Over $3.3 billion (as of November 5, 2024) was wagered on the Trump-Harris matchup, making it the most active market on the platform. That price action also answers what a prediction market is in the simplest possible way. Every $0.66 YES share recorded the crowd’s 66% confidence that the event would happen, which is exactly what a prediction market price is for.
So what is a prediction market, and how does the YES/NO price translate to a probability? The mechanics behind that translation, the platforms running these markets today, and their legal status in the United States are below.
Key Takeaways
- Prediction markets are exchanges where binary contracts pay $1 if a specific future event happens and $0 if it does not, with prices acting as the market’s implied probability.
- Polymarket users wagered over $3.3 billion on the 2024 Trump-Harris race as of November 5, 2024, the platform’s most active market.
- The CFTC issued Polymarket an Amended Order of Designation as a Designated Contract Market on November 25, 2025, opening U.S. operations and intermediated trading.
- Kalshi obtained CFTC-designated-contract-market licensing in November 2020 and won a DC Circuit ruling on October 2, 2024, that allowed congressional-control contracts to trade pending appeal.
- Sports betting comprises over 90% of Kalshi’s activity, while elections, macro indicators, and weather events remain core categories across the industry.
What Is a Prediction Market?
A prediction market is an exchange where contracts pay off based on the realization of a future event, so the contract price can be interpreted as an aggregated forecast or implied probability. That definition comes from economists Justin Wolfers and Eric Zitzewitz, whose Journal of Economic Perspectives survey is a canonical academic reference for the category.
According to Stanford Law’s Legal Aggregate analysis, platforms like Kalshi and Polymarket operate differently from traditional gambling because there is no house that sets the odds and acts as the counterparty to all positions; participants instead trade directly with each other, similar to futures markets.
Two consequences flow from that design. The price aggregates information from every trader who steps in, which is why the academic literature treats prediction-market prices as forecasts. And because the venue takes a fee instead of a position, payouts depend on the event resolution rule.
How Prediction Market Prices Translate to Probabilities
On regulated prediction-market exchanges, traders buy YES or NO shares on specific outcomes; a YES share for 30 cents pays $1 if the event occurs, with the contract price reflecting the implied probability between 0 and 99 cents. That is the heart of the format, and it is also the reading skill that most newcomers miss on first contact with these platforms.
The translation works in both directions. Kalshi’s documentation gives a worked example using a government shutdown forecast: if traders assess a 30% probability of occurrence, the YES contract trades at $0.30, and a successful prediction yields $1.00 per share, while the complementary NO position would trade at $0.70, reflecting the 70% probability of no shutdown. Market prices on these exchanges continuously adjust based on new information and trading activity, effectively functioning as a real-time probability gauge for any specified event outcome.
By the numbers: According to Kalshi’s documentation, a YES share priced at 30 cents corresponds to a 30% probability the event will occur and pays $1.00 per share if it does, while the complementary NO position would trade at $0.70, reflecting the 70% probability of no shutdown.
For a deeper look at how these contracts settle on-chain, including the role of oracles and centralized order books, see the polymarket and Chainlink automated predictions integration coverage of the resolution layer.
The Major Prediction Market Platforms
The two platforms that dominate U.S. attention today are Polymarket and Kalshi, with very different origin stories. Wikipedia’s overview of the platform notes that Shayne Coplan established Polymarket in 2020 and that the platform operates as a cryptocurrency-based prediction market headquartered in New York City, using the Polygon blockchain network for transactions and accepting USDC deposits. The same overview reports that Polymarket acquired QCEX, a CFTC-licensed derivatives exchange and clearinghouse, for $112 million in mid-2025, and that the platform’s value increased substantially through 2025-2026, reaching $8–9 billion following major investments from Intercontinental Exchange and other backers.
Kalshi was established in 2018 by financial analysts Tarek Mansour and Luana Lopes Lara, obtained licensing from the Commodity Futures Trading Commission in November 2020, registered as a designated contract market, and launched publicly in July 2021. The result is the first federally regulated U.S. prediction-market exchange operating under CFTC oversight, distinguishing Kalshi from competitors operating in less regulated frameworks.
Capital flow into these venues is widening through funding rounds and liquidity partnerships, including the Kalshi funding round and global expansion.
Are Prediction Markets Legal in the United States?
The short answer is yes, with caveats specific to each platform. The longer answer is a chain of CFTC orders and one federal-court opinion that together set the current ground rules.
