What Are Prediction Markets and How Can Crypto Users Bet on Them?

Core Insights

Prediction markets allow users to buy and sell shares tied to future events, leveraging blockchain technology for global access, transparency, and automation. The article explains how these markets work, the different types and platforms available, and highlights the importance of security—recommending hardware wallets like Tangem for safe participation. It also covers legal considerations, risks involved, and practical steps for getting started, emphasizing self-custody and informed decision-making.

 

Imagine putting money on whether Bitcoin hits $150,000 this year, who wins the next US election, or whether a specific AI company will go public before December. Not just a casual bet with a friend, but a real market where thousands of people are all putting their money where their mouth is, and the price you see actually tells you what the crowd thinks will happen. That's exactly what prediction markets do, and with crypto, anyone with a wallet and an internet connection can join in.

What Exactly Is a Prediction Market?

A prediction market is a platform where you buy and sell "shares" tied to the outcome of a future event.

 

Think of it like this: If a question asks, "Will Ethereum hit $10,000 before the end of the year?", there will be two types of shares: Yes and No. Each share costs between $0 and $1. If a “Yes” share is trading at $0.35, that means the market, which real people form by putting real money in, believes there’s roughly a 35% chance that Ethereum reaches $10,000. If you're right when the event resolves, your share pays out $1.00. If you're wrong, it's worth $0. That's it at the core. Simple enough. But the mechanics underneath are fascinating.

A Quick History Lesson

Prediction markets aren't a new idea. People have been betting on future events for hundreds of years, from who would win a war to who'd be the next king. The Iowa Electronic Markets, one of the first modern prediction platforms, launched back in 1988 at the University of Iowa to forecast election outcomes.

 

What crypto did was supercharge the whole thing. With blockchain technology, prediction markets can now be:

• Open to anyone with a crypto wallet (no bank account needed)
• Transparent: every trade and outcome is recorded on-chain
• Automated: smart contracts pay out winners without a middleman
• Global: accessible from almost anywhere in the world

Between January and October 2025, prediction market platforms generated over $27.9 billion in trading volume. Weekly activity hit a record high of $2.3 billion in a single week in October 2025. That's not a niche experiment anymore, that's a real market.

How Do Crypto Prediction Markets Actually Work?

Here's the step-by-step of what happens under the hood:

1. A Market Gets Created

Someone creates a question with a clear, verifiable outcome and a deadline. For example: "Will Bitcoin close above $100,000 on December 31, 2026?"

2. Shares Are Issued

The system creates two outcome tokens: Yes and No. You can buy either one. Prices start at $0.50 each (a coin flip) and shift based on how people are trading.

3. Prices Move With the Market

As more people buy "Yes," the price rises (and "No" falls). The price at any moment reflects the crowd's best guess at the probability. If "Yes" trades at $0.72, the market thinks there's a 72% chance Bitcoin hits that price.

4. You Can Trade Before the Event Resolves

Just like stocks, you don't have to hold your position until the deadline. If you bought "Yes" at $0.30 and it rises to $0.65 because of positive news, you can sell and pocket the difference.

5. An Oracle Settles the Market

When the event happens or doesn't, an oracle, a system that feeds real-world data to the blockchain, reports the outcome. The smart contract then automatically pays $1.00 per share to the winning side and $0 to the losing side.

The Role of Oracles And Why They Matter

This is one of the more technical and important parts of prediction markets that people gloss over.

An oracle is basically a bridge between the real world and the blockchain. Smart contracts can't browse the internet or watch TV; they can only read data that gets pushed onto the chain. Oracles do that job.

 

Platforms like Polymarket use the UMA Optimistic Oracle system, which works like this:

• When an event resolves, someone proposes the outcome
• If nobody disputes it within a window (usually 48-72 hours), it's accepted
• If someone does dispute it, UMA token holders vote to settle the debate

 

This system works most of the time, but it has known weaknesses. In March 2025, a manipulation attack on a Web3 prediction market's oracle led to a $7 million loss for users. That's not a scare tactic; it's just an honest look at where the risks live. More centralized platforms like Kalshi use their own internal resolution process, which is faster but means you're trusting a company.

Types of Prediction Markets

Most beginners start with binary markets; they're the easiest to understand and offer the clearest win-or-loss outcomes.

What Can You Actually Bet On?

The range is honestly wide. Here's what's available on major platforms today:

• Crypto prices — Will BTC reach $X by Y date?
• Elections and politics — Presidential races, senate seats, policy decisions
• Sports — Champions League winners, NBA championships, Super Bowl
• Tech milestones — Will a specific AI model beat a benchmark? Will a company launch before a date?
• Macro economics — Will the Fed cut rates? Will US inflation hit X%?
• Pop culture — Awards shows, viral events, social media follower counts
• Even niche stuff — Will Elon Musk tweet about a specific topic this week?

 

This flexibility is part of what makes prediction markets genuinely useful. They aggregate the knowledge of thousands of people into a single number, and that number is often more accurate than polls or expert forecasts.

The Main Platforms You Should Know

• Polymarket

The biggest name in decentralized prediction markets. Polymarket runs on the Polygon blockchain and uses USDC for all trading. It's hit over $18 billion in trading volume and covers thousands of active markets at any time.

 

The upside: massive liquidity, tons of markets, transparent, and on-chain. 

The downside: it's not available to users in the US, UK, France, Australia, Germany, and several other countries due to regulatory restrictions.

• Kalshi

The first CFTC-regulated prediction market in the US. Kalshi is legal for US users and operates more like a traditional exchange. It accepts USDC and other crypto deposits, then converts them into dollars for trading. By September 2025, Kalshi was processing around $1.3 billion in monthly volume.

 

The upside: legal in the US, regulated, trustworthy. 

The downside: a more limited market selection compared to Polymarket, and it's a centralized platform.

• Opinion Markets

Launched on BNB Chain in October 2025, Opinion is the fast-rising challenger. By January 2026, its TVL hit a record $158 million, making it the second-largest decentralized prediction market after Polymarket. Unlike Polymarket, Opinion charges fees and has already generated over $14 million in cumulative protocol revenue.

• Augur

One of the originals. Augur pioneered decentralized prediction markets but never quite took off at scale and gained notoriety when people started placing markets on political assassinations. Today, it's a shadow of its former self, with only about $1 million in TVL.

Centralized vs. Decentralized: What's the Difference?

If you care about truly owning your funds and not asking anyone for permission, decentralized is