Prediction Market Glossary: 50 Polymarket Terms Explained

Prediction market glossary

50 terms you meet when trading on Polymarket and other prediction markets, each with a plain definition, how it works on Polymarket and a link to a live page or tool.

Arbitrage Arbitrage is buying and selling the same outcome in different places, or complementary outcomes, to lock in a profit whatever happens.

Balance of power Balance of power describes which party controls each chamber of Congress.

Basis point A basis point is one hundredth of a percentage point: 25 basis points (bps) is 0.25 percentage points.

Bid-ask spread The bid-ask spread is the gap between the highest price a buyer offers and the lowest price a seller accepts.

Binary market (Yes/No market) A binary market has two outcomes, Yes and No.

Brier score The Brier score measures forecast accuracy as the average of (forecast minus outcome) squared, where the outcome is 1 or 0.

Calibration A forecaster or market is well calibrated when outcomes it rates at 70% happen about 70% of the time, and so on for every level.

CFTC The Commodity Futures Trading Commission is the US regulator for futures, swaps and event contracts traded on US exchanges..

Designated contract market (DCM) A designated contract market is an exchange the US Commodity Futures Trading Commission has approved to list futures and event contracts..

Dispute A dispute is a challenge to a proposed market outcome.

Event contract An event contract is a financial contract whose payout depends on the outcome of a specific event, such as an election, a data release or a game.

Expected value (EV) Expected value is the average result of a bet over many repeats: each outcome's payoff times its probability, summed.

Favorite-longshot bias The favorite-longshot bias is a pattern, long documented in betting markets, in which long shots are priced too high and favourites too low relative to how often they win..

FOMC The Federal Open Market Committee (FOMC) is the Federal Reserve body that sets the target range for the federal funds rate.

Futures commission merchant (FCM) A futures commission merchant is a CFTC-registered firm that accepts customer orders and holds customer money for futures and event contracts, much as a stock broker does for shares..

Futures market (season-long market) In sports prediction markets, a futures market asks about an outcome at the end of a season or tournament, such as the champion, a division winner or an award, rather than a single game..

Geoblocking Geoblocking means restricting access to a service based on the user's location..

Hedging Hedging means taking a second position that gains if your first one loses, to reduce risk at the cost of some profit..

Implied probability The implied probability is the chance of an outcome that a price suggests.

Introducing broker An introducing broker is a CFTC-registered firm that brings in customers and passes their orders on without holding their money; a futures commission merchant holds the funds..

Kelly criterion The Kelly criterion is a formula for how much of a bankroll to stake on a bet with a known edge, to maximize long-run growth.

Leaderboard A leaderboard ranks traders by profit or trading volume over a period..

Limit order A limit order is an order to buy or sell only at a set price or better.

Liquidity Liquidity is how easily you can trade a contract without moving its price.

Maker and taker A maker adds liquidity by placing an order that rests on the book; a taker removes liquidity by trading against a resting order.

Market order A market order buys or sells right away at the best prices available on the order book.

Market resolution Resolution is the moment a market's outcome is decided and winning shares are paid.

Midpoint price The midpoint is halfway between the best bid and the best ask.

Moneyline A moneyline bet or market is on who wins a game outright, with no point spread.

Multi-outcome market A multi-outcome market asks a question with several possible answers, such as the winner of an election, and lists a price for each.

Negative risk (neg risk) Negative risk describes multi-outcome markets where only one outcome can win, which lets an exchange treat a No share on one outcome as equivalent to Yes shares on all the others.

No-action letter A no-action letter is a statement from regulator staff that they will not recommend enforcement if a firm operates as described.

Open interest Open interest is the number or value of contracts that are still open, not yet closed or settled.

Order book An order book is the list of open buy orders (bids) and sell orders (asks) for a contract, with their prices and sizes.

Parlay A parlay combines two or more outcomes into one position that pays only if all of them happen; if the legs are independent, its fair price is roughly the product of their chances..

Polygon Polygon is a blockchain network that runs alongside Ethereum with lower transaction costs..

Polymarket US Polymarket US is Polymarket's separate app for US residents, run by QCX LLC as a CFTC-designated contract market and trading in US dollars..

Prediction market A prediction market is an exchange where people buy and sell contracts whose value depends on whether a future event happens.

Prop market A prop (proposition) market asks about a specific event within a game or season, such as a player's statistics, rather than who wins..

pUSD pUSD is the token Polymarket.com uses as collateral for positions, backed 1:1 by USDC on the Polygon network..

Reach and dip market A reach (or 'hit') market asks whether a price will touch a level at any time before a deadline; a dip market asks whether it will fall to a level.

Resolution source The resolution source is the official data or authority a market's rules name to decide the outcome, such as a government agency, a league or a news organization..

Slippage Slippage is the difference between the price you expected and the average price you actually paid, caused by your order eating through several levels of the order book..

Strike ladder A strike ladder is a set of Yes/No markets on the same asset and date, one per price level (the strike), such as 'Bitcoin above $84,000' and 'above $86,000'.

Three-way market A three-way market has three outcomes, usually home win, draw and away win in soccer (also called 1X2).

Toss-up A toss-up is a race or question with no clear favourite.

Trading volume Trading volume is the total value of contracts traded in a market over a period.

UMA optimistic oracle UMA's optimistic oracle is a system that settles a question by accepting a proposed answer unless someone disputes it in time; disputes go to a vote of UMA token holders..

USDC USDC is a US-dollar stablecoin, a crypto token designed to keep a value of one dollar..

Whale A whale is a trader who places very large orders, big enough to move prices in thinner markets..