A Plain-English Glossary Of Prediction Market Terms
Prediction markets have a vocabulary problem. The ideas are simple, a price that doubles as a probability, a contract that pays a dollar or nothing, but the words wrapped around them (ladder, depth, maker, basis risk) make a first-time reader feel like they walked into the wrong classroom. So here is a glossary of prediction market terms with the jargon stripped out: every term gets exactly one plain sentence, and every term links to the guide that covers it in depth. Read it top to bottom once and the rest of this site, and every order book you ever open, gets easier.
The Quick Answer
A prediction market is a place to buy and sell contracts that pay $1 if a real-world event happens and $0 if it does not, and every specialized word in the space describes some part of that machine. The full A-to-Z list is below, followed by a worked example that turns a 30-cent price into a probability and an American betting line, and the one risk shape hiding behind half of these terms.
The Terms, A To Z
Arbitrage. Buying an outcome cheaply on one venue while selling it at a higher price on another to capture the difference, a plan that works less often in practice than the spreadsheet says.
Basis risk. The gap between the thing you care about and the thing the contract actually measures, like a city temperature market that settles on one specific named weather station, and not always the one you would guess, rather than the number on your phone.
Bid and ask. The bid is the most anyone will currently pay for a contract and the ask is the least anyone will sell it for, and reading them band by band is how you see what a market really thinks.
Calibration. The real test of whether a market is any good: its 70-cent contracts should settle YES about 70 percent of the time, and the measured record on that question is more interesting than you would guess.
CFTC. The Commodity Futures Trading Commission, the federal regulator that oversees Kalshi as a designated contract market, the substance behind the "is it legit" question.
Contract (event contract). A tradable claim on a defined real-world outcome that settles at $1 if the event happens and $0 if it does not, the basic unit of everything else on this page.
Depth. How many contracts you can actually buy or sell near the quoted price before your own order starts moving the market, one of the biggest real differences between venues.
Contract, settlement, and resolution source are the three terms that form the machine: a contract defines the question, the resolution source supplies the answer, and settlement pays it out. Every other entry here describes some part of trading that loop.
De-vig (no-vig price). Stripping the sportsbook's margin out of a line to recover the fair probability underneath, the step that collapses a -110/-110 spread to a true 50/50, and the step an exchange price lets you skip.
Exchange. A venue that matches buyers and sellers against each other instead of taking the other side of your trade itself, which makes it a fundamentally different business from a sportsbook.
Fees. What the venue charges you to trade, and on Kalshi it sits outside the price where you can see it rather than hidden inside the odds.
Hold (vig). The margin a sportsbook bakes into its prices, visible whenever the two sides of a -110/-110 line at DraftKings or FanDuel add up to 104.8 percent instead of 100, and a big part of why exchange prices read cleaner.
Implied probability. The chance a price is claiming: a contract trading at 30 cents is the market saying the event is about 30 percent likely, and converting that into odds you recognize takes one line of arithmetic.
If you learn one term on this page, make it implied probability. Every price on every venue is a probability wearing a costume, and the worked example below does the full conversion.
Ladder. The full set of side-by-side ranges a market offers over one number, every temperature band for one city for example, which read together form a probability distribution rather than a list of separate bets.
Line shopping. Checking the same market's price at several books and venues before you commit, the habit an odds screen exists to automate, because the same contract is often a few cents cheaper somewhere else.
Longshot. A low-priced contract whose few-cent premium tempts sellers, even though one loss on that trade can erase the winnings from thirty or forty wins.
Maker and taker. A maker rests an order at their price and waits for the market to come to them, while a taker crosses the spread for an instant fill and usually pays for the privilege, a choice that matters most when the whole question is only worth a few cents.
Resolution source. The specific data feed named in the market rules that decides the outcome, the way Kalshi's rain markets spell out exactly which gauge and which definition of "rain" counts.
Settlement. The moment the outcome becomes official and every contract pays out at $1 or $0, decided by the named source in the rules, not by what it felt like outside.
Spread. The gap between the bid and the ask, and the fastest honesty check on any market: a cent or two wide means a real crowd is arguing over the price, while 20 or 30 cents wide means almost nobody is home.
Spread and depth are the two-second liquidity check before any trade: a tight spread tells you the price is real, and depth tells you whether you can actually get filled at it. A market can fail either test on its own, so glance at both.
Venue. The platform a contract trades on, worth noticing because the same contract often trades at different prices on different venues at the same moment.
Weather contract. A contract that settles on an observed temperature or rainfall number, the cleanest working example of how event contracts resolve because the answer arrives on a public feed every day.
