If you have ever wished you could peek a little into the future without resorting to tea leaves or your aunt’s horoscope, prediction markets are your ideal companion.
Prediction markets let you predict things the universe has not revealed yet, like whether your team will finally win or whether the weather will betray your weekend plans again. It is a bit like the stock market decided to loosen its tie, kick off its shoes, and have some fun guessing what comes next.
And yes, you can now trade prediction markets straight from your Phantom wallet, so read on to learn how!
What are prediction markets?
From election outcomes to sports championships to economic indicators, prediction markets allow you to trade on your views about future events. By buying and selling event contracts that settle based on real-world results, you can express your predictions while potentially profiting from accurate forecasts.
How prediction markets work
Here’s how a typical prediction market works step by step:
- A question or event is defined clearly: For example, “Will it rain in New York on July 1st?” or “Will Team X win the championship?” The event needs a clear outcome (yes/no, a specific number, etc.) that can be verified easily once it happens.
- Contracts or shares are issued: Each contract pays out a certain amount if the event comes true. The most common format is a binary (yes/no) contract that will pay $1 if the answer is yes or $0 if no. Before the outcome is known, this contract trades somewhere between $0 and $1 (or 0 to 100 if we use percentage points). The current price represents the market’s implied probability of the event.
- Traders buy and sell based on their beliefs: You (and other traders) can buy shares if you think the event is more likely to happen than the current price indicates. For example, if the “Rain on July 1st” contract is at 0.30 (30%), but you have information or a strong hunch that it’s very likely to rain (say a 60% chance), you’d buy at 0.30. If you’re right, the price should rise toward 0.60 as others catch on, and you could sell at a profit; or if you hold until July 1st and it does rain (event is true, pays $1), you’d get $1 for each share that cost you 30¢, netting 70¢ profit per share (see “Payout” below). Conversely, if you believe an outcome is less likely than the market thinks, you can sell shares (or bet “no”) to profit if the price falls.
- Prices update with new information: Prediction market prices aren’t set by any single authority—they move based on trader actions. If breaking news makes an outcome more probable, more people will buy shares and push the price up. If something makes the outcome less likely, people will sell or bet against it, pushing the price down. This continuous buying and selling aggregates all available information into the price in real time.
- Payout: When the event’s outcome is known, the market is resolved. If you held shares in the correct outcome, you get the payout ($1 per share for a yes/no market, for example). If you held the losing side, your shares are worthless. Essentially, the market rewards those who predicted correctly. This profit motive is what drives people to trade based on what they truly believe will happen.
Behind the scenes, different platforms may use different mechanisms (some use continuous trading with order books like a stock exchange, others use an automated market maker that always offers a price). But the core idea is the same: you earn money for being right about the future, and the market price at any given time can be read as the community’s probability estimate.
Prediction markets: Risks & limitations
Market manipulation
One concern is whether someone can manipulate the market by placing big bets to sway the odds.
In theory, a wealthy or motivated player might buy or sell a large volume of shares to push the price artificially high or low. The worry is that this could mislead observers into thinking an outcome is more or less likely than it truly is.
The good news is that research studies have found that attempts to manipulate prediction markets usually get corrected quickly, and in some cases the attempt ends up increasing the market’s accuracy by encouraging counter-bets from informed traders. After all, if someone deliberately misprices the odds, savvy participants can make money by forecasting against the manipulator.
Illiquidity
Illiquidity is a fancy term for a market that doesn’t have many participants or much money being traded.
In a highly liquid market (like major stock exchanges), one trade won’t move the price much because there are many buyers and sellers. But in a small prediction market with few traders, the market can be “thin.”
This means prices can swing sharply on just a handful of trades. Low liquidity is a limitation because it makes the market’s probabilities less reliable. If only a few people are trading, the price might reflect one person’s opinion rather than a true crowd consensus. In other words, with too few traders, the “wisdom of the crowd” can turn into just the whim of a couple of people.
A well-designed prediction market tries to attract a critical mass of traders to stay liquid. Some platforms use automated market makers to provide instant prices and thus encourage continuous trading even when user activity is low.
Regulatory & legal issues
One major limitation for prediction markets’ worldwide availability isn’t technical at all—it's legal.
In some jurisdictions, prediction markets face regulatory hurdles because authorities view them as a form of gambling or unregulated financial trading. The regulatory limbo has caused many prediction market platforms to restrict their services. For users, this means accessibility can be limited. You might find that a prediction market isn’t available in your region.
The landscape is slowly changing as some regulators consider allowing certain event markets (for instance, prediction markets on elections or economic indicators).
Some common misunderstandings of prediction markets
Because prediction markets combine concepts from finance and probability, we wish to clarify a few common misunderstandings:
- “Prediction markets are just gambling.” It’s true that participating in a prediction market may feel like betting: you can win or lose money based on an outcome. The key difference, however, is the purpose and the mechanism. The purpose: prediction markets are designed to forecast and aggregate information, not just for entertainment or risk-taking. The mechanism: with prediction markets, there is no “house”—rather, users interact with these markets by buying “yes” or “no” contracts and the platform does not necessarily act as a counterparty or take a direct loss if the user “wins.”
- “If the market says 70%, that outcome will happen for sure.” A market probability is not a guarantee. If something is at 70%, it means if the same situation occurred 100 times, the market expects that the event would happen in about 70 of those times and would not happen 30 of those times. In a one-off reality, a 30% chance can absolutely happen.
- “Only people with insider information can win.” Not true. While having better information obviously helps, prediction markets can be profitable for anyone, and you can profit by research and logical reasoning. Many successful traders simply stay up to date on news, use statistics, or notice when the odds don’t align with publicly available data. In fact, insider trading rules may apply and insiders should not participate in markets if they have non-public inside information.
- “Prediction markets always beat polls or experts.” They do often outperform other methods because of the reasons we discussed. However, it’s not a universal law. Sometimes well-designed polls or expert analyses might do as well or better, especially if a market is low on participation or if the poll includes information the market hasn’t absorbed.
Trading prediction markets with Phantom
You can now trade prediction markets directly in your Phantom wallet—powered by Kalshi via DFlow.
To get started, you’ll need the Phantom mobile app. Prediction markets in Phantom are supported only on mobile and are not available in all jurisdictions.
Once you’re set, open the Phantom app and tap "Predictions". From there, you can browse featured, trending, or live markets, or filter by categories like sports, politics, or crypto. Select any event to view key details, available outcomes, and current prices before placing your trade.
If you’d like to learn more about trading prediction markets on Phantom, our help guide has everything you need.
FAQs
Disclaimer: Prediction markets in Phantom are not available in all jurisdictions. They may involve risks, including but not limited to volatile pricing, limited liquidity, and potential regulatory changes. Trading prediction markets may incur transaction fees and other costs. If your prediction is incorrect, you may lose the entire amount you allocate to an event. References to third parties are informational only and do not imply endorsement or affiliation.
