Once you understand that a contract price is a probability, the next question is how that price actually gets set and how money moves. The answer is the same machinery that powers stock and crypto exchanges — an order book — with a settlement step bolted on the end.
The order book
For every market, the platform keeps a live list of what people want to buy and sell. On one side are bids (the highest prices buyers will pay for Yes); on the other are asks or offers (the lowest prices sellers will accept). A trade happens whenever a bid and an ask meet.
| Price (Yes) | Side | Size |
|---|---|---|
| 66¢ | Ask | 1,200 |
| 65¢ | Ask | 800 |
| — spread — | ||
| 63¢ | Bid | 1,500 |
| 62¢ | Bid | 2,100 |
Here the best you can buy Yes for right now is 65¢ (the lowest ask), and the best you can sell for is 63¢ (the highest bid). The 2¢ gap between them is the spread. The “market price” you see quoted is usually the midpoint, around 64¢.
Market orders vs. limit orders
You interact with that book in one of two ways:
- A market order fills immediately at the best available price. Fast, but you accept whatever the book is offering — and if you buy more than sits at the top price, you eat into worse prices as you go.
- A limit order lets you name your price. You might place a bid for Yes at 60¢ and wait; it only fills if a seller comes down to meet you. Patient, and often cheaper, but it may never fill.
Beginners typically start with market orders for simplicity. As trade size grows, limit orders become the tool for getting in and out without moving the price against yourself.
Spread, liquidity and slippage
Three linked ideas decide how cheap a market is to trade:
- Liquidity is how much money is resting in the order book. Deep, popular markets (a major election, a Super Bowl) have thick books; obscure markets are thin.
- Spread tends to be tight in liquid markets and wide in thin ones. A wide spread is a hidden cost — you buy high and sell low.
- Slippage is the price movement caused by your own order when it is large relative to the book. Buy a big Yes position in a thin market and your average fill price can be several cents worse than the quote.
Liquidity is why the same event can be a better trade on one platform than another. Before placing a sizeable order, glance at the book depth — and consider splitting a large trade into smaller limit orders to reduce slippage.
Makers, takers and rebates
When you post a limit order that waits in the book, you are a maker — you are adding liquidity. When you take an existing order off the book with a market order, you are a taker. Several platforms charge takers a small fee while paying makers a rebate, precisely to encourage people to fill the book. If you trade patiently with limit orders, you can sometimes be paid to provide liquidity rather than paying to remove it.
How platforms make money
Unlike a sportsbook, a prediction-market exchange does not take the other side of your trade, so it has no “vig” built into the odds. Instead it earns through fees, and the model varies:
- Some charge a small per-contract or percentage trading fee, sometimes scaled by how close the price is to 50¢ (where risk is highest).
- Some use the maker-taker split described above.
- Others fold costs into deposit or withdrawal mechanics, especially crypto-funded platforms.
Because fees are usually low and transparent, total trading costs on a liquid market are often a fraction of a sportsbook’s margin. We break down each platform’s structure in the platform reviews, and you can model any trade’s costs with the profit calculator.
What moves a price
A market price drifts as new information and new money arrive. A strong jobs report can swing an interest-rate market in seconds; an injury can move a sports market; a poll can shift an election contract. Because trading is continuous, the price is always the latest balance of opinion — which is exactly what makes prediction markets useful as forecasts and tradeable as instruments. The flip side: prices can move sharply, and a position that looked safe can reverse fast.
Resolution and settlement
Every market has a written resolution rule and a resolution source — the official data or authority used to decide the outcome. When the event concludes, the market resolves: winning contracts become worth $1 and are paid into your balance, losing contracts go to $0. Well-run platforms publish unambiguous rules up front so there is no argument about edge cases; occasionally a contested or genuinely ambiguous outcome triggers a documented dispute process. Always read the resolution criteria before trading a market — most disagreements come from traders who didn’t.
Where your money actually sits
This is the biggest practical difference between platforms:
- USD / brokerage model (e.g. Kalshi, FanDuel Predicts): you fund with a bank transfer or debit card, balances are held in dollars, and the experience feels like a trading app. Simple, no crypto required.
- On-chain model (e.g. Polymarket): you fund with the USDC stablecoin, and positions live as smart contracts on a blockchain. That means self-custody and full transparency, but a steeper learning curve around wallets.
Neither is strictly better — it is a trade-off between the convenience of dollars and the transparency of on-chain settlement. See Kalshi vs Polymarket for a direct comparison.
Frequently asked questions
What is an order book in a prediction market?
It's the live list of every outstanding buy and sell order at each price. Your trade is matched against other traders' orders peer-to-peer, rather than against a bookmaker, so the price reflects genuine supply and demand.
What's the difference between a market order and a limit order?
A market order fills immediately at the best available price — fast but you accept whatever the book offers. A limit order fills only at your chosen price or better — you control the price but it may not fill straight away.
What is the spread and why does it matter?
The spread is the gap between the best buy price and the best sell price. A narrow spread signals a liquid, efficient market and lower trading cost; a wide spread means you pay more to enter and exit, which matters most in thin markets.
How does a market settle?
At resolution the outcome is determined from an agreed source, and contracts pay out — $1 per share to the winning side, $0 to the losing side. Always read a market's exact resolution rules before trading.