YES and NO. The two sides of every contract, which always sum to $1, meaning a YES bought at 30 cents and a NO bought at 70 cents are the same market seen from opposite ends, and you can hold both.
One disclosure before we go further, since a few entries above name platforms: we have no affiliate or commercial relationship with Kalshi, and we do carry sign-up offers for some other prediction-market and betting platforms.
The Term That Does The Most Work: A Worked Example
As promised, here is the implied probability entry earning its keep, because it converts everything else on this page into a language you already speak. Take a contract trading at 30 cents. The market is saying the event is about 30 percent likely. To turn that into an American betting line, look at what the trade returns: a winning 30-cent contract pays $1, so the profit is 70 cents on 30 risked, which works out to roughly +233 in sportsbook terms. The same arithmetic runs at every price on the ladder:
| Contract Price | Implied probability | American odds equivalent |
|---|---|---|
| 20 Cents | 20% | +400 |
| 30 Cents | 30% | +233 |
| 50 Cents | 50% | +100 |
| 70 Cents | 70% | -233 |
| 80 Cents | 80% | -400 |
The 50-cent row is the one worth staring at. An even-money outcome costs you +100 on an exchange, while the sportsbook version of the same coin flip is typically -110 on both sides, and that difference is the hold entry from the glossary showing up in your bankroll.
Now run the comparison in the other direction. A point spread priced at -110 on both sides at DraftKings or FanDuel implies 52.4 percent for each team, and 52.4 plus 52.4 is 104.8 percent, which is impossible: the extra 4.8 percent is the book's margin baked into the line. De-vig it, strip the hold out, and -110/-110 collapses to a fair 50/50. A prediction market quotes you the 50-cent contract directly and charges its fee where you can see it. Neither structure is automatically the better deal on a given day, but only one of them makes you do algebra to find out what the price actually claims, which is exactly why the line shopping entry above applies to both worlds.
The Risk Shape Hiding Behind Half These Terms
Look back at longshot, maker and taker, and spread, and you will notice they all orbit the same trap. Selling an unlikely outcome collects a small premium and risks most of a dollar, so one loss can wipe out the premiums from thirty or forty wins.
That arithmetic, not the hit rate, is why position sizing is the entire game in these markets, and why a red day that erases a green stretch is the known shape of that style of trading rather than a malfunction.
We say that from experience rather than theory: Stokastic trades Kalshi's weather markets and holds positions in them, so we are not a neutral dictionary author. Our live trading log is short, it is currently negative, and it is far too small a sample to prove or refute an edge, which is exactly what the calibration entry above would predict about any young record. Every position is publicly graded once it settles, losses included, on our live weather markets hub, and that page, rebuilt through the day, is where the current figures live.
Where To Go From Here
This page is deliberately the shallow end of the pool: one sentence per term, with the depth one click away. If you are brand new, start with the contract entry's link and read forward from there. If you already trade and just wanted the vocabulary check, the ladder and spread links are where the practical craft lives. And if what you actually want is not a vocabulary lesson but a read on tonight's games, our analysts post free expert picks every day across the sports we cover.
FAQ: Prediction Market Terms
What is the most important prediction market term to learn first? Implied probability. Once you read every price as a percentage, the ladder, the spread, and the hold comparison all snap into focus, and the cents-to-odds conversion takes one line of arithmetic.
Do YES and NO prices always add up to $1? On the same venue, yes: a YES at 30 cents and a NO at 70 cents describe the same market from opposite sides, before fees. Across different venues the numbers can drift apart, which is where the arbitrage entry comes in, along with its practical catches.
Is a prediction market the same thing as a sportsbook? No. An exchange matches traders against each other and charges a visible fee, while a sportsbook sets its own line, takes the other side, and earns the hold baked into prices like -110/-110. The exchange versus sportsbook guide walks through what that difference means in practice.
Where can I see these terms on a live market? Any open ladder works, and our weather markets hub shows the ideas on real settled contracts, including the ones we got wrong.
Disclosure
Stokastic trades Kalshi's weather markets and holds positions in them, and where our public log describes a settled position, we were the seller. That log is an open record of a strategy we have not yet proven, not trading advice, and nothing on this page is a recommendation to trade any market. We have no affiliate or commercial relationship with Kalshi; we do carry sign-up offers for some other prediction-market and betting platforms, and any page comparing them discloses that. Kalshi's markets are CFTC-regulated event contracts traded on a designated contract market, a real regulatory distinction that does not make them safe: contracts can lose their full value, and on the side we trade, individual losses run large. 18+, available where Kalshi operates.
