What Are Prediction Markets?
A Beginner’s Guide (2026)
Legally available nationwide, Prediction Markets let you trade on all sorts of real-world outcomes using probability-based contracts - including sports, politics, economy, and culture.
Prediction markets let you trade on the outcome of real-world events using probability instead of traditional betting odds. Instead of placing a bet and waiting for the result, you buy and sell positions based on how likely you think something is to happen.
They look unfamiliar at first, but once you understand the basics, prediction markets can be one of the most flexible and transparent ways to speculate on sports, politics, and major events legally the United States.
This guide explains how prediction markets work, how they compare to sportsbooks and DFS, and where to start if you’ve never used one before.
How Prediction Markets Work
Have you ever wanted to bet on whether the Fed cuts rates next month, or if Taylor Swift’s next album breaks streaming records? Then you are in luck, because that’s the idea behind prediction markets - platforms that let you trade on the of outcomes of just about anything.
One of the best alternatives to legal sportsbooks, prediction markets don't just focus solely on sports. These platforms also allow bettors to make predictions about things like elections, economic trends, court decisions, weather, or pop culture moments.
Each market poses a simple yes-or-no question - like 'Will inflation rise above 4% this year?' or 'Will the Yankees make the playoffs?'
Each question becomes a market, and each possible outcome has a price between $0.00 and $1.00. That price represents the market’s estimate of how likely the outcome is to happen.
- A price of $0.70 implies a 70% chance
- A price of $0.25 implies a 25% chance
That price shifts as people buy, sell, and react to new information - just like stocks. If you think the market is wrong, you can buy shares of the outcome you believe in - or short the ones you don't.
Unlike sportsbooks, prediction markets use a peer-to-peer model. They're treated as financial instruments and regulated by the Commodity Futures Trading Commission (CFTC), making them available in every jurisdiction in the U.S.
Prediction Markets - Key Features Compared
Markets
share price
Sportsbooks
Why Use a Prediction Market Instead of a Sportsbook?
Prediction markets aren’t run by a “house” that sets the odds and takes a cut. Instead, you're trading directly with other users - and that comes with a few key advantages:
- Legal Access In Every State - The prediction markets we recommend are federally regulated, meaning you can use them even in states where sportsbooks are banned.
- Unparalleled Transparency - You can literally see how many people are backing each side, and how confident the market is.
- Lower Fees / No Juice - Prediction markets charge minimal trading fees. You're not paying vig to a book. If you win, you win the full $1 per share.
- Market-driven Pricing - Odds reflect what the public actually believes, not what the sportsbook wants you to bet.
- Trade In And Out Anytime - You’re not locked into a pick - you can sell your position as the odds change.
- Bet On More Than Sports - Politics, the economy, weather, pop culture - anything with a clear outcome is fair game.
- No Limits For Sharp Bettors - Prediction markets don’t throttle or ban winning users like many sportsbooks do.
- Taxes - Prediction market taxes don't work like sports betting taxes. There's no W-2G, no 24% withholding, just regular income tax - which in most cases should be lower.
What Can You Trade On With Prediction Markets?
Prediction Markets offer a broad spectrum of event contracts, allowing traders to engage with real-world events across various sectors. Below you will find an overview of the categories and examples of the types of markets you'll find in each.
Types of Prediction Markets
Sports prediction markets allow users to trade on outcomes of major sporting events, such as:
- Will Team X win the Super Bowl in 2026?
- Will a specific player win the MVP award in the 2026 season?
- Will the U.S. win more than 30 gold medals in the 2028 Summer Olympics?
Ari's Take: Sports prediction markets offer a fresh alternative to traditional sportsbooks. You can trade on game-day outcomes, season-long futures, or narrative-driven props - all without dealing with bookie margins or arbitrary limits. Most importantly, you’re betting against the public, not the house. That means sharper odds, more flexibility, and a chance to outsmart the crowd.
Politics Prediction markets enable users to trade on all sorts of political outcomes, offering insights into public sentiment and potential policy shifts. Examples include:
- Will the Republican Party win control of the U.S. Senate in the 2026 midterm elections?
- Will a federal government shutdown occur in 2026?
- Will the Supreme Court overturn a major decision in 2026?