Polymarket’s regulatory history starts with an enforcement settlement. In a CFTC order, Blockratize, Inc. (d/b/a Polymarket.com) was found to have offered over 900 event-based binary option contract markets during the Relevant Period and was ordered to pay a civil monetary penalty in the amount of one million four hundred thousand dollars ($1,400,000), plus post-judgment interest within ten days of the date of entry of this Order. The CFTC order found that Blockratize, Inc. d/b/a Polymarket.com violated Sections 4c(b) and 5h(a)(1) of the Commodity Exchange Act and has never been registered with the CFTC in any capacity. The platform exited the U.S. market under that settlement and operated overseas for several years.
The status changed for U.S. operations. The U.S. Commodity Futures Trading Commission issued an Amended Order of Designation on November 25, 2025, permitting Polymarket to operate an intermediated trading platform subject to the full set of requirements applicable to federally regulated U.S. exchanges, with the Amended Order vacating and superseding the prior provision that had restricted futures commission merchants from intermediating transactions on QCEX contracts. With this approval, Polymarket will be able to onboard brokerages and customers directly and facilitate trading on U.S. venues, with users able to trade through FCMs and leverage traditional market infrastructure, custody, and reporting channels, while remaining subject to all provisions of the Commodity Exchange Act and applicable CFTC regulations governing Designated Contract Markets.
Kalshi’s pathway through the courts cleared a different barrier. From the U.S. Court of Appeals for the DC Circuit, KalshiEx LLC, a commodities exchange regulated by the Commodity Futures Trading Commission, sought to offer Congressional Control Contracts that would allow persons within the United States to place money on the outcome of the November 2024 congressional elections, and the Commission’s motion for a stay was argued on September 19, 2024, and decided October 2, 2024. The court denied the motion without prejudice because the Commission had failed at this time to demonstrate that it or the public would be irreparably injured absent a stay, leaving the district court’s judgment that vacated the Commission’s prohibition in effect.
Key finding: The U.S. Commodity Futures Trading Commission issued an Amended Order of Designation on November 25, 2025, permitting Polymarket to operate an intermediated trading platform subject to the full set of requirements applicable to federally regulated U.S. exchanges, with Polymarket able to onboard brokerages and customers directly and remain subject to all provisions of the Commodity Exchange Act.
For the broader regulatory picture, the SEC and CFTC crypto enforcement statistics tracker covers cumulative enforcement actions that frame how event contracts are likely to be policed.
What People Trade on Prediction Markets
The category that captured public attention is elections. On Polymarket, over $3.3 billion was wagered on the Trump-Harris matchup as of November 5, 2024, making it the most active market on the platform, with users depositing USDC and trading shares representing outcome probabilities. Polymarket operates as an event-contract market where users trade shares based on predicted outcomes of political events, military conflicts, economic indicators, weather, and awards.
Sports have taken over the volume share at the regulated DCM. At Kalshi, sports betting comprises over 90% of activity; beyond sports betting, Kalshi facilitates trading on future events other than sports, including economic indicators, cultural events, technological developments, and political outcomes. Stanford Law’s analysis observes that the markets offer contracts similar to prop bets, focused on highly specific outcomes that can be easily manipulated, including micro-decisions related to sensitive information.
The retail rails are also widening. Coinbase’s launch of Kalshi-powered event contracts inside its main app brought event-contract trading inside one of the largest U.S. crypto exchange accounts, broadening access beyond the standalone Kalshi and Polymarket apps.
How Prediction Markets Compare to Sports Betting
The mechanical and regulatory differences between a Polymarket position and a sportsbook wager are sharper than they look from the outside. Stanford Law’s analysis draws the distinction explicitly: platforms like Kalshi and Polymarket operate differently from traditional gambling because there is no house that sets the odds and acts as the counterparty to all positions; participants instead trade directly with each other, similar to futures markets.
The downstream effects of that structural difference are non-trivial. A sportsbook adjusts the line to protect house margin, blending probability with operational risk. A prediction-market price reflects the marginal trade between two participants, which is closer to a financial-market quote than a bookmaker’s line.
The Stanford Law analysis also notes that the market for prediction contracts has expanded rapidly, raising regulatory questions about disclosure obligations, insider trading concerns, and the boundary between commodity event contracts and state-regulated gambling. That boundary is the open question that state attorneys general and federal regulators are still litigating.
