Table of Contents Expand Table of Contents How Prediction Markets Work What You Can Bet On Today Regulation Risks and Rewards Bottom Line The Investment That Lets You Bet on Movies, Sports, and Elections—Here's How It Works By Adam Hayes Full Bio Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the University of Lucerne in Switzerland.Adam's new book, "Irrational Together: The Social Forces That Invisibly Shape Our Economic Behavior" (University of Chicago Press) is a must-read at the intersection of behavioral economics and sociology that reshapes how we think about the social underpinnings of our financial choices. Learn about our editorial policies Published August 01, 2025 Fact checked by Vikki Velasquez Fact checked by Vikki Velasquez Full Bio Vikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. She has conducted in-depth research on social and economic issues and has also revised and edited educational materials for the Greater Richmond area. Learn about our editorial policies Though officially unavailable to U.S. users, Polymarket has become a major prediction market platform to trade on the outcomes of real-world events, including political elections. See More Bloomberg / Getty Images Close Imagine if the headlines in your news feed also came with a live price tag—one that ticks up when new polls favor a candidate or down if a star quarterback tweaks an ankle. That’s the premise of prediction markets, exchanges where you can trade “Yes/No” outcome contracts on a range of future events. These markets span from betting-style platforms to federally-regulated event contracts that trade like traditional investment options. Key Takeaways Prediction markets allow bets on events, including political elections and sports matches. Contracts trade from $0–$1, where the price reflects the market's implied probability of success. U.S. regulation treats some event contracts as commodities overseen by the U.S. Commodity Futures Trading Commission (CFTC), but others as gambling overseen by state authorities. How Prediction Markets Work In a prediction market, every contract lists a verifiable question—e.g., "Will Movie X open this weekend with a gross above $100 million?"—along with a settlement date and a public data source for verification. The wagers are offered like stocks that can only be worth $1 or $0. Traders buy "Yes" or "No" shares, and both sides always add up to $1. So if a "Yes" share costs $0.63, that means the crowd thinks there's a 63% chance the movie will hit that target (with "No" shares costing the remaining $0.37). When the weekend box office numbers come out, the contract settles—"Yes" shares become worth $1 if the movie succeeds, or $0 if it doesn't. Kalshi's wagers range in topic from sports to the most serious political matters, including the two above, available on June 11, 2025. Kalshi Just like stocks, you don't have to hold event contracts until the end. You can sell your position early if the price moves in your favor, keep it until the end, or even bet the other way to protect yourself from losses. The markets stay active because other traders are constantly buying and selling, as well as professional traders who try to profit through arbitrage when they spot price differences among different prediction platforms, such as Kalshi, PredictIt, or Polymarket. The result is a live odds board that updates far faster than most polling averages or expert predictions. What You Can Bet On Today Politics and elections: Platforms list questions such as who will win a specific election, the vote share of a political party, the timing of concession speeches, and the passage of particular bills. Sports: While traditional sportsbooks price point spreads, prediction exchanges greatly expand the scope of available sports bets. Entertainment: Box-office openings and the probability of Grammy wins. Technology and AI: Will ChatGPT reach one billion monthly users? When will the next major AI breakthrough happen? Which tech company will be the first to hit a $5 trillion market cap? Economics and finance: The monthly consumer price index or quarterly gross domestic product numbers, as well as the next fed funds rate decision, are among the markets offered. Tip The earliest online prediction market was the Iowa Electronic Markets, launched in 1988 as an experiment in market-based forecasting by the University of Iowa's Tippie School of Business. Regulation Risks and Rewards In the U.S., prediction markets straddle two regimes: commodity derivatives overseen by the CFTC and gambling products policed by state gaming regulators. KalshiEX LLC holds a designated contract market license, in line with its claim that event contracts are economically “hedgeable” just like corn futures. Initially, the CFTC fought to prevent Kalshi from offering contracts on political events, but the winds shifted with the second Trump administration. In January 2025, Kalshi announced that Donald Trump Jr., the eldest son of President Donald Trump, had joined the company as a strategic advisor, and five months later, the administration voluntarily dismissed an appeal to end its two-year challenge to political prediction markets. This made Kalshi the first federally regulated platform where Americans can legally trade on election outcomes. Winning that fight emboldened Kalshi to push into sports and entertainment markets. But this triggered new court battles: seven states, including Nevada, New Jersey, Arizona, and Maryland, issued cease-and-desist orders, claiming Kalshi's sports contracts violate state gambling laws. Kalshi then filed lawsuits in federal courts challenging these state actions, arguing that federal regulation preempts state law when it comes to CFTC-regulated derivatives. Tip In 2025, X and Polymarket launched "X Predictions," which feeds live social media data directly into betting markets. The partnership tracks how much people are posting about events, analyzes whether the sentiment is positive or negative, and uses X's Grok AI to summarize the buzz, all of which appears instantly on traders' screens. Bottom Line Prediction markets turn headlines into tickers; a hunch into a tradable asset. For investors comfortable with the risk, event contracts can add some spice, a novel hedge, or simply a reason to follow the weekend box office or ballots more closely. But the asset class is still maturing—legally, technically, and culturally—so size bets modestly, stay on top of the rulebook, and treat the exercise more like a probability-weighted wager on how this market will unfold. If you or someone you know has a gambling disorder, please call the National Problem Gambling Helpline at 1-800-GAMBLER (1-800-426-2537) or visit ncpgambling.org/chat to chat with a helpline specialist. Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Nasdaq. "Regulatory Roundup: From Elections to Sports—The Dynamics of Decentralized Prediction Markets." Polymarket. "What is Polymarket?" ESPN. "How Kalshi and Prediction Markets Are Disrupting Sports Betting." Iowa Electronic Markets. "What Is the IEM?" Bookies. "Your Guide To Legal Prediction Markets: The Future Of Gaming Or A Regulatory Minefield?" Brownstein. "Kalshi v. CFTC Challenges Contracts on Political Events." Kalshi. "Kalshi Names Donald Trump Jr. as Strategic Advisor." Justia. "KalshiEX LLC v. CFTC, No. 24-5205." Reuters. "CFTC Moves to Drop Appeal in Kalshi's Event Contracts Case." SBC News. "X Signs Polymarket Data Deal Weeks After Kalshi Backtracking." Take the Next Step to Invest Advertiser Disclosure × The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Read more Investing Markets Partner Links Take the Next Step to Invest Advertiser Disclosure × The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.