Prediction Market Glossary: 14 Essential Terms

Understand prediction market terms, from settlement and implied probability to liquidity and fees. Use clear definitions before reading a contract.

14 terms

Event contract: A contract whose payoff depends on a defined future event under specified settlement rules.
Yes / No: The two sides of a common binary event contract. The winning side normally settles at the contract’s stated payout, subject to its rules.
Implied probability: A way of reading a price as the market’s assessment of an outcome. It is not an objective guarantee or a personal forecast.
Settlement: The process of determining a contract’s result and distributing its stated payoff.
Resolution source: The official report, authority, or other source specified in a contract’s rules for deciding the outcome.
Liquidity: The amount of buying and selling interest available. It affects whether and at what price an order can be filled.
Limit order: An instruction to trade only at a specified price or better. Submission does not guarantee execution.
Spread: The difference between available buying and selling prices. It can affect the cost of entering and exiting a position.
Maker / taker: A maker adds an order that rests in the book; a taker trades against available orders. Fees may differ.
CFTC: The U.S. Commodity Futures Trading Commission, the federal derivatives regulator.
DCM: Designated contract market: a category of exchange registered with the CFTC.
Gross payout: The amount received at settlement before subtracting the purchase cost and fees.
Net profit: Proceeds minus purchase cost and all applicable fees.
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