Prediction Markets — Everything You Need to Know

Prediction markets are financial exchanges where you trade on the outcome of future events. Instead of buying shares in a company, you buy a contract that pays $1 if a specific outcome happens — for example, "Will the Fed cut rates in June?" or "Who will win the 2026 US midterms?"

The price of a contract directly reflects the market's collective probability estimate. A contract trading at 65¢ means the market believes there is roughly a 65% chance of that outcome occurring. As new information emerges, prices update in real time — often faster and more accurately than any poll or expert forecast.

Prediction markets work because participants have real money at stake. This incentivises honest, informed trading rather than the social pressure and biases that affect polls and surveys.

Prediction markets have a strong track record of outperforming expert forecasters and polling averages, particularly on political and economic events. Academic research consistently shows that markets aggregate information more efficiently than any individual analyst or even groups of experts.

The key reason is the incentive structure. Traders who make accurate predictions profit; those who are wrong lose money. This creates a constant feedback loop that pulls prices toward reality. Large-volume markets with deep liquidity tend to be the most accurate — lower-volume markets can be moved by a single trader and are less reliable.

There are important differences, though the line can be blurry and depends on jurisdiction. Key distinctions:

Prediction markets: Based on real-world events with verifiable outcomes. Prices set by informed traders aggregating genuine information. CFTC-regulated platforms (like Kalshi) are classified as derivatives exchanges, not gambling. Profits can be derived from information edge, not just luck.

Traditional gambling: Fixed odds set by a bookmaker rather than a market. The house has a structural edge. No mechanism for informed traders to correct mispricings.

That said, all trading involves risk, and prediction markets should be approached thoughtfully. Only trade with money you can afford to lose.

Polymarket is the world's largest prediction market by volume, operating on blockchain technology. Key facts:

• Uses USDC — a digital currency always worth exactly $1
• Create an account with email (Magic link) or a crypto wallet
• No KYC required for deposits under $1,000
• Widest range of markets globally — politics, crypto, economics, entertainment, sports
• Markets resolve based on publicly verifiable data sources
• You can buy YES or NO and sell your position at any time before resolution

Browse Polymarket markets →

Kalshi is a CFTC-regulated prediction market exchange — the first of its kind to receive full US regulatory approval. Key facts:

• Uses regular USD — no cryptocurrency required
• Requires identity verification (KYC) — photo ID, takes 1–5 minutes
• Deposits via bank transfer or debit card
• Strong in economics, politics, and weather markets
• Each contract pays exactly $1 on a correct prediction
• The simplest entry point for US users new to prediction markets

Open a Kalshi account →

USDC is a stablecoin — a digital currency that is always pegged to exactly $1. It is used on Polymarket instead of regular dollars because it allows instant, low-cost transfers on the blockchain without going through traditional banking rails.

You do not need prior crypto knowledge to use it. You can buy USDC directly on Polymarket using a credit or debit card, or via platforms like Coinbase.

If you would prefer to avoid cryptocurrency entirely, use Kalshi — which accepts regular USD via bank transfer.

Neither is universally better — they suit different users and use cases:

Choose Polymarket if: You want the widest range of markets, deepest liquidity, and are comfortable with crypto/USDC. Best for experienced traders and global market access.

Choose Kalshi if: You want regulated, USD-based trading with no crypto involved. Best for US users new to prediction markets, and for economics and policy-focused markets.

Use iPredicta if: You want to see both side by side and always trade at the best available price. Both platforms are active affiliate partners.

On Kalshi (easiest for beginners):
1. Go to kalshi.com and create an account
2. Verify your identity (photo ID, takes 2 minutes)
3. Deposit USD via bank transfer or debit card
4. Browse markets, choose YES or NO, enter your stake, confirm

On Polymarket:
1. Go to polymarket.com and sign up with email or crypto wallet
2. Deposit USDC (buy on platform or transfer from exchange)
3. Find a market, choose YES or NO, enter stake, confirm

Use the iPredicta Guides section for full step-by-step walkthroughs with screenshots.

Both platforms allow very small starting amounts. On Kalshi you can deposit as little as $10. On Polymarket the minimum is similarly low.

For learning, £50–100 is a sensible amount that lets you take meaningful positions on several markets without significant financial risk. Treat it as the cost of learning a new skill — the goal is to understand how markets move and how to read probabilities before scaling up.