Ari's Take: Prediction markets let you turn your political instincts into action. Whether you follow polls obsessively, binge campaign coverage, or just want to back your gut, political markets give you a way to stay engaged and profit off being right.
Economic indicators are pivotal for investors and policymakers. Economic prediction markets offer options such as:
- Will the Federal Reserve raise interest rates in Q4 2026?
- Will the U.S. unemployment rate exceed 5% in 2026?
- Will the Consumer Price Index (CPI) increase by more than 3% in 2026?
Ari's Take: If you’re already keeping an eye on inflation, interest rates, or jobs reports, why not put that awareness to work? Economic markets are a way to turn headlines into predictions - and predictions into profits. These are perfect for news junkies who want to make informed calls on big-picture trends.
For those interested in pop culture, prediction markets offers the chance to trade on outcomes like:
- Will a specific movie win the Academy Award for Best Picture in 2026?
- Will a particular artist win Album of the Year at the 2026 Grammy Awards?
- Will a new video game release be delayed beyond its announced date?
Ari's Take: Entertainment markets are where prediction meets pop culture. Whether you're betting on the Grammys, guessing a release date delay, or riding fan hype ahead of awards season, these contracts let you have skin in the game on the stuff you already obsess over. They’re fast-moving, fun, and often underpriced - especially when the internet’s wrong.
Prediction markets also enable trading on weather-related events, which can be crucial for various industries. Examples include:
- Will New York City experience a snowfall exceeding 10 inches in January 2026?
- Will a named hurricane make landfall in Florida during the 2026 hurricane season?
- Will the average temperature in Los Angeles exceed 100°F on July 4, 2026?
Ari's Take: Ever feel like the weather apps are always wrong? Now you can bet on it. Whether it’s a heatwave in LA or snow totals in New York, these markets are a fun way to test your local knowledge - or your flair for meteorology.
Are Prediction Markets Legal in the US?
Yes - but only under specific federal guidelines.
Prediction markets are legal when they’re regulated by the Commodity Futures Trading Commission (CFTC), the federal agency that oversees futures and derivatives markets. Unlike sportsbooks, they aren’t classified as gambling under U.S. law. They’re treated as financial event contracts.
If a platform is registered with the CFTC and follows its rules, it can legally offer markets across all US states, regardless of local sports betting laws.
However, not all prediction markets out there are legal or CFTC-regulated - and the ones that aren't can face federal enforcement.
What Makes a Prediction Market Legal?
The Commodity Futures Trading Commission (CFTC) regulates prediction markets the same way it regulates futures and derivatives markets. Platforms like Kalshi are registered as Designated Contract Markets (DCMs), the same designation used by major commodities exchanges.
To operate legally, a platform must:
- Register with the CFTC
- Submit contracts for review
- Comply with federal trading rules
Contracts that are overly speculative or deemed against the public interest can be rejected.
Why aren't Prediction Markets considered gambling?
This is one of the most common misconceptions.
Under U.S. law, “gambling” usually refers to wagering on games of chance - things like roulette, blackjack, or even sports betting, where outcomes aren’t considered tradeable financial events.
Prediction markets avoid the gambling label because:
- They structure contracts like financial derivatives
- You’re not betting against a house - you’re trading against other participants
- They’re regulated as markets, not casinos
In other words, if it looks like a trading platform, settles like a financial contract, and is regulated by a financial authority - it’s not gambling. Even if the topic is political, cultural, or even sports.
Which Prediction Markets are Legal in the US?
There are two types of prediction markets available to U.S. users: federally regulated platforms and unregulated offshore or decentralized alternatives. Regulated platforms operate under oversight from the Commodity Futures Trading Commission (CFTC), while others function outside U.S. approval.
On this site, we focus exclusively on federally regulated options to ensure stronger consumer protections, clearer rules, and full legal compliance for our readers.
