A prediction market lets you buy and sell shares in the outcome of a real-world event, and the price of a share is the market’s estimate of how likely that outcome is. If “Will it happen?” trades at 63 cents, the crowd is pricing roughly a 63 per cent chance. Get it right and each share pays out 1 dollar (100 cents). Get it wrong and the share is worth nothing. That single idea is the whole game.

What is a prediction market?

A prediction market is an exchange for outcomes. Instead of a bookmaker setting odds and taking the other side, traders buy and sell contracts against each other. Each contract resolves to either 1 (the event happened) or 0 (it didn’t). Because shares trade between 1 and 99 cents, the live price doubles as a probability: a 25c share means the market thinks there is about a 25 per cent chance. Prices move in real time as new information arrives, the same way a share price moves on a stock exchange.

Why prediction markets exist

They aggregate information. When thousands of people put real money behind their opinion, the resulting price is often a sharper forecast than any single pundit or poll. That is the “wisdom of crowds” in action, sharpened by the fact that being wrong costs you money. Markets exist for elections, sports, crypto prices, weather and culture.

How a market works, step by step

Step	What happens
1. A market is created	A clear yes/no question with a fixed resolution date and source.
2. Shares trade	You buy YES or NO shares at the current price (1 to 99 cents).
3. Price moves	As traders react to news, the price floats toward the new consensus.
4. You can exit early	Sell your shares any time before resolution to lock a profit or cut a loss.
5. The event resolves	The market settles to 1 or 0 using the stated source. Winners are paid.

A worked example

Say a market asks “Will Team A win the final?” and YES trades at 40 cents. You buy 100 YES shares for 40 dollars. If Team A wins, each share pays 1 dollar, so you receive 100 dollars, a 60 dollar profit. If they lose, your shares are worth zero and you lose the 40 dollars. You did not have to wait for the final, though. If the price climbs to 70 cents at half-time, you could sell and bank a 30 dollar profit straight away.

Order books versus automated pricing

Some platforms match buyers and sellers through an order book, the same mechanism a stock exchange uses. Others use an automated market maker that quotes a price from a pool of liquidity. The practical difference is depth: deep, liquid markets let you trade large sizes without moving the price much, while thin markets can jump on a single order. The mechanics are covered in full on how prediction markets work.

Where South Africans trade

The two largest platforms are Polymarket, which settles in USDC on the Polygon network, and Kalshi, a US-regulated exchange. They differ on fees, available markets and how easy they are to reach from South Africa. The full breakdown is in our Polymarket vs Kalshi comparison and the fees comparison. Before depositing, read the legal status for SA users. Ready to start? Open a Polymarket account.

The risks to understand first

Prediction markets carry liquidity risk, regulatory risk, platform and custody risk, and the chance of a disputed resolution. None of that means avoid them, but it does mean size your positions sensibly and never trade money you cannot lose. We cover each in detail on the prediction market risks page, and the jargon is defined in the glossary.

Page FAQ

Are prediction markets gambling?

They share features with betting, but the design is closer to an exchange: you trade a contract that settles on a real outcome, and you can exit before resolution. Treat the money at risk the same way you would a bet, and trade responsibly.

Can South Africans use prediction markets?

SA users access international platforms like Polymarket at their own risk; they sit outside the National Gambling Board. Kalshi is US-regulated with its own access rules. Read our legal status page before depositing.

How is the price decided?

By supply and demand among traders. The live price of a YES share, in cents, is the market’s estimate of the probability of that outcome.

What happens if I am right?

Each share you hold settles at 1 dollar (100 cents) when the event resolves in your favour. Your profit is the difference between that and what you paid.

Do I have to wait until the event ends?

No. You can sell your shares at the live price any time before the market resolves, to lock in a profit or limit a loss.

Keep reading

• Prediction markets hub, the section homepage.
• How prediction markets work, the mechanics in depth.
• Polymarket vs Kalshi, the platform comparison.
• Prediction market fees compared.
• Prediction market risks, before you trade.
• Glossary, 28 key terms.