If a market resolves against your position, your contract pays out $0 — you lose the amount you staked on that contract. For example, if you bought YES at 62¢ and the event doesn't happen, you lose 62¢ per contract.

However, you do not have to hold to resolution. You can sell your position at any time before the market closes — if you bought YES at 62¢ and the probability drops to 45¢, you can sell and limit your loss to 17¢ per contract rather than the full 62¢.

Arbitrage means the same event is priced differently on two platforms — creating an opportunity to buy both sides and guarantee a profit regardless of the outcome.

Simple example: Polymarket prices YES on a Fed rate cut at 62¢. Kalshi prices NO at 33¢. You buy both — total stake: 95¢. One of these must resolve as correct and pay $1. You collect $1 on a 95¢ investment — a guaranteed 5¢ profit (5.3% return) with no directional risk.

These gaps exist because Polymarket and Kalshi have separate pools of traders and prices are set independently. iPredicta identifies and displays these opportunities automatically.

In theory, matched arbitrage is risk-free. In practice, several factors can reduce or eliminate the profit:

Trading fees: Both platforms charge fees that reduce your net return. Always calculate profit after fees.
Liquidity: If there isn't enough liquidity to fill your full order at the quoted price, you may get partial fills at less favourable rates.
Resolution mismatch: The two contracts may look equivalent but resolve under slightly different conditions. Always read both resolution criteria carefully.
Window closing: Arbitrage gaps close quickly as other traders act. Prices may change between identifying the opportunity and executing both trades.

iPredicta's disclaimer on each opportunity highlights these risks and recommends manual verification before trading.

Prediction markets exist in a regulatory grey area in the UK. There is currently no FCA-regulated prediction market exchange equivalent to Kalshi in the US.

Polymarket is technically accessible from the UK but is not FCA-authorised. UK users trade at their own risk and should be aware of the lack of regulatory protections.

Kalshi is US-regulated (CFTC) and is available to US residents. Availability for UK users varies — check Kalshi's current geographic restrictions.

The regulatory landscape is evolving. The UK government has expressed interest in bringing event-based derivatives markets under a clearer regulatory framework. We strongly recommend checking the current status before trading.

Yes — for CFTC-regulated platforms. Kalshi received full CFTC approval in 2020 and is a legal, regulated exchange for US residents. Prediction markets are legal under US federal law as event-based derivatives contracts.

Polymarket is accessible to US users via blockchain, though its regulatory classification is more complex. The general regulatory environment in the US has become significantly more favourable since 2024, with the CFTC's approach becoming more accommodating of prediction market structures.

This is an evolving and genuinely unclear area. HMRC has not published specific guidance on prediction market trading. General principles that may apply:

Capital Gains Tax: If your activity is treated as investment (occasional trading, capital appreciation), profits may fall under CGT with an annual allowance.
Income Tax: If you trade frequently and systematically, HMRC may classify this as a trading activity subject to Income Tax and National Insurance.
USDC/crypto considerations: Converting USDC to other currencies may trigger additional reporting requirements under UK crypto tax rules.

In the US, profits from prediction market trading are generally treated as ordinary income and must be reported to the IRS. Regulated platforms like Kalshi may issue tax forms (1099) for qualifying activity.

USDC and crypto-related gains on Polymarket are also subject to IRS crypto reporting requirements. The IRS requires reporting of all crypto transactions including conversions between USDC and other currencies.

Consult a qualified US tax professional for advice specific to your situation.

iPredicta is a prediction market discovery and intelligence platform. We aggregate live markets from Polymarket and Kalshi into one dashboard, surface arbitrage opportunities, provide AI-powered market analysis, and help users navigate the prediction market ecosystem.

iPredicta earns affiliate commissions when users sign up and trade on partner platforms via our links. This is at no additional cost to the user — you pay the same whether you go directly to Polymarket or through iPredicta. Our business model aligns with our users: we benefit when you find good markets and trade confidently.

iPredicta is a discovery and information platform, not a trading platform. We do not hold client funds, execute trades, or provide regulated financial advice. We aggregate publicly available market data and provide educational content to help users make informed decisions.

All trading occurs directly on Polymarket or Kalshi — both of which have their own regulatory frameworks (Kalshi is CFTC-regulated). iPredicta does not constitute a regulated financial service under FCA or CFTC rules.

Nothing on iPredicta constitutes financial advice. Always conduct your own research before trading.

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