How Does Polymarket Work? Markets, Funding And Settlement
How does Polymarket work? At the surface, simply: it is a prediction market, an exchange where you buy and sell Yes/No contracts on real-world events. Each contract trades somewhere between 1 cent and 99 cents, settles at $1 if the event happens and $0 if it does not, and the live price is the crowd's working probability. A contract at 62 cents is the market saying roughly a 62% chance. But one level down, "Polymarket" is not one thing. It is one brand running two mechanically different venues, and almost everything that confuses people about the platform, from how deposits work to who is allowed to trade, resolves the moment you know which venue you are actually looking at. That split is the story of this page, and by the end of it you will also know the one question that separates the two venues more than any other: when a market's outcome is contested, who decides?
The Quick Answer
Polymarket is an exchange for event contracts: Yes/No shares on real outcomes that trade between 1 and 99 cents and settle at $1 or $0, so the price is the market's live probability. There are two distinct venues behind the brand: the original international exchange, which runs on cryptocurrency, and Polymarket US, a CFTC-regulated exchange that trades in dollars through the Polymarket App. How each venue holds your money, how a disputed market gets decided, and what any of it costs — the full mechanics are below.
One Brand, Two Different Machines
Start with the structure, because it explains everything after it.
The original Polymarket exchange is the international, crypto-native platform at polymarket.com. It built its reputation on huge election and news markets, and it settles trades in a dollar-pegged stablecoin on a blockchain. For US residents, that site is view-only: you can watch the prices, but you cannot trade there.
Polymarket US is the second machine. After years locked out of the American market under an earlier enforcement action, Polymarket came back by acquiring a CFTC-licensed exchange, and US trading now runs through that regulated entity and its clearing organization. Access is through the Polymarket App, which launched iOS-first, so check availability for your device; deposits are in actual dollars, and signing up means full identity verification, the same kind a brokerage requires. Mechanically, Polymarket US looks much more like Kalshi than like its own international sibling.
Both venues quote the same kind of instrument. If you have read our explainer on how prediction markets work, the trading experience will feel identical. The differences live underneath the price: where the money sits, and who rules on the outcome. Hold that thought, because we are coming back to it.
How Polymarket Markets Are Structured
Every market on Polymarket is a question with three parts written into its rules: the exact thing being measured, a resolution source, and a deadline. "Will X happen by this date, according to this source." Vague questions make bad contracts, so the rules text is the contract; reading it is not optional.
Each question trades as a pair of shares:
| Yes share | No share | |
|---|---|---|
| What It Pays If The Event Happens | $1.00 | $0.00 |
| What It Pays If It Does Not | $0.00 | $1.00 |
| Price Range While Trading | 1–99 cents | 1–99 cents |
The fact that makes the whole table work is not printed in it: the Yes price and the No price add up to $1.00 at any matched price, because they are two sides of the same coin. Buying No at 38 cents is the same economic position as selling Yes at 62. There is no bookmaker setting these numbers. Prices come from an order book, other traders posting bids and offers, and the exchange simply matches them. And the markets Polymarket is famous for, the marquee election and news questions, are not single markets at all: a "who wins the election" event is a bundle of these binary markets, one Yes/No pair per candidate, and the Yes prices across the whole field sum to about a dollar for the same reason one pair does. That is why an election page on Polymarket reads like a probability distribution over the field rather than a list of odds.
Two consequences fall out of that structure. First, you are never betting against the house; someone who disagrees with you is on the other side. Second, you can exit early. A contract is a thing you own, and any time the market is open you can sell it at the current price instead of waiting for settlement. If cents-to-probability conversion is new to you, our guide to reading exchange prices as odds covers the arithmetic; it works the same on every event-contract venue.
A Worked Example: One Contract, Start To Finish
Numbers make the structure concrete. Say a market asks whether a bill passes by the end of the year, and Yes trades at 62 cents.
- You buy 100 Yes shares at 62 cents: $62 committed, and that $62 is your maximum possible loss.
- If the bill passes, the market settles Yes. Your 100 shares redeem at $1 each: $100 back, $38 profit.
- If it fails, the shares expire at $0 and the $62 is gone.
- Now the middle path: three weeks later the bill clears a key committee and Yes reprices to 75 cents. You can sell all 100 shares for $75, book $13, and never find out how the story ends.
That third path is the piece sportsbook bettors are not used to. The price moves continuously as information arrives, and your real decision is not just "which side" but "at what price in, and at what price out." The 62-cent entry was a claim that the true chance was better than 62%; the 75-cent exit was someone else paying you for the remaining uncertainty.
How Funding Works, And Where Your Money Actually Sits
Here is where the two machines split for real, and it is the least understood part of how Polymarket works.
