How prediction market prices work
A price is what traders pay for a contract that pays $1 if something happens.
A prediction market sells contracts on a question with a clear answer: will the Fed cut rates in December, who wins the Kansas Senate race. Each contract pays $1 if its outcome happens and nothing if it doesn't.
So the price is a probability. If a "Yes" contract trades at 62 cents, traders as a group are paying 62 cents for a dollar that arrives only if the thing happens. That's roughly the same as saying they think it's 62% likely. On PricedNews we show it as 62%.
Who sets the price
Nobody does, on purpose. Buyers and sellers post orders, and the price is wherever the latest trade happened between someone who thinks it's too cheap and someone who thinks it's too dear. When news breaks, the people who react first move the price, and everyone can see it move.
When a price is worth less
Little money traded. A market with a few thousand dollars in it can swing on one order. We mark these as thin and never lead with them.
A wide spread. If the best offer to buy is 55 cents and the best offer to sell is 65, the "price" in the middle is a guess. Market pages show the spread.
Several outcomes. In a market with many candidates, the prices usually add up to a little more than 100%. That extra is the overround, the cost of trading, and it's why a candidate's price isn't exactly their chance.
See it live
The Kansas Senate race is close to a coin flip, the Fed decision page shows several outcomes adding up, and today's biggest moves show prices reacting to news. Next: how to read a probability.