Prediction Markets: Frequently Asked Questions
Answers to the most common questions about how prediction markets work, deposits, taxes, and regulation.
The Basics
Q: What exactly is a prediction market? A prediction market is an exchange where you trade contracts on whether real-world events will happen. Contracts pay $1 if the event occurs and $0 if it doesn't. The price of a contract directly represents the crowd's probability estimate — a contract at $0.70 means the market thinks there's a 70% chance of the event happening.
Q: Is this gambling? Legally and structurally, no — at least not in the US. Kalshi is regulated by the CFTC (the same body that regulates oil and corn futures) as a designated contract market. Polymarket gained CFTC approval in 2025. The contracts are classified as financial derivatives, not gambling products. That said, like any speculative activity, you can lose money — so approach it with appropriate risk management.
Q: How is this different from sports betting? Several important ways. In sports betting you're playing against the bookmaker's artificially skewed odds. In prediction markets you're trading against other market participants at market-determined prices. You can exit your position at any time before resolution. Sharp, informed traders are welcomed (not banned). And the fee is explicit and small (~1-2%) rather than hidden in manipulated odds (~5-10%).
Q: Do I need to know about crypto to use prediction markets? For Kalshi — no. It uses regular USD and works like any financial app. For Polymarket — yes, some basic crypto knowledge is needed. You'll need USDC (a dollar-pegged stablecoin) and a crypto wallet. It's not complicated, but it's an extra step compared to Kalshi.
Q: Can I really make money doing this? Yes, but it requires genuine edge — a view on probability that differs from the market's, backed by better information or analysis. Traders who approach it as skill (researching events, comparing prices, finding arbitrage) can profit consistently. Traders who approach it as a gut-feel betting activity typically lose over time, just like with any market.
Using Prediction Markets
Q: What does Prediction Markets actually do? Prediction Markets aggregates real-time probability data from both Kalshi and Polymarket into one dashboard. You can see all active markets, how probabilities have changed over time, and — most usefully — where the two platforms disagree. Those disagreements are potential arbitrage opportunities.
Q: Is Prediction Markets a trading platform? No. We don't execute trades and we don't hold your money. We're a data and analytics layer — think Bloomberg Terminal for prediction markets. When you click "Trade" on any market, you're redirected to Kalshi or Polymarket to execute the actual trade on their regulated platforms.
Q: How current is the data? We fetch data from both platforms every 2 minutes, around the clock. Our API caches are refreshed every 60 seconds. For fast-moving markets (breaking news, imminent events), always verify the live price directly on the platform before trading.
Q: What does the arbitrage highlight mean? When the same market is priced differently on Kalshi and Polymarket by more than 2 percentage points, we flag it as a potential arbitrage opportunity. This means you could theoretically buy one side on each platform and profit regardless of the outcome. Always verify the resolution criteria match before trading. See our full Arbitrage Guide for details.
Q: Why are some markets only on one platform? Each platform independently decides which markets to list. Kalshi tends to focus on US-centric events; Polymarket has broader global coverage. Many events are on both, but neither platform lists everything the other does.
Trading Mechanics
Q: What is the minimum amount I can trade? On both Kalshi and Polymarket, the minimum is effectively $1 (one contract). You can start very small while you learn the mechanics.
Q: Can I lose more than I invest? No. The maximum loss on any position is your initial investment. Unlike some leveraged financial products, prediction market contracts have a defined downside — you buy a contract for $0.65 and your worst case is losing that $0.65. There's no margin, no leverage, no possibility of owing money.
Q: Can I sell my position before the event resolves? Yes — this is one of the key advantages over traditional betting. If you buy Yes at $0.55 and the market moves to $0.72, you can sell and take your profit immediately without waiting for the event. If a position is moving against you, you can cut losses early.
Q: How long until I get my money after a market resolves? Kalshi: typically within 24 hours of resolution, transferred to your account balance. Polymarket: near-instant (smart contracts settle automatically on the blockchain). Withdrawing to your bank or exchange from either platform takes additional time depending on the method.
