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Prediction markets let you buy a contract on a yes-or-no question, such as “Will it rain in New York tomorrow?”, at a price between 1¢ and 99¢. If the answer is yes, the contract pays $1; if not, it pays nothing. Kalshi and Polymarket are the two biggest names.
Quick answer: the price of a contract is the market’s estimate of the chance in percent, so a 62¢ Yes means roughly a 62% chance. You profit when you buy below the true chance, after fees. Kalshi is a US exchange regulated by the Commodity Futures Trading Commission (CFTC); Polymarket began as a crypto exchange and now also runs a regulated US app. Their legal status is still being fought over in US courts, and both are restricted in many countries, so check your local laws first.
Last checked: 28 October 2026, when we worked out the fee and break-even figures ourselves from Kalshi’s published fee formula and checked each legal fact against at least two independent sources. This page explains how the markets work; it isn’t financial advice.
What are prediction markets?
A prediction market is an exchange where people trade contracts on future events: elections, economic numbers, the weather, awards and, more and more, sport. Each contract asks one question with a yes or no answer. The CFTC describes them as event contracts: a contract that costs 70¢ implies a 70% chance, and it pays $1 if the event happens.
The big difference from a bookmaker is who you trade with. A sportsbook sets its own odds and takes the other side of your bet. On a prediction market you buy from, and sell to, other traders; the exchange matches the orders and takes a fee rather than a position.
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How do prediction markets work?
Take a market asking “Will it rain in New York tomorrow?” with Yes trading at 62¢. Here is what 100 Yes contracts look like on Kalshi, using its standard taker fee (our own sums):
| Step | Amount |
|---|---|
| Cost of 100 Yes contracts at 62¢ | $62.00 |
| Trading fee (0.07 × 100 × 0.62 × 0.38, rounded up) | $1.65 |
| Total paid | $63.65 |
| If it rains: payout | $100.00 (profit $36.35) |
| If it doesn’t rain | $0 (loss $63.65) |
| Chance of rain you need just to break even | 63.65% |
You don’t have to hold a contract until the result. If the price rises to 80¢ the next morning, you can sell to another trader and take the gain early. Prices move all the time as news arrives, which is why a market’s price is often quoted as the crowd’s forecast.
Prices as odds
If you are used to betting odds, a contract price converts like this (before fees):
| Contract price | Implied chance | Decimal odds | American odds |
|---|---|---|---|
| 10¢ | 10% | 10.00 | +900 |
| 25¢ | 25% | 4.00 | +300 |
| 40¢ | 40% | 2.50 | +150 |
| 50¢ | 50% | 2.00 | +100 |
| 62¢ | 62% | 1.61 | -163 |
| 75¢ | 75% | 1.33 | -300 |
| 90¢ | 90% | 1.11 | -900 |
Our odds calculator converts any other price.
How does Kalshi work?
Kalshi is registered with the CFTC as a designated contract market, the same kind of exchange that lists futures. You pick a market and buy Yes or No contracts. Kalshi charges a fee when your order trades; it doesn’t take the other side of your trade.
Kalshi’s election markets came after a court fight. In September 2024 a federal judge in Washington DC ruled that the CFTC had exceeded its authority in blocking Kalshi’s election contracts, and in October 2024 the appeals court refused the CFTC’s request to pause that ruling, so the contracts went live.
How does Polymarket work?
Polymarket started as a crypto prediction market outside the US system. In 2022 the CFTC fined it $1.4 million for offering event contracts without registering and ordered it to stop serving US users. In July 2025 it bought QCX, a CFTC-licensed exchange, for $112 million, received no-action relief from the CFTC in September 2025, and relaunched in the US in December 2025.
That leaves two Polymarkets: the regulated US app and the original international exchange, which still doesn’t accept new trades from US users. The contracts work the same way: Yes and No shares priced from 1¢ to 99¢ that pay $1 if they win.
Kalshi vs Polymarket
| Kalshi | Polymarket | |
|---|---|---|
| Regulator | CFTC (designated contract market) | US app: CFTC, through its QCX exchange. International exchange: not CFTC regulated |
| US users | Yes, but some states are fighting its sports contracts in court | US app since December 2025; the international exchange is closed to new US trades |
| Contract | 1¢ to 99¢, pays $1 | 1¢ to 99¢, pays $1 |
| Fees | Taker fee of 0.07 × contracts × price × (1 − price), rounded up to the next cent; lower maker fees on some markets | Taker fees that vary by market category; makers pay no fee. The rates changed in 2026, so check its fee page |
| History | Election contracts since October 2024 after a court win | Fined by the CFTC in 2022; back in the US after buying QCX |
Fees: what you pay, in our sums
Kalshi publishes its taker fee as a formula: 0.07 × number of contracts × price × (1 − price), rounded up to the next cent. Because of the price × (1 − price) part, the fee in dollars is largest at 50¢, but as a share of what you spend it is largest on cheap long shots. We worked it out for 100 contracts at each price:
| Price | Cost of 100 contracts | Fee | Fee as % of stake | Chance you need to break even |
|---|---|---|---|---|
| 10¢ | $10 | $0.63 | 6.30% | 10.63% |
| 25¢ | $25 | $1.32 | 5.28% | 26.32% |
| 40¢ | $40 | $1.68 | 4.20% | 41.68% |
| 50¢ | $50 | $1.75 | 3.50% | 51.75% |
| 60¢ | $60 | $1.68 | 2.80% | 61.68% |
| 75¢ | $75 | $1.32 | 1.76% | 76.32% |
| 90¢ | $90 | $0.63 | 0.70% | 90.63% |
Two things stand out. First, rounding hurts small trades: a single contract at 50¢ pays a 2¢ fee, which is 4% of the stake rather than 3.5%. Second, compare a coin-flip bet at a sportsbook: at the standard -110 price you need to win 52.38% of the time to break even, against 51.75% for 100 Kalshi contracts at 50¢. On that example the exchange is slightly cheaper, but it isn’t free.
