Prediction Markets Like Polymarket Explained: How They Work & Why They Matter in 2026

Frequently Asked Questions

01.What is a prediction market in plain terms?

A prediction market is an exchange where each contract is a share in a stated outcome that pays one dollar if the outcome happens and nothing if it does not. Because the payout is fixed, the price a share trades at reads directly as the market's implied probability, so a share at 62 cents implies a probability of 0.62. On Polymarket those shares are collateralised in a dollar stablecoin, matched against a public order book, and redeemed once the question has been resolved.

02.How does Polymarket decide who won a market?

Resolution runs through an optimistic oracle. A whitelisted proposer posts the outcome with a bond, and if nobody challenges it within the dispute window the result stands and shares are redeemed. If someone disputes, the question escalates to a token holder vote that decides the payout. That vote is a governance process rather than a court of fact, which is why settlement risk on a prediction market sits in the resolution layer and not in the price.

03.Are prediction markets legal in the United States?

Event contracts are regulated derivatives in the United States, and a venue must be a designated contract market to list them. QCX LLC, now operating as Polymarket US, received its order of designation from the Commodity Futures Trading Commission in July 2025. The Commission retains authority under 17 CFR 40.11 to review and prohibit event contracts that involve gaming, war, terrorism, assassination or activity unlawful under state or federal law, and it has used that authority before.