Glossary
Plain-language definitions of prediction-market terms, A to Z.
24
terms in our glossary
A
- Arbitrage
- Arbitrage means profiting from price differences for the same outcome, for example buying YES and NO on related markets for less than the guaranteed $1 payout. In practice, prediction market arbitrage gaps are small, short-lived and reduced by fees.
B
- Bid and Ask
- The bid is the highest price someone is willing to pay right now; the ask is the lowest price someone is willing to sell at. The gap between them is the spread.
C
- CFTC
- The CFTC (Commodity Futures Trading Commission) is the US federal agency that regulates futures, options, swaps and event contracts. It oversees exchanges like Kalshi and Polymarket US, and in 2022 it fined Polymarket's operator $1.4 million.
D
- Designated Contract Market (DCM)
- A Designated Contract Market is an exchange licensed by the U.S. CFTC to list futures and event contracts. Kalshi is a DCM.
E
- Event Contract
- An event contract is a financial contract whose payout depends on whether a specific event happens — for example 'Will the Fed cut rates in June?'. In the US, event contracts on exchanges like Kalshi and Polymarket US are regulated by the CFTC.
- Expected Value (EV)
- Expected value is what a trade is worth on average if you could repeat it many times. It combines your estimate of the probability with the price and the payout.
H
- Hedging
- Hedging means taking a position that offsets a risk you already have, so a bad outcome hurts less.
I
- Implied Probability
- Implied probability is the chance of an outcome that a market price suggests. On Kalshi a contract pays $1 if it wins, so a price in cents reads almost directly as a percentage.
K
- Kelly Criterion
- The Kelly criterion is a formula for sizing a position based on your edge and the price. It suggests what fraction of your bankroll to risk.
L
- Limit Order
- A limit order lets you choose the maximum price you'll pay (or minimum you'll accept). It only fills at that price or better.
- Liquidity
- Liquidity is how easily you can trade without moving the price much. A liquid market has many orders close to the current price.
M
- Maker and Taker
- A maker adds an order to the book that waits to be filled; a taker fills an order that's already there. Exchanges often charge them differently.
- Market Order
- A market order buys or sells straight away at the best prices available in the order book.
- Multi-Outcome Market
- A multi-outcome market groups several YES/NO contracts under one event, where usually only one outcome can win.
O
- Open Interest
- Open interest is the number of contracts that are still held and not yet settled. It shows how much money is currently riding on a market.
- Order Book
- The order book is the live list of every open buy and sell order in a market, grouped by price. It shows how many contracts people want to trade at each level.
P
- Prediction Market
- A prediction market is an exchange where people trade contracts on the outcome of future events. Each share pays $1 if the event happens and $0 if it doesn't, so its price in cents works as the crowd's probability estimate.
R
- Resolution Source
- The resolution source is the official data or publication a market uses to decide its outcome, such as a government statistics release or an official sports result.
S
- Settlement
- Settlement is when a market closes and pays out. Winning contracts pay $1 each; losing contracts pay nothing.
- Slippage
- Slippage is the difference between the price you expected and the average price you actually got.
- Spread
- The spread is the difference between the best ask and the best bid. It's a hidden cost: if you buy and sell straight away, you lose roughly the spread.
- Strike
- A strike is the threshold a market is built around, such as a price level, a temperature or a number of votes.
T
- Trading Fees
- Trading fees are what the exchange charges when your order fills. On Kalshi they depend on the price and number of contracts, and are highest near 50¢.
V
- Volume
- Volume is how many contracts have traded in a market, over its life or over a period such as the last 24 hours.
Prediction market terms A–Z
From implied probability and liquidity to market maker, order book, speculation, hedging, resolution and oracle, this glossary defines the words you'll meet on Kalshi, Kalshi and other event-contract platforms — plus related finance terms like futures contracts, efficient market hypothesis and mark to market.