There is a second, hidden cost: the gap between Yes and No. If Yes costs 52¢ and No costs 50¢, the two add up to 102¢ for a $1 payout, the same overround a bookmaker builds into its odds. Strip it out and the fair chance of Yes is 52 ÷ 102 = 51.0%. Our no vig calculator does this for any pair of prices, and the Kelly criterion calculator shows how much to stake if you think a price is wrong.
Are prediction markets legal?
In the US, the federal answer and the state answer don’t match yet. Kalshi says its contracts are federally regulated derivatives that only the CFTC can police. Several states say sports contracts are sports betting under another name and need a state licence. The appeals courts have split:
- April 2026: the Third Circuit ruled 2-1, at the preliminary stage, that New Jersey couldn’t enforce its gambling law against Kalshi.
- August 2026: the Ninth Circuit ruled that Nevada’s gambling laws apply.
- 25 September 2026: the Sixth Circuit ruled unanimously that Ohio and Tennessee can apply their gambling laws, finding that sports contracts are not swaps.
Because the appeals courts disagree, the question may end up at the US Supreme Court. Until then, what is allowed can change state by state and month by month.
Outside the US, many countries treat event contracts as gambling or as financial products that need a local licence, and prediction platforms limit which countries they accept. Only use a platform that accepts customers where you live, and never use a VPN to get round a block: it breaks the platform’s terms, and you could lose your balance. Check your local laws first.
Prediction markets vs sports betting
| Prediction market | Sportsbook | |
|---|---|---|
| Who sets the price | Other traders | The bookmaker |
| Who you trade against | Other traders | The bookmaker |
| How the house earns | A trading fee | The margin built into the odds |
| Cash out early | Sell your contracts at the market price | Only if the bookmaker offers cash out |
| Markets | Politics, economics, weather, culture and sport | Mostly sport, with some specials |
Bookmakers also price many of the same events, from elections to the Oscars; our guide to novelty betting covers those markets and how they settle.
The risks
- You can lose everything you put in. A contract that loses is worth zero.
- Thin markets. In a small market there may be no one to sell to at a fair price, and a few large orders can move the price.
- Fake platforms. The CFTC warns about unregistered offshore sites and fake apps that pose as prediction markets. Check that a US platform is registered with the CFTC before you send money.
- Rules can change. Court rulings can pull markets from your state with little notice.
Treat money on prediction markets the way you would a bet: set a limit you can afford to lose. If it stops being fun, our responsible gambling guide lists free help.
Prediction markets FAQs
What is Kalshi?
A US prediction market exchange regulated by the CFTC. You buy Yes or No contracts on events, priced from 1¢ to 99¢, and each winning contract pays $1.
Is Kalshi or Polymarket better?
Neither is better for everyone. Kalshi has been CFTC regulated for longer and publishes a simple fee formula; Polymarket has a large international exchange and a newer US app. Use whichever is legal where you live and compare the fee on the market you want.
Is a prediction market gambling?
Legally it depends on where you are, and US courts disagree about sports contracts. In practice it carries the same risk as a bet: you can lose your whole stake.
How do you read a prediction market price?
As a percentage chance: 35¢ means the market gives the event about a 35% chance. In decimal odds that is 1 ÷ 0.35 = 2.86, before fees.
How much are Kalshi fees?
On a standard market the taker fee is 0.07 × contracts × price × (1 − price), rounded up to the next cent. That works out at $1.75 on 100 contracts at 50¢ and $0.63 on 100 contracts at 10¢ or 90¢.
Can I sell a contract before the result?
Yes, if another trader will buy it. You get the current market price, which may be more or less than you paid, and a trading fee may apply.
How we checked this
- How event contracts are priced and paid, and the risks: CFTC and Fidelity.
- Kalshi fee formula: Kalshi fee schedule and OddsShopper. Every fee, odds and break-even figure on this page is our own sum from that formula.
- Kalshi election contracts rulings: The Block (September 2024), The Block (October 2024) and Cointelegraph.
- Appeals court rulings on state gambling laws: CoinDesk and Al Jazeera.
- Polymarket’s CFTC fine, QCX purchase and US return: Yahoo Finance and Yahoo Finance. International exchange and US users: Tech Insider and StartPolymarket. Fees by category: Predictefy and StartPolymarket.
- Figures last checked: 28 October 2026.
Important: check your local laws before you trade
Prediction market and gambling laws differ from country to country and, in the US, from state to state. In some places these markets are restricted or not permitted at all. Check that the platform is legal where you live and accepts customers from your area. You must be 18 or older (or the legal age where you live, if higher). Only trade with money you can afford to lose.
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