A
3 terms- AMM (Automated Market Maker)
- A smart contract that automatically provides liquidity for prediction market trading using algorithmic pricing rather than matched orders. Common on decentralised platforms like some Polymarket markets and Augur.
- Arbitrage
- Buying and selling the same outcome on different platforms simultaneously to capture risk-free profit when prices diverge. Common between Polymarket and Kalshi during news-flow events. See our how to make money guide for examples.
- Augur
- The original decentralised prediction protocol, launched on Ethereum in 2018. Uses the REP token for market reporting and dispute resolution. Still active in 2026 but with much thinner liquidity than Polymarket.
B
5 terms- Bankroll
- The total capital you have allocated to prediction market trading. Bankroll management means sizing positions as a fraction of total bankroll to survive bad streaks.
- Bid
- The highest price a buyer is currently willing to pay for a prediction contract. Always lower than the current ask. The difference between bid and ask is the spread.
- Bid-Ask Spread
- The difference between the best bid and best ask prices on a market. The spread is the structural cost of round-trip trading. Liquid markets have tight spreads (1-2 cents). See our liquidity guide for more.
- Binary Contract
- A prediction contract that pays $1 if the predicted outcome occurs and $0 if it does not. The most common prediction market structure. See our binary prediction markets guide.
- Brier Score
- A standard metric for measuring forecast accuracy. The average squared error between predicted probability and actual outcome (0 or 1). Lower is better. Liquid prediction markets typically score 0.08-0.15 on flagship events. See our accuracy guide.
C
4 terms- Calibration
- The accuracy of probability estimates over many forecasts. A perfectly calibrated forecaster's events at 70% probability happen 70% of the time. Liquid prediction markets tend to be reasonably well calibrated with some long-shot bias at extremes.
- CFTC (Commodity Futures Trading Commission)
- The US federal agency that regulates derivatives markets including event contracts. Kalshi and Robinhood Predict operate as CFTC-regulated Designated Contract Markets. See our legal status guide.
- Contract
- A unit of trade on a prediction market. Each contract pays $1 if the predicted outcome occurs and $0 if not. Prices range from $0.01 to $0.99 between launch and resolution.
- Crowns
- DraftKings' loyalty rewards programme. Earned across DraftKings Sportsbook, Daily Fantasy, Predictions, and Casino. Redeemable for free entries, sportsbook credit, branded merchandise, and event tickets.
D
4 terms- DCM (Designated Contract Market)
- The CFTC's highest level of regulatory approval for a derivatives exchange. Kalshi and Robinhood Derivatives are the only prediction market platforms with full DCM status as of 2026.
- Decentralised Exchange
- A prediction market that operates as smart contracts on a blockchain rather than as a centralised platform. Polymarket and Augur are the leading examples. See our crypto prediction markets guide.
- Demon Pick
- A PrizePicks Predict variant that raises the posted statistical line for higher payouts. Demon picks pay more if they hit but require larger statistical performance to resolve correctly.
- Dispute
- A formal challenge to a market resolution. CFTC-regulated platforms have structured dispute processes. Polymarket uses the UMA Protocol oracle for decentralised dispute resolution. See our resolution guide.
E
3 terms- Event Contract
- The CFTC term for binary contracts that pay based on real-world event outcomes. The legal category that covers prediction markets under federal regulation.
- Edge
- An informational or analytical advantage that produces positive expected value on a trade. Edge can come from domain expertise, structural opportunities like arbitrage, or exploitation of known biases like long-shot bias.
- Expected Value
- The probability-weighted average outcome of a trade. A trade with positive expected value produces profit on average across many similar trades. Negative expected value produces losses. Successful traders consistently take positive expected value trades.
F
4 terms- FanCash
- Fanatics Markets ecosystem reward currency. Earned on prediction entries, redeemable on Fanatics merchandise including team jerseys and licensed apparel.
- Fee Tier
- A volume-based fee structure used by exchange-integrated prediction platforms (Coinbase Predictions, Crypto.com Predictions). Higher monthly volume produces lower percentage fees per trade.
- Flex Play
- A PrizePicks Predict variant that pays partial multipliers when not all picks hit. More forgiving than standard Power Plays where every pick must hit for any payout.
- FOMC
- The Federal Open Market Committee, the body within the Federal Reserve that sets US interest rates. FOMC rate decision contracts are the highest-volume financial prediction market category. See our financial prediction markets guide.
G
2 terms- Goblin Pick
- A PrizePicks Predict variant that lowers the posted statistical line for safer entries with reduced payouts. Easier to hit than standard or Demon picks but pays less.
- Gas Fee
- The cost of executing a transaction on a blockchain. Polymarket runs on Polygon where gas costs are minimal. Augur runs on Ethereum mainnet where gas can be significant.
H
1 term- Hedging
- Using a prediction market position to offset risk in a different exposure. Some institutional traders use Kalshi Fed rate contracts to hedge specific FOMC scenarios in equity portfolios.
I
2 terms- Implied Probability
- The probability implied by a prediction market price. A $0.65 contract implies 65% probability of the yes outcome. See our reading probabilities guide.
