Prediction Market Glossary: 40 Essential Terms (2026)
Every new prediction market trader hits the same wall in week one: the jargon. Event contracts borrow language from sportsbooks, exchanges, and crypto simultaneously — half the terms mean something subtly different here than anywhere else. This glossary defines the forty terms that matter, each with a concrete Polymarket or Kalshi example.
The core mechanics
Implied probability. What a contract’s price says about the chance of the event. A market at 40¢ implies a 40% probability. On Polymarket, prices range 1¢–99¢; at resolution YES pays $1.00, NO pays $0.00.
Contract. A single tradeable binary outcome (“Will X happen by date Y”). On Kalshi these are event contracts; on Polymarket, markets within events.
Event. The real-world question a market sits under. One event can contain many markets: “Who wins the 2028 election?” contains one market per candidate.
Resolution. The final determination of a market’s outcome. Kalshi resolves per its written criteria; Polymarket resolves through UMA’s optimistic oracle.
Complete set. A YES + NO pair that always mints for $1.00 and redeems for exactly $1.00. The arbitrage anchor that keeps both sides honest.
Order book and execution
CLOB. Central limit order book — matching engine where buyers and sellers post orders at specific prices. Polymarket’s trading runs on a CLOB over Polygon; Kalshi runs a traditional CLOB.
Order book. The live list of bids and asks at each price level. Reading depth before sizing is core hygiene — see order book mechanics.
Bid / Ask. The highest price a buyer offers / the lowest a seller accepts. On a 60/62 market you can sell at 60 or buy at 62.
Spread. Ask minus bid. Tight spreads mean liquid markets; wide spreads mean your fills will hurt — the core of liquidity evaluation.
Midpoint. (Bid + ask) / 2. The most honest single-number quote on a thin book.
Slippage. The difference between the price you expected and the price you got, caused by walking the book with size.
Maker / Taker. Makers post liquidity (resting orders); takers remove it (market orders). Fee schedules often treat them differently — see maker vs taker mechanics.
Fill. An executed order, fully or partially.
Limit order / Market order. Execute at your price or better / execute now at whatever the book gives.
Trading and strategy
Short. A position that profits when the event doesn’t happen — built by buying NO or selling YES.
Long. A position that profits when the event happens — YES shares or long perps.
Arbitrage. Profiting from price differences: between platforms (Kalshi vs Polymarket) or within one (YES + NO under $1.00). See the arbitrage guide.
Negative risk. Polymarket’s mechanism for multi-outcome events where mutually exclusive outcomes can be bundled — the pricing glue behind “anyone but X” positions.
Kelly criterion. The bankroll-fraction formula for sizing bets with an edge — full framework in the position sizing guide.
Edge. The gap between your estimated probability and the market price, net of fees. No edge, no trade.
Vig. The bookmaker’s embedded commission. Prediction markets replace it with explicit fees — the core of the sportsbook comparison.
EV (expected value). The average outcome of a repeated bet: p_true × payout − cost. Positive EV is the only reason to enter.
Perps and leverage
Perpetual futures (perps). Derivative contracts with no expiry that track an underlying — Polymarket launched event perps in April 2026. See perps explained.
Funding rate. The periodic payment between longs and shorts that anchors perp prices to the underlying — sampled every 5 seconds, charged hourly, capped at 4%. Full math in funding rate mechanics.
Mark price. The price used for margin calculations on a perp, distinct from last-trade price.
Leverage. Trading with borrowed exposure. Polymarket Perps supports up to 20× on supported markets — see the leverage guide.
Margin. The collateral backing a leveraged position.
Liquidation. Forced closure of a leveraged position when equity falls below the maintenance requirement — MMR = 0.5 / MaxLeverage on Polymarket Perps. Details in liquidation mechanics.
ADL. Auto-deleveraging — the exchange closes profitable counterparties’ positions when the losing side can’t be liquidated fast enough.
Accounts, security, and money movement
KYC. Identity verification. Required on Kalshi and Polymarket US; not required on Polymarket global — see US vs global access.
Session keys. Scoped API credentials that let a bot trade without holding your main key — Srey Leak’s Session Keys guide covers the pattern.
Wallet drainer. A scam that tricks you into signing approvals or delegations — the October 2026 EIP-7702 wave is the current state of the art.
pUSD. Polymarket’s USD-denominated collateral token in the post-2026 migration era — see the withdrawals guide.
Gas. Polygon transaction fees — minor on Polymarket, but real for high-frequency bots.
API key. Programmatic credentials. Polymarket derives them from wallet signatures; Kalshi issues RSA key pairs.
Market structure
Liquidity. How much size the book absorbs without moving — the practical test before any real position.
Thin book / thick book. Few resting orders / many. Thin books gap on news; thick books absorb it.
Whale. A trader whose size moves the market. Whale-watching via the Data API is a documented strategy — see copy trading.
Open interest. Total outstanding positions on a market.
Volume. Shares traded in a period. The 2026 records: Polymarket’s growth data.
Dead market. A market with no liquidity and no resolution path — avoid regardless of price.
Ambiguous resolution criteria. Wording that could resolve either way — the silent killer. Read criteria twice before entering.
Educational content, not financial advice. Not affiliated with Polymarket or Kalshi. Last updated October 2026.
