, although you’ll need to check the terms of the prediction market site you are using.