Below we list every single CFTC-regulated prediction market platform operating in the US.
| Platform | Category | Website |
|---|---|---|
| Kalshi | Prediction Markets | kalshi.com |
| Polymarket | Prediction Markets | polymarket.com |
| Robinhood Prediction Markets | Prediction Markets | robinhood.com |
| Crypto.com | Prediction Markets | crypto.com |
| FanDuel Predicts | Prediction Markets | fanduel.com/predicts |
| DraftKings Predictions | Prediction Markets | predictions.draftkings.com |
| Fanatics Markets | Prediction Markets | fanaticsmarkets.com |
| Webull | Prediction Markets | webull.com |
| PredictIt | Prediction Markets | predictit.org |
| ForecastEx (IBKR) | Prediction Markets | forecasttrader.interactivebrokers.com |
| Underdog Predictions | Prediction Markets | underdogfantasy.com |
| Iowa Electronic Markets (IEM) | Prediction Markets | iemweb.biz.uiowa.edu |
| Manifold | Prediction Markets | manifold.markets |
How to Trade on Prediction Markets
Take a look at our list of legal prediction markets above and choose the one you would like to try out
Make a deposit using whichever payment method is the most convenient for you.
Remember: Some platforms charge fees for debit card deposits!
Find a market that interests you - from politics to sports to the economy and more.
Contracts are priced between $0 and $1, based on how likely the market thinks the event is.
You can buy as many shares as you want - as long as there is enough liquidity.
As news breaks or sentiment shifts, prices change.
You can sell early to lock in profit or cut losses - or hold to resolution.
Once the market settles, if you're right you get $1 per contract. If you're wrong, you get $0.
Prediction Markets vs Sportsbooks
The way I see it, sportsbooks are built to take your money. Prediction markets, on the other hand, are a playground for well-informed speculators.
Sounds harsh? Maybe. But if you’ve been around the betting world long enough, you know it’s not far off. Here’s why more and more sharp bettors (and beginners) are turning to prediction markets instead of traditional books.
The adage says "the house always wins". But what happens when there is no house?
In prediction markets, every trade is peer-to-peer. That means more transparent pricing, user-driven odds, and no arbitrary bet limits or baked in margins.
As long as there is enough liquidity in the market, you can bet as much as you want on just about anything - giving you plenty of opportunities to find value and exploit it.
There’s no hidden edge working against you. No one juicing the line for margin. In prediction markets, prices are determined by real people - not a book looking to make 7% off every wager.
Most prediction markets are federally regulated and available in states where sportsbooks still aren’t. If you're in a sportsbook blackout zone, this is your best way in - especially if you don't want to deal with redeeming virtual coins in sweepstakes sportsbooks.
No decimal conversions. No -110 guesswork. You’re trading on questions with yes/no outcomes and prices that move between $0 and $1.
A contract at 63¢? That’s a 63% implied chance. Clear, clean, and instantly understandable - even if you’ve never bet before.
Prices move as the public reacts. That means you can get in early, lock in profit mid-stream, or bail if the tides turn. You’re not locked into a line the moment you hit submit.
From elections and economic reports to climate events and pop culture, prediction markets offer dozens of topics you can’t find on sportsbooks. Even better: these markets are often less efficient - and easier to beat - than mature betting lines.
Prediction markets don’t punish winners. If you’re profitable, you’re welcome. That’s how it should be.
Trade history. Volume. Sentiment. You’ll find more transparency here than on any major sportsbook - which means better decisions and fewer blind spots.
When retail bettors pile into one side of a prediction market, prices move - and that creates real opportunity for sharp contrarians to get value at the right moment.
When You’re Better Off Using a Sportsbook
Prediction markets are super cool and offer great value, but they’re not for every kind of bettor. If you're here for the full sports betting experience, traditional sportsbooks still do it better.
Here’s what you’re getting there that you won’t find in prediction markets:
- Way more options per game
Not just “who wins,” but spreads, totals, player props, live stats, alternate lines - the whole playbook. - Parlays, teasers, same-game stacks
Love chasing the big hits? You won’t get that kind of action in binary markets. - Bonuses, promos, and boosts
Whether it’s bonus bets, odds boosts, or no sweat bets - sportsbooks constantly throw value your way (especially if you’re new). - Live betting experience
You can stream games live, track every play in a real-time stats hub, and place bets as momentum shifts - all inside the app. Prediction markets can’t touch that. - Smoother UX for sports fans
Sportsbooks are designed for sports bettors. Prediction markets are designed for traders - and yeah, it shows.
