Published July 27, 2026

What Prediction Markets Are and How They Differ From Sportsbooks

A prediction market lets people trade contracts on the outcome of an event, and the price of each contract is the market's estimate of how likely that outcome is. That one idea is what separates a prediction market from a sportsbook, and it changes how you read prices, where the house makes money, and how you find an edge.

This post sets up the terminology the rest of our prediction market coverage builds on: what a contract is, how contract prices map to the odds you already know, why people say these markets have "no vig" (and where that claim breaks down), and the honest pros and cons versus a traditional book.

The core difference in one line

• A sportsbook sets the price. It is your counterparty, it builds a margin into every line, and it profits when the prices are balanced.
• A prediction market matches you against other traders. The price is whatever buyers and sellers agree on, and the venue takes a cut through fees or commission rather than a margin baked into the odds.

Everything else follows from that. A book quotes you -110 on both sides. A prediction market shows you a contract trading at 54 cents because that is the last price two traders agreed on.

What a contract actually is

A prediction market contract pays out a fixed amount, usually $1, if an event happens, and $0 if it does not. You buy and sell these contracts like shares.

Take a contract on "Team A wins tonight."

• It settles at $1.00 if Team A wins.
• It settles at $0.00 if Team A loses.
• Right now it trades at $0.54.

That price is the market's read on the probability: about 54%. If you buy at $0.54 and Team A wins, you collect $1.00, a profit of $0.46 per contract. If they lose, you lose the $0.54 you paid.

Most venues offer both sides. On Kalshi you can buy Yes or No. On Polymarket you buy the outcome token you want. On a betting exchange like Betfair, Novig, or ProphetX the same idea is framed as "back" (bet it happens) and "lay" (bet it does not).

Contract prices are just probabilities

This is the part that makes prediction markets easy to fold into a normal betting workflow: the contract price is the implied probability. To compare it against a sportsbook, convert it to American odds.

A contract at price p (in dollars) converts like this:

• Implied probability = p (54 cents = 54%)
• Decimal odds = 1 / p → 1 / 0.54 = 1.85
• American odds: for a favorite (p above 0.50), -100 * p / (1 - p); for an underdog, 100 * (1 - p) / p

For our 54-cent contract:

• -100 * 0.54 / 0.46 = -117

So a Yes contract at $0.54 is roughly a -117 moneyline. A No contract on the same event would trade near $0.46, which is about +117. Now you can line it up against any book's price and against your no-vig consensus. If you already devig book odds, prediction market prices slot straight into the same framework. See how to devig sportsbook odds for that pipeline.

Yes/No contracts vs American odds, side by side

The two systems describe the same thing in different units.

The mental shortcut: cents equal percent. A contract in cents tells you the implied probability directly, which is exactly the number a sportsbook hides behind its odds format and its margin.

Is there really no vig?

Short answer: there is no vig baked into the quoted prices the way a book adds one, but you still pay to play. "No vig" is a statement about the price, not about total cost.

Here is the difference. A two-way sportsbook market at -110/-110 has implied probabilities that sum to about 104.76%. That extra 4.76% is the overround, the book's margin. You are paying it on every bet whether you notice or not.

On a prediction market, the Yes and No prices tend to sum to about $1.00, meaning the implied probabilities sum to roughly 100%. There is no structural overround. In that sense the "no vig" claim is real, and it is why prediction market prices are often a cleaner probability estimate than any single book.

But the venue still has to make money, and it does so in ways that are easy to miss:

• Trading fees. Kalshi charges a per-trade fee that scales with the contract price (largest near 50 cents, smaller near the extremes). It is small per contract but it is a real cost, and fee schedules change, so check the current one.
• Spread. The gap between the best buy and best sell price is a cost you pay on entry and exit. On a thin market that spread can be wider than a sportsbook's margin.
• Exchange commission. Betting exchanges usually take a commission on net winnings per market, often in the 2% to 5% range, rather than a fee per trade. Novig and ProphetX use their own peer-to-peer models. Same idea, different mechanics.
• Settlement and funding. Polymarket settles in stablecoin (USDC), so there is crypto on and off ramp friction rather than a card deposit.

So the accurate framing is: prediction markets remove the margin from the price but recover it through fees, spread, or commission. On liquid markets the all-in cost is often lower than a sportsbook's vig. On thin markets it can be higher once you account for the spread. Always compute your after-fee break-even before calling something +EV.

Why the "price is the probability" model matters

Because there is no margin in the quote, a prediction market price is close to a true no-vig probability without you doing any work. That has two practical uses:

• Better devig inputs. Adding a liquid prediction market to your consensus pulls your probability estimate toward a lower-margin source. It is another data point that is not distorted by one book's juice.
• Cross-venue edges. When a sportsbook and a prediction market disagree, that gap can be a +EV spot or an arbitrage, as long as the fees and spread do not eat the difference. This is a common blind spot; see mistakes new arb bettors make.

Pros of prediction markets

• No margin in the price. The quoted probability is cleaner than a vig-inflated book line.
• Sharp, fast pricing on liquid markets. Prices reflect informed money quickly, which makes them a useful benchmark.
• They usually do not limit you. Because you trade against other people rather than the house, taking sharp positions does not get you throttled the way it does at a book. That is the opposite of the account-limiting problem sharp bettors hit at sportsbooks.
• Both sides are tradable. You can back or lay, and you can often close a position before the event resolves to lock in profit or cut a loss.

Cons of prediction markets

• Liquidity is uneven. A quoted price is not a fillable price. On thin markets you cannot get real size down without moving the price, and the spread can be wide.
• Coverage is narrower. Sportsbooks price thousands of games, alternate lines, and player props. Prediction markets concentrate on fewer, higher-interest events, though sports coverage is growing.
• Fees and spread are easy to underestimate. The "no vig" headline hides real costs that only show up when you do the after-fee math.
• Access and rules vary. Availability, funding methods, and the legal treatment of event contracts differ by venue and jurisdiction, and they change often.

How this fits the rest of our coverage

The takeaway that carries into every other prediction market post: a contract price is a probability, there is no margin in that price, but there is still a cost to trade. Read the price as a probability, convert it to odds when you need to compare, and always subtract fees and spread before you trust an edge.

From here the natural next steps are using prediction market prices to sharpen your devig consensus, spotting +EV when a book and a market disagree, and checking whether a cross-venue gap is a real arb after costs.