What are prediction markets?
Prediction markets are platforms that allow you to trade shares on specific outcomes. You place a money-backed guess to predict the outcome of events across sports, politics, economics, pop culture and more.
You can access and trade prediction markets directly inside MetaMask Mobile, powered by Polymarket. This integration lets you easily explore and participate in global markets all from your phone. Refer to our guide for a step by step tutorial.
Each market represents a question like:
- "Which team will win the championship?"
- "Will Ethereum hit $5,500 by the end of the year?"
- "What will celebrity X wear on the red carpet in March?"
You can trade shares in each possible outcome and profit if correct. Many people use prediction markets as information markets to gauge how likely major events are to occur based on real-time sentiment.
Not available to users in the following regions: USA, UK, France, Ontario (Canada), Belgium, Poland, Singapore, Australia, Taiwan, Thailand, Germany, Romania and countries on the USA sanctions list. Refer to Polymarket TOS.
Not intended for UK persons.
How do prediction markets work?
Okay, let’s say you’re a super fan or just want to dabble in a new market. The basic premise is that prediction markets allow you to trade on information.
All markets follow a similar lifecycle:
Market creation → Market movement → Market resolution
Market creation and resolution are managed by the prediction market platform (in MetaMask’s case, Polymarket) while traders simply focus on choosing and managing their positions.
- Each outcome (like “Yes/No” or “Team A/B”) is priced between $0 and $1.
- You purchase shares in whichever outcome you think will occur.
- Prices shift dynamically as people enter/exit their positions. You can trade your position at any time.
- When the actual event occurs, the market resolves automatically through an oracle, which reports the verified outcome on-chain.
- If your prediction is correct, you profit; if not, you lose the amount you staked.
All trades happen peer-to-peer. Each trade deposits funds into a shared pool that guarantees payouts to the winners after resolution.
Prediction markets carry risks including potential manipulation, biased trading, liquidity constraints, and regulatory uncertainty. Don’t trade with money you aren’t prepared to lose.
How prediction market prices fluctuate
Each share is priced between $0 and $1, representing the market’s implied probability of an outcome. For example, if a “Yes” share is $0.65, the market believes there’s a roughly 65% chance that outcome will happen.
In essence, you’re buying a “discounted dollar”: if your prediction is correct, it resolves to $1; if not, it becomes worthless.
Share prices do not remain constant. They fluctuate as new traders enter and exit the market or as beliefs change over time. Common factors include information shocks like news, polls, and credible leaks. Thin markets also mean that traders can greatly influence the price.
Because these prices represent the aggregated belief of many traders, people often use them as real-time indicators of probability and sentiment.
You can buy or sell your position anytime before the market ends aka the resolution date. This allows you to:
- Lock in profits early if the market moves your way
- Limit losses if the market shifts against you
Once prices stabilize or the event concludes, the market moves into the resolution phase.
How prediction markets resolve
Every market includes a resolution date and a set of rules that define when and how it will be settled. When that date arrives—for example,“Will Ethereum be above $5,500 on December 31?”— the market closes and settles automatically through an oracle, which reports the verified outcome on-chain. Once the oracle reports the final result, the smart contract redistributes the collateral to the winners after they claim their winnings.
What are oracles?
In prediction markets, oracles are systems that bring real-world information to the blockchain. They act as a bridge between off-chain reality and on-chain settlement.
Here’s how it works:
- The oracle checks trusted data sources and posts the verified outcome to the smart contract
- The market automatically resolves (“Yes” or “No”)
- Payouts are distributed based on that result
Some platforms, including Polymarket, allow disputes if the result appears incorrect or ambiguous. If a dispute is upheld, the outcome and payouts are updated.
If your prediction is correct, you can redeem each share for $1. If you’re wrong, you receive nothing and lose your original stake. All payouts happen automatically once the oracle finalizes the outcome.
Prediction markets carry risks including potential manipulation, biased trading, liquidity constraints, and regulatory uncertainty. Don’t trade with money you aren’t prepared to lose.
How are prediction markets different from traditional betting?
While both involve staking value on an outcome, prediction markets are built on open, peer-to-peer models, not a traditional “house” or bookmaker model.
| Prediction markets | Traditional betting |
|---|---|
| Peer to peer trading | Betting against the house |
| Prices move dynamically | Betting on fixed odds |
| Can trade anytime | Bets are locked in |
When you’re ready, head over to ‘Predict’ in the MetaMask Mobile app to explore markets. Refer to our guide for a step by step tutorial.