Bottom line? If you want variety, bonuses, and real-time action, stick with a sportsbook. Prediction markets are a solid option - especially if you live in a no-sportsbook state - but they’re not built for the full sports bettor lifestyle.
Prediction Markets FAQ
A prediction market lets you bet on the outcome of real-world events. For example:
“Will the unemployment rate rise next month?” or “Will the Yankees make the playoffs?”
You buy “Yes” or “No” contracts - if your prediction is right, you profit.
Kalshi offers yes-or-no contracts on real-world events. Each contract is priced between $0 and $1 based on market sentiment. If your prediction is correct, the contract resolves to $1.
You can buy, sell, or exit trades anytime before the event is settled.
Yes. PredictIt is a real-money prediction market that has operated in the U.S. since 2014 under a special arrangement with the CFTC.
While its regulatory status has been challenged in recent years, it remains operational and widely used for political forecasting.
Polymarket is a crypto-based, decentralized prediction market.
Because it’s not regulated by U.S. authorities, American users are legally barred from trading on the platform - even though it's accessible in other countries.
While American bettors can access this platform using a VPN, we recommend you stay on the safe side and use one of the great CFTC-regulated options, like Kalshi, Crypto.com, or RobinHood.
Yes. Most prediction markets offer sports-related contracts, like “Will the Chiefs win the Super Bowl?” or “Will LeBron score 30+ this weekend?”
Unlike sportsbooks, these are peer-to-peer trades with market-set prices.
Yes - when using regulated platforms.
Sites like Kalshi and Crypto.com follow rules set by the U.S. Commodity Futures Trading Commission (CFTC), which helps protect users and ensure fair play.
We do not recommend unregulated or offshore platforms.
Yes - if you make accurate predictions, you can profit. Each correct contract pays out $1, minus small platform fees. The more efficiently you spot mispriced markets, the more you can earn.
Kalshi is a federally regulated exchange (via the CFTC) with broader market categories and higher trading limits.
PredictIt operates under a no-action letter, focuses solely on politics, and enforces tighter limits on investment per contract.
Profits from prediction markets are typically taxed as 'Other Income', not gambling winnings or capital gains.
However, the IRS has not issued formal guidance specific to prediction market taxes, so this could be changing in the near future. Always consult a tax advisor.
Most platforms charge a small percentage per trade (e.g., Kalshi charges 1–2¢ per contract). There may also be fees on withdrawals or debit card deposits. Exact fees vary by platform.
Yes. Regulated prediction markets like Kalshi are available in most U.S. states, including those without legal sportsbooks. Always check the platform’s availability map to confirm access in your state.
Yes. Platforms like Kalshi offer mobile apps for iOS and Android, as well as full-featured web platforms. You can trade, track prices, and manage your portfolio from your phone.
While they may not look like traditional “live betting” menus, prediction markets are kept open right until the event is resolved. This means you can enter or exit positions while the event is unfolding - especially for long-duration contracts.
Prediction markets cover a wide range of categories:
- Politics
- Economy & Inflation
- Climate & Weather
- Sports
- Entertainment
- Financial markets
Each market is built around a single yes/no question.
Yes - regulated prediction market platforms require Know Your Customer (KYC) verification. This usually includes uploading ID and confirming your address, similar to signing up for a stock trading platform.
Decentralized platforms like Polymarket run on blockchain tech and use cryptocurrencies (e.g., USDC) for deposits. This enables open access globally - but also puts them outside U.S. regulatory compliance.
We highly recommend you stick to CFTC-regulated, cash-settled, U.S.-based platforms like Kalshi, Crypto.com, or RobinHood.
If you are looking to bet using crypto, your best option is to use Crypto.com, which allows you to use your Crypto wallets to trade on prediction markets, by instantly converting your crypto funds to USD.
Ari started his gaming career as a poker grinder, then a crypto trader, before stumbling onto prediction markets. He’s now deep into betting on everything from politics to pop culture to tech layoffs. If it has uncertainty and odds, Ari’s in.
Skeptical by nature, Ari is fully convinced that the weirdest bets often hide the sharpest edges. If you’ve ever wondered whether it’s possible to beat the market by reading the news better than everyone else - Ari’s here to show you how.