Risks and Limits of Prediction Markets
Three categories of risk show up across the platforms:
- Geographic and identity gating: The earlier CFTC settlement specifically faulted Blockratize, Inc. d/b/a Polymarket.com, which has never been registered with the CFTC in any capacity, for offering over 900 event-based binary option contract markets during the Relevant Period and was ordered to pay a civil monetary penalty in the amount of one million four hundred thousand dollars ($1,400,000). U.S. access has since been reopened under the November Amended Order of Designation, though state-level residency restrictions and KYC checks still apply on regulated venues.
- Resolution risk: On binary contracts, the design is that contracts settle at the full dollar value of $1 when the predicted event occurs, or at zero if it does not. Whether the event has actually occurred depends on the platform’s resolution mechanism. On centralized DCMs, that is, the exchange itself acting under CFTC self-regulatory obligations; on decentralized platforms, it is an oracle or designated authority. Either layer can be wrong.
- Liquidity and manipulation: Stanford Law’s analysis flags that the markets offer contracts similar to prop bets, focused on highly specific outcomes that can be easily manipulated, including micro-decisions related to sensitive information, raising regulatory questions about disclosure obligations and insider trading concerns. In thin long-tail markets, a small number of trades can move the implied probability sharply, which is the same liquidity dynamic that affects any financial market with limited depth.
None of this is investment advice. CoinLaw’s coverage across more than 2,400 articles shows institutional adoption typically follows regulatory clarity, and the November Amended Order is the first time both legs aligned for U.S. event contracts.
Readers tracking adjacent risks across the broader crypto stack can review the cryptocurrency security and fraud statistics tracker, which covers the platform-side losses that any custody-bearing event-contract venue inherits.
Frequently Asked Questions (FAQs)
Yes, on registered venues. Kalshi obtained CFTC-designated contract market licensing in November 2020. The DC Circuit denied the CFTC stay request on October 2, 2024, allowing Kalshi’s congressional-control contracts to trade. The CFTC issued an Amended Order of Designation on November 25, 2025, permitting Polymarket to operate an intermediated trading platform in the United States.
The defining feature of what is a prediction market is that the share price equals the implied probability. A trader could buy a YES share for 30 cents and get paid out $1 if the event occurs, with the contract trading at $0.30 reflecting a 30% probability. Contracts settle at full dollar value of $1 when the predicted event occurs, or at zero if it does not, with the complementary NO position trading at $0.70, reflecting the 70% probability of no shutdown.
Polymarket and Kalshi run the largest U.S.-relevant venues. Shayne Coplan established Polymarket in 2020, and the platform acquired QCEX, a CFTC-licensed derivatives exchange and clearinghouse, for $112 million in mid-2025. Kalshi was established in 2018 by financial analysts Tarek Mansour and Luana Lopes Lara, and in November 2020, the platform obtained licensing from the Commodity Futures Trading Commission as a designated contract market.
Polymarket operates as an event-contract market where users trade shares based on predicted outcomes of political events, military conflicts, economic indicators, weather, and awards. At Kalshi, sports betting comprises over 90% of activity, while the platform also facilitates trading on economic indicators, cultural events, technological developments, and political outcomes.
Platforms like Kalshi and Polymarket operate differently from traditional gambling because there is no house that sets the odds and acts as the counterparty to all positions; participants instead trade directly with each other, similar to futures markets. That structural difference is what underpins the CFTC commodity-event-contract framework rather than a state gaming framework.
Conclusion
A prediction market is, at its core, an exchange where every traded price does two jobs at once: a dollar cost on a contract and a probability reading on the underlying event. Over $3.3 billion was wagered on the Trump-Harris matchup on Polymarket as of November 5, 2024, making it the most active market on the platform at that time.
The U.S. legal status of these venues moved meaningfully recently. Polymarket received an Amended Order of Designation as a Designated Contract Market on November 25, 2025, permitting it to operate an intermediated trading platform subject to the full set of requirements applicable to federally regulated U.S. exchanges. The categories on offer have widened in step: elections, macro indicators, sports, weather, awards, and a long tail of specific event contracts.
The open questions are about boundaries. State-level gambling regimes, insider-trading rules, and the perimeter between hedging instruments and prohibited election or sports gambling are still being litigated. The platforms are usable today on regulated venues, the prices are interpretable as probabilities once the YES/NO mechanic clicks, and the next chapter is being written one CFTC order and one appellate opinion at a time.
