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Glossary: prediction markets, betting and derivatives
Short definitions with the detail that matters for reading prices. Each term links to the live pages and guides where you will meet it.
Terms
54
across 9 groups
Start here
Implied probability
the one idea everything else builds on
Then
The scorecard
how accurate markets really are
Prediction markets
Prediction marketAn exchange where people trade contracts that pay out based on whether a real-world event happens, so prices act as crowd-sourced probabilities.Event contractA derivative that settles to a fixed amount depending on whether a specified event occurs, which is the legal form prediction market contracts take in the US.ResolutionThe process of deciding the final outcome of a market and paying $1 per winning share.UMA oracleThe decentralised dispute system Polymarket uses to confirm how a market resolved.NegRisk (negative risk) marketA Polymarket structure for multi-outcome questions where exactly one outcome can win, letting traders convert No shares across outcomes efficiently.Market makerA trader who continuously quotes both a bid and an ask, earning the spread and providing liquidity.Order bookThe list of resting buy and sell orders at each price for a contract.Yes and No sharesThe two sides of a binary prediction market contract, which together always pay exactly $1 at resolution.Series, events and markets (Polymarket structure)The three levels Polymarket uses to organise questions: a series groups recurring events, an event groups related markets, and a market is one tradable Yes/No contract.
Odds and pricing
Implied probabilityThe chance of an outcome that is implied by a price or odds quote, calculated by converting the quote into a percentage.Vig (vigorish)The bookmaker's built-in margin, visible as implied probabilities that sum to more than 100 percent.Bid-ask spreadThe gap between the highest price a buyer will pay and the lowest price a seller will accept for a contract.LiquidityHow much can be bought or sold without moving the price, measured by the size of resting orders near the current price.VolumeThe total dollar value of contracts traded in a market over a period, usually reported as 24-hour and lifetime figures.
Regulation
Designated contract market (DCM)A US exchange licensed by the CFTC to list futures, options and event contracts for the public.Cease-and-desist letterA formal demand from a state regulator that a company stop an activity, in this context offering sports or election contracts to that state's residents.PreemptionThe legal doctrine that federal law overrides conflicting state law, invoked by exchanges to argue state gambling laws cannot reach CFTC-regulated contracts.GeofenceTechnology that blocks or permits access to a service based on the user's physical location.Self-certificationThe process by which a CFTC-regulated exchange lists a new contract by certifying that it complies with the law, without prior approval.Insider trading (prediction markets)Trading on material non-public information about an event, which is prohibited on regulated exchanges and has become a live enforcement issue.
Sports betting
MoneylineA bet on which side wins a game outright, with odds that reflect each side's chance.Point spreadA handicap applied to the favorite so that both sides of a game are roughly even-money bets.Totals (over/under)A bet on whether the combined score of both teams lands above or below a line set by the book or market.ParlayA single bet that combines several selections, all of which must win, in exchange for a multiplied payout.Closing line value (CLV)The difference between the odds you got and the odds available at close, used to judge whether a bettor beats the market over time.Sharp moneyBets placed by professional or well-informed bettors, identified by their effect on the line rather than their size.JuiceAnother word for vig: the commission a sportsbook builds into its odds.PushA tie between the bet and the line, where stakes are refunded.Futures betA wager on a season-long outcome, such as a championship or MVP, settled months later.Steam moveA sudden, coordinated line move across many sportsbooks, usually triggered by sharp groups betting the same side at once.
Strategy
Kelly criterionA formula for bet sizing that maximises long-run growth: stake the edge divided by the odds.Expected value (EV)The average outcome of a bet if it were repeated many times: probability of winning times profit, minus probability of losing times stake.Brier scoreA measure of forecast accuracy: the average squared difference between predicted probabilities and actual outcomes, where lower is better.CalibrationThe property that events forecast at X percent happen about X percent of the time.Favorite-longshot biasThe tendency for long shots to be overpriced and favorites underpriced relative to their true chances.ArbitrageLocking in a riskless profit by buying and selling the same outcome at different prices on different venues or in mismatched contracts.HedgeA second position taken to reduce the risk of a first one, usually by backing the opposite outcome.Take profit and stop lossStanding orders that close a position automatically at a target price or at a maximum acceptable loss.Bankroll managementRules for how much of your capital to risk per bet or trade so that losing streaks do not end the game.
Derivatives
Open interestThe total number of contracts outstanding that have not been settled or closed.Perpetual futures (perps)Futures contracts with no expiry date, kept near the spot price by periodic funding payments between longs and shorts.Funding rateThe periodic payment between long and short perpetual futures holders that keeps the contract price anchored to spot.LiquidationThe forced closing of a leveraged position when losses consume the margin backing it.LeverageControlling a position larger than your capital by borrowing from the exchange, which multiplies both gains and losses.WhaleA trader whose positions are large enough to move a market or to be worth tracking for what they reveal.Long/short ratioThe proportion of traders or open interest positioned long versus short in a perpetual futures market.
Crypto
Venues
Polymarket USThe CFTC-regulated, dollar-denominated version of Polymarket that serves American users through the QCX LLC designated contract market.KalshiThe first CFTC-regulated exchange for event contracts, listing markets on economics, politics, sports and culture for US users.HyperliquidAn on-chain perpetual futures exchange with its own blockchain, known for deep liquidity, public positions and tokenised stock perps.SportsbookA licensed bookmaker that sets odds and takes the other side of customers' bets.Betting exchangeA platform where bettors bet against each other at odds they set, with the operator taking a commission on winnings.
BetG8
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