On the international exchange, your balance is not dollars. Deposits are converted into USDC, a stablecoin designed to hold a $1 value, and positions settle on a blockchain. Custody is crypto custody: your funds live in a wallet, transfers move over crypto rails, and your protections are the stablecoin's backing and the platform's own controls. None of it sits inside the US financial regulatory perimeter, which is precisely why US residents are not allowed on that venue.
On Polymarket US, the machine is a regulated derivatives market. You deposit actual dollars through approved financial intermediaries, trades clear through a CFTC-regulated clearing organization, and customer funds are handled under federal rules written for exactly this job. That is the same structural category as a US futures exchange, and it is the model Kalshi runs as well: dollars in, a federally supervised exchange and clearinghouse in the middle, a rulebook filed with a regulator.
Side by side, the split looks like this:
| International exchange | Polymarket US | |
|---|---|---|
| Money In | USDC stablecoin | US dollars |
| Where It Sits | a wallet on a blockchain | a CFTC-regulated exchange and clearinghouse |
| Who Can Trade | non-US users | US residents, after full identity checks |
| Hard Disputes Decided By | bonded token-holder vote | a rulebook filed with a federal regulator |
The practical difference is what stands behind your balance. On a CFTC-regulated venue, it is a legal framework with defined customer protections and a federal agency supervising the operator. On the crypto venue, it is a stablecoin and the platform itself. Neither arrangement removes trading risk, a wrong position loses money in both worlds, but they are different answers to "what happens if something other than my trade goes wrong."
How Markets Settle, And Who Decides A Dispute
Settlement is the callback to the two machines, and it is the sharpest mechanical difference between them.
Most markets resolve without drama: the deadline passes, the named source says what happened, holders of the winning side redeem at $1. The interesting case is the contested one, an ambiguous headline, a source that moved, two readings of the rules text. Who rules?
The international exchange uses a decentralized oracle system. An outcome is proposed and backed with a financial bond; anyone who disagrees can post a bond and dispute it; a contested outcome goes to a vote of the oracle's token holders. It is settlement by economically incentivized crowd, and while it works far more often than not, its most controversial calls have come exactly here, when a market's wording collided with a messy reality and a token vote picked the reading.
A CFTC-regulated exchange resolves the same situation through its rulebook. The settlement source and procedure are filed with the regulator in advance, the exchange applies them, and disputes run through a defined process under federal oversight, with a regulated clearinghouse standing behind the payout. No token vote, and a regulator above the referee.
Neither system is magic. Both ultimately depend on the quality of the market's wording, which is why the single best habit on any prediction market is reading the resolution rules before the price.
The difference in one line: on the international exchange, the hard settlement call goes to a bonded token-holder vote; on Polymarket US, it goes to a rulebook filed with a federal regulator. For a trader, that answer is worth more than any interface feature.
What Trading On Polymarket Costs
Prediction markets earn differently than sportsbooks. A book builds its margin into the line; an exchange charges you at the edges. On Polymarket the visible cost has historically been low, with no separate commission on most markets, but low fee lines make the invisible cost matter more: the spread. If Yes is bid at 60 and offered at 64, crossing that gap instantly costs you 4 cents per share, and in a thin market the gap can be wide enough to swallow whatever edge you thought you had. Patient orders that rest in the book pay less than impatient ones that cross it; that is true on every exchange, and it is half the craft.
Fee schedules change and can differ between the international venue and Polymarket US, so treat any specific number you read as stale and check the venue's current fee page before trading. For contrast, Kalshi publishes a per-trade fee formula, which we break down in how Kalshi's fees work. Different structures, same lesson: the quoted price is not the whole price.
The Risk Shape Nobody Puts In The Marketing
One more piece of honesty before the comparisons, because it applies to every event-contract venue and it is the mistake that actually costs people money.
Selling an unlikely outcome, or what is the same thing, buying its heavy favorite side, collects a small premium and risks most of a dollar. Sell a 3-cent long shot and you pocket 3 cents against a 97-cent loss if the unlikely thing lands. At that shape, one loss erases the premiums from roughly thirty or forty wins. A trader can be right twenty times straight and give it all back in an afternoon, and the arithmetic, not the hit rate, is why position sizing is the entire game.
The takeaway: a red day that wipes out a green stretch is the shape of this trade working as designed, not a malfunction. We trade these structures ourselves and publish the losses when they happen, so this is not theory to us.
Reading A Polymarket Price Like A Sharp
Everything above tells you what a price is. The habit that separates careful traders from hopeful ones is asking whether a price is any good, and the cleanest way to do that is to compare it against another market pricing the same outcome.
