Glossary
The vocabulary of prediction markets in plain English, framed for UK users.
Prediction market
A marketplace where participants trade contracts whose payout depends on the outcome of a real-world event. In the UK these sit awkwardly between FCA-regulated derivatives and Gambling Commission betting products.
Event contract
A standardised financial contract that pays a fixed amount (usually $1) if a specified event occurs, and zero otherwise. The CFTC regulates these in the US; the UK has no equivalent licensed product.
YES / NO shares
The two sides of a binary prediction market. A YES share pays $1 if the event happens; a NO share pays $1 if it does not. Their prices sum to roughly $1 and can be read as the implied probability of each outcome.
Implied probability
The price of a YES share read as a percentage. A YES share trading at $0.62 implies the market believes there is a 62% chance the event will occur.
Orderbook
A traditional matching engine where buyers and sellers post limit orders. Kalshi and Polymarket use orderbooks, which produce tight spreads in liquid markets.
AMM (Automated Market Maker)
A smart-contract liquidity pool that prices shares algorithmically rather than matching orders. On-chain venues use AMMs because they always provide a quote, even in thin markets.
Resolution
Settling a market once the event is decided. Resolution can be handled by a centralised operator (Kalshi), a decentralised oracle (UMA on Polymarket) or a community vote.
Liquidity
How easily a position can be opened or closed without moving the price. Deep liquidity means tight spreads; thin liquidity means high slippage.