- Iowa Electronic Markets
- The oldest continuous online prediction market platform, run by the University of Iowa since 1988. Operates under a CFTC no-action letter as an academic research platform. See our history guide.
K
2 terms- Kalshi
- The leading CFTC-regulated US prediction market platform. Won a landmark federal court ruling in 2024 that confirmed election prediction markets are legal under CFTC oversight. See our Kalshi review.
- Kelly Criterion
- A mathematically optimal bet sizing rule for traders with known edge. Recommends betting a fraction of bankroll proportional to edge divided by variance. Most practical traders use fractional Kelly (25-50% of the recommendation) to reduce variance.
L
2 terms- Liquidity
- The ability to trade meaningful size at fair prices. Measured by daily volume, order book depth, and bid-ask spread. Liquid markets are more accurate and have lower trading costs. See our liquidity guide.
- Long-Shot Bias
- The tendency for prediction markets to overprice low-probability outcomes (5% events trade at 7-10%) and underprice high-probability outcomes (95% events trade at 90-93%). Active traders exploit this by taking the high-probability side.
M
3 terms- Maker Fee
- The fee charged when an order adds liquidity to the order book (a limit order that does not immediately match). Most prediction markets charge zero maker fees. See our fees guide.
- Market Maker
- A trader who provides two-sided liquidity by quoting tight bid-ask spreads on prediction markets. Earns income from spread capture. Professional market makers significantly improve market quality on liquid platforms.
- Momentum
- A trading strategy that bets on continuation of recent price moves rather than reversal. Common during news-driven price adjustment periods on political markets.
N
2 terms- No-Settlement
- An edge case where a prediction market does not resolve cleanly because the underlying event becomes impossible to verify. Platforms have specific rules for handling no-settlement scenarios.
- Non-Custodial
- A platform where users retain custody of their funds in personal wallets rather than depositing into platform-controlled accounts. Polymarket is non-custodial. Kalshi is custodial.
O
2 terms- Oracle
- A mechanism for bringing real-world data into a prediction market for resolution. Centralised platforms use platform staff. Polymarket uses the UMA Protocol oracle. Augur uses its own REP-token-based oracle.
- Order Book
- A list of all current bid and ask orders for a prediction market. Order book depth at common trade sizes indicates how much you can trade without slippage.
P
4 terms- Pick'em
- A prediction market format where users select multiple picks (typically 2-6) and need every pick to hit for a payout. Used by PrizePicks Predict, FanDuel Predicts, and DraftKings Predictions. See our sports prediction guide.
- Polymarket
- The leading decentralised prediction market by trading volume. Runs on Polygon with USDC as trading currency. Geo-blocked for US users following its 2022 CFTC settlement. See our Polymarket review.
- Power Play
- A PrizePicks Predict standard pick'em entry where every pick must hit for any payout. Pays full multipliers. Distinct from Flex Plays which pay partial multipliers on partial hits.
- Probability
- The likelihood that an event will occur, expressed as a number between 0% and 100%. Prediction market prices imply probabilities: a $0.65 contract implies 65% probability.
R
3 terms- REP
- The Augur protocol's native token used for market reporting and dispute resolution. REP holders stake tokens to report market outcomes and earn fees in return.
- Resolution
- The process of determining whether a prediction contract resolves yes or no based on the underlying event outcome. Each platform follows pre-published criteria. See our resolution guide.
- Robinhood Predict
- The CFTC-regulated prediction market product inside the standard Robinhood mobile app. Launched in 2025 via Robinhood Derivatives. See our Robinhood Predict review.
S
2 terms- Slippage
- The cost of trading larger size than the order book supports at the current best price. Buying through multiple bid levels produces slippage as your order fills at progressively worse prices.
- Spread
- Short for bid-ask spread. The difference between the best bid and best ask prices. The structural cost of round-trip trading on any market.
T
1 term- Taker Fee
- The fee charged when an order removes liquidity from the order book (a market order that immediately matches existing orders). Polymarket charges 1-2% taker fees. Kalshi charges approximately 7% on winnings.
U
2 terms- UMA Protocol
- The decentralised oracle network that handles resolution for Polymarket. UMA token holders can dispute resolutions and vote on contested outcomes. Designed to be secure as long as attack cost exceeds contract value.
- USDC
- A US dollar-pegged stablecoin issued by Circle. The trading currency on Polymarket and many other crypto prediction platforms. Each USDC is backed 1:1 by US dollars in regulated bank accounts.
V
2 terms- Vig (Vigorish)
- The margin sportsbooks build into their odds, typically 4-10%. Prediction markets typically use commission-based or transparent payout models rather than embedded vig. See our prediction markets vs sports betting guide.
- Volume
- The total dollar amount traded on a market over a given time period. Higher volume markets are typically more liquid and produce more accurate prices.
W
1 term- Wallet (Web3)
- A non-custodial cryptocurrency wallet (MetaMask, Rainbow, Coinbase Wallet, Trust Wallet) used to interact with decentralised prediction markets like Polymarket. Holds your USDC and signs trades.
Y
1 term- Yield
- The return on capital deployed to a prediction market position. Successful active traders typically aim for 10-30% annual return on capital deployed, comparable to skilled active stock traders.
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