Prediction markets borrow vocabulary from derivatives trading, sports betting and crypto at once, which means the same idea often has three names depending on who is talking. This is every term worth knowing, defined plainly.
Terms are grouped by what you need them for rather than alphabetically, because that is how you actually encounter them.
The instrument
Event contract. The thing you buy. A contract that pays $1 if a specified event happens and $0 if it does not. The legal term for what Kalshi, Polymarket and Novig list, and the basis on which they are regulated as derivatives rather than gambling.
YES / NO. The two sides of a binary contract. Buying NO at 70¢ is the same position as selling YES at 30¢.
Settlement. The moment a contract resolves and pays out. Every contract settles at either $1 or $0.
Resolution criteria. The rulebook: who decides the outcome, using what source, by what deadline, and what happens in edge cases. The single most-skipped and most-expensive thing to skip — our guide to resolution covers why.
Notional value. The $1 a contract is worth at settlement. Volume figures are usually quoted in notional terms.
Prices and probability
Cents (¢). How prediction markets quote. A contract at 52¢ costs 52 cents and implies a 52% chance.
Implied probability. What a price says about the chance of an event. On a prediction market it is simply the price, because contracts settle at $1 — no conversion needed, unlike American or decimal odds. Our odds converter handles the other formats.
American odds. The sportsbook convention: −110 means stake 110 to win 100; +150 means win 150 on a stake of 100. Favourites negative, underdogs positive.
Decimal odds. Total return per unit staked, including the stake. 1.91 means $1 returns $1.91.
Costs
Spread. The gap between the best bid and the best ask. What it costs to enter and exit immediately, and usually the largest cost on any thin market.
Vig (juice, hold). The margin built into quoted prices. If both sides sum to more than 100%, the excess is the overround and the vig is that excess as a share of the total. Under 1% on a liquid prediction market against 4–5% on a sportsbook line — see our vig guide and calculator.
Overround. How far past 100% a book's implied probabilities add up, in percentage points.
No-vig fair value. Prices with the margin stripped out, scaled to sum to 100%. The market's actual opinion.
Taker fee. Charged for crossing the spread to fill immediately. Polymarket takes 0.75–1.80% by category.
Maker rebate. Paid for posting liquidity rather than taking it. Polymarket rebates 20–50% on some markets.
Kalshi's fee formula. 0.07 × contracts × price × (1 − price), rounded up to the cent. Peaks on a 50¢ contract and shrinks toward either extreme. Our fee calculator runs it.
The order book
Bid. The highest price someone will pay. Where you sell.
Ask (offer). The lowest price someone will sell at. Where you buy.
Order book. The full queue of resting orders at each price.
Depth. How much size sits behind the best quote. Deep books absorb large orders without moving; thin ones do not.
Liquidity. How easily you can trade at the quoted price. Covered in full in our liquidity guide.
Market order. Fills immediately at whatever is available. You pay the spread.
Limit order. Your own price, resting until filled or cancelled. Avoids the spread; may never fill.
Maker / taker. A maker posts an order and waits; a taker crosses the spread to fill now. Makers are usually cheaper.
Open interest. Contracts currently outstanding. A measure of how much is actually at stake, as opposed to volume, which counts turnover.
Strategy
Expected value (EV). Your probability minus the price. A 52¢ contract you rate at 60% carries 8¢ of edge per contract — see our EV guide.
Edge. The gap between your estimate and the market's. Real edges are rarer than people think, because prediction markets are well calibrated.
Arbitrage. Buying YES on one venue and NO on another for under $1 combined, locking the difference regardless of outcome. Our live scanner tracks these across Polymarket and Kalshi.
Brier score. A measure of forecast accuracy, where lower is better. Polymarket's markets have posted scores around 0.09, roughly 94% accuracy — the bar any personal edge has to clear.
Favourite-longshot bias. The systematic overpricing of long shots and underpricing of favourites, observed across nearly every prediction and betting market. Why 3¢ contracts are usually worse value than they look.
Calibration. Whether things you call 70% happen about 70% of the time. The only honest test of whether you have an edge.
Parlay. Multiple contracts combined so all must land. The payout multiple is one divided by the product of the probabilities — our parlay calculator shows why the multiple looks better than it is.
Venues and regulation
DCM (Designated Contract Market). A federal exchange licence from the CFTC — the same category CME and ICE hold. Kalshi holds one; Novig holds one through its Ludlow Exchange entity.
CFTC. The Commodity Futures Trading Commission, the US regulator for derivatives and the body that licenses these exchanges.
Oracle. The mechanism a decentralised venue uses to resolve markets. Outcomes are proposed and can be disputed by posting a bond.
USDC. The dollar-pegged stablecoin Polymarket settles in, on the Polygon network.
Federal pre-emption. The argument that a CFTC exchange licence overrides state gaming law — the central question in the fight over whether these are gambling.
1099-MISC. The tax form Kalshi issues on winnings. Polymarket issues nothing, which does not remove the obligation — see our tax guide.
Market types
Binary market. One question, two outcomes. YES or NO.
Multi-outcome market. Several mutually exclusive outcomes, like a nomination field. Prices should sum to roughly 100%.
Futures / outright. A season-long market resolving at the end — championship winners, award races. Long-dated, which matters because capital is tied up until resolution.
Scalar market. Resolves across a range rather than yes/no, such as a price band or a count.
New to the category? Start with how prediction markets work, or go straight to a first trade walkthrough. To see the vocabulary in action, our odds comparison shows live bids, asks and spreads across two venues at once.
Frequently Asked Questions
What does a contract price in cents mean?
It is the implied probability. A contract at 52¢ costs 52 cents, implies a 52% chance, and pays $1 if the event happens.
What is the difference between vig and spread?
The spread is the gap between bid and ask on one market. Vig is the margin implied when both sides of a market sum to more than 100%. They overlap in practice — a wide spread produces a high measured vig.
What is open interest versus volume?
Volume counts contracts traded over a period; open interest counts contracts currently outstanding. High volume with low open interest means a lot of turnover rather than a lot at stake.
What does maker and taker mean?
A maker posts a resting order and waits to be filled; a taker crosses the spread to fill immediately. Makers usually pay less and may earn rebates.
What is a Brier score?
A measure of forecasting accuracy where lower is better. Polymarket's markets have posted around 0.09, roughly 94% accuracy.
What is favourite-longshot bias?
The tendency for long shots to be overpriced and favourites underpriced across betting and prediction markets. It is why cheap contracts often represent worse value than their price suggests.
