Prediction markets are similar to sports betting lines, but with a few key differences.
Much like a sports bet, a prediction betting market allows players to pick a side of an event with multiple possible outcomes. The player makes a profit if they pick the right side, and lose money if they pick the wrong side.
If you make a “bet” at a prediction market site, you enter into a contract with a player who’s taking the other side of the bet. The payout odds are determined by the percentage of players that have taken either side of the market.
For example, Crypto.com introduced prediction markets for the NFL just in time for the 2024-2025 playoffs. Keeping in mind that several top NFL teams were still in contention for a championship at that time, the prediction market odds on the Super Bowl winner looked like this:
Of the teams listed in the screenshot above, Kansas City had the best chance of winning the Super Bowl at 25%. That number derived from the fact that 25% of bettors were picking the Chiefs to win the Super Bowl at that time.
That 25% number sets the payout odds on a Kansas City Super Bowl win. Bettors can enter into a $100 contract on a team’s chances to win the NFL championship game.
In the case of the Chiefs, you could buy “Yes” for $25, or “No” for $77. You buy one side of the contract, and the trade completes when another player buys the other side of the prediction. The winner of the trade collects $100 total.
Bettors that bought “No” on the Chiefs at $77 collected $23 in profit after Kansas City came up short in the Super Bowl against the Philadelphia Eagles.
If you took the Eagles “Yes” at $11.25 (as shown above), you collected $89.75 in profit. Your profit comes from players that took “No” on the Eagles, with Crypto.com taking a commission from all trades.
Look for prediction markets to continue booming in 2025, with sports, politics, television award shows, and many other types of events available for investing.