Sportsbook lines are the readiest comparison for sports and many news-adjacent events, but a moneyline hides the book's margin. Say DraftKings has an outcome at -150 and FanDuel has the other side at +130. Convert both: -150 implies 60.0%, and +130 implies 43.5%. They add to 103.5%, so about 3.5 points of that market is vig, not information. Strip it out and the favorite's no-vig, fair implied probability is 58%. That de-vigged number is in the same unit a Polymarket contract trades in, so if the same outcome is sitting at 55 cents on the exchange, you are looking at a 3-point gap between the exchange's read and the sportsbook market's fair read, before fees and spread. Sometimes the gap says the exchange is slow; sometimes it says the exchange knows something. Either way, you learned more from thirty seconds of comparison than from staring at one price alone.
This is the same discipline as line shopping on an odds screen, applied across market types instead of across sportsbooks, and it is the single most transferable skill between the betting world and prediction markets. One price is an opinion. Two independent prices on the same outcome are the beginning of information.
How Polymarket Compares With Kalshi
The natural next question is which venue to use, and we keep a full, honest breakdown in Kalshi vs Polymarket. The short version: Kalshi has the broader US footprint and event menu; Polymarket's identity is depth on the marquee political and cultural questions.
Disclosure, before you weigh that comparison: OddsShopper is a Polymarket partner and may earn a commission if you sign up through our links, and we have no affiliate or commercial relationship with Kalshi. Our financial incentive points toward Polymarket on this page, so judge anything comparative here with that in mind; we would rather tell you where the money flows than pretend it does not.
If you have read this far and want to try Polymarket US, our link installs the Polymarket App (iOS-first; check availability for your device) and carries offer code OS3, currently a Deposit $10, get a $20 trading bonus for new users: claim it here. The full walkthrough is in our Polymarket sign-up bonus guide.
OddsShopper is a Polymarket partner and may earn a commission if you sign up through our links. 18+ Only. Restrictions and eligibility requirements apply. Not available in all jurisdictions. Trading is risky. 100% loss can occur. See polymarket.com/tos for more information. The Polymarket US App serves as an independent software provider and affiliate of Polymarket US and Polymarket Clearing, the CFTC-regulated exchange and clearing organization.
Can You Actually Use Polymarket Where You Live?
We are deliberately not printing a state list here, because it would be wrong within months. Polymarket's US availability has changed more than once, several states restrict or contest these markets, and the legal fights are still moving. What stays true: US residents trade only through Polymarket US via the Polymarket App, the international site is view-only from the US, and eligibility is state-specific on every prediction market. Check the platform's own eligibility screen and current terms before funding anything, and for the running picture, our guides to whether Polymarket is legal in the US and prediction-market legality state by state track the map as it shifts.
FAQ: How Polymarket Works
How does Polymarket work in one sentence? You buy Yes or No shares on a real-world question at a price between 1 and 99 cents, and each share settles at $1 if you were right and $0 if you were not.
How does Polymarket make money? Like an exchange, not a bookmaker: through fees at the edges of trading rather than margin baked into the price. The spread between bid and offer is the cost traders feel most. Fee structures change, so check the current fee page.
Is Polymarket legal in the US? US residents can trade only on Polymarket US, the CFTC-regulated venue, through the Polymarket App, and availability is state-specific and still shifting. Our Polymarket legality guide tracks the current map; always confirm on the platform's own eligibility check.
Does Polymarket use real money? Both venues trade real value, in different forms. The international exchange settles in USDC, a dollar-pegged stablecoin on a blockchain. Polymarket US trades in actual US dollars under federal derivatives regulation.
Can I sell before a market resolves? Yes. Contracts trade continuously until resolution, so you can take a profit or cut a loss at the current price any time the market is open, exactly like the 75-cent exit in the worked example above.
So, how does Polymarket work? Two machines under one brand: the same 1-to-99-cent contracts everywhere, with the real differences hiding underneath, in whether your balance is a stablecoin in a wallet or dollars at a regulated clearinghouse, and in whether a hard settlement call goes to a token vote or a filed rulebook. Read the resolution rules, respect the spread, and size like the 3-cent example is aimed at you, because it is. We hold ourselves to the same standard in public: our Kalshi weather markets hub is an open log of our own event-contract trading, losses included. And if you want to watch probability-first thinking applied to games while you decide what to make of all this, our free expert picks are a no-cost place to see it daily.
Event contracts on any venue can lose their full value. Kalshi and Polymarket US contracts are CFTC-regulated derivatives, not sportsbook wagers; the international Polymarket exchange operates outside US regulation and is not available to US residents. 18+, where each platform operates. Stokastic trades Kalshi's weather markets and holds positions in them; where our public log describes a settled position, we were the seller. That log is open research into a strategy we have not proven. Nothing on this page is trading advice, and nothing here is a pick or a recommendation.