Q: What happens if I'm on the right side but the market resolves differently than I expected? Resolution is determined by the specific criteria written in each market's description — not by common sense or general media interpretation. This is why reading resolution criteria before trading is essential. For example, "Will the Fed cut rates in June?" might specify it resolves based on the official FOMC statement, not media reports or market expectations.
Q: What if there's a dispute about how a market resolves? Both platforms have dispute resolution processes. Kalshi has a defined resolution committee. Polymarket uses a resolution oracle system (UMA Protocol). Disputes are rare but do happen — particularly on ambiguous or unprecedented events. Stick to clearly defined markets when starting out.
Risk and Safety
Q: Are my funds safe? On Kalshi: Yes. It's CFTC-regulated with customer fund protections required by law. On Polymarket: Your USDC is held in smart contracts on the Polygon blockchain — no single party (including Polymarket) can access or freeze your funds between deposit and resolution. Both are more secure than unregulated offshore betting sites.
Q: What's the biggest risk in prediction markets? For most retail traders, it's resolution criteria risk — a market resolving differently than expected because you didn't read the exact wording. Second is illiquidity risk — being unable to exit a position at a fair price in a thinly traded market. Third is concentration risk — putting too much capital on a single event.
Q: Can prices be manipulated? Manipulation is possible in thin markets (low liquidity) — a large trader can temporarily move the price. However, well-arbitraged markets (those on both platforms with active traders) are much harder to manipulate. And unlike stocks, prediction markets resolve to $0 or $1 at a defined date — so any manipulation has to reverse at resolution. Stick to liquid markets to minimise manipulation risk.
Q: Is there a tax on prediction market winnings? In the US, prediction market winnings are generally treated as ordinary income or capital gains depending on your holding period and how you classify the activity. Tax treatment is evolving as the regulatory framework develops. Consult a tax professional familiar with derivatives for specific advice. Both Kalshi and Polymarket provide transaction history for tax reporting purposes.
Market Types
Q: What kinds of events can I trade on? The four main categories on Prediction Markets:
- Elections — National and local elections worldwide; presidential approval ratings; legislative outcomes
- Crypto — Bitcoin and Ethereum price levels; crypto regulatory decisions; project launches
- Macro — Fed interest rate decisions; inflation (CPI) readings; unemployment; GDP; central bank decisions globally
- Sports — Major sports outcomes; championships; individual performance milestones
Q: Are there markets on controversial topics? Yes. Prediction markets exist on geopolitical events, conflicts, leadership changes, and other sensitive topics. The rationale is that accurate probability information on these events has genuine societal value — for risk management, policy planning, and resource allocation. Both platforms have policies on what they will and won't list.
Q: Can I create my own market? Not on Kalshi or Polymarket's main platforms — market creation requires approval. Some platforms (like Manifold Markets, which uses play money) allow user-created markets. The regulated platforms curate their markets to ensure clear resolution criteria and sufficient liquidity.
Getting Started
Q: How much money should I start with? Start with an amount you're comfortable losing entirely. For most beginners, $100–200 split across 5–10 small positions is enough to learn the mechanics without significant financial risk. Once you've made 20–30 trades and understand how things work, you can assess whether to increase your stake.
Q: Which category should I trade first? Trade in the category where you have the most existing knowledge. If you follow Fed policy closely, start with macro markets. If you're a political junkie, start with elections. If you're a crypto trader, start there. Your existing knowledge is your edge — use it.
Q: Where should I learn more? You're already in the right place. Our full educational library:
- Complete Beginner's Guide to Prediction Markets
- How to Read Probability Charts
- Kalshi vs. Polymarket: Full Comparison
- 7 Strategies for Profitable Trading
- How to Find and Trade Arbitrage
- Understanding Market Liquidity
- Prediction Markets vs. Stocks: A Trader's Comparison
Or jump straight in: [View all live markets on Prediction Markets →]
Have a question not answered here? Email us at hello@predictionmarkets.exchange and we'll add it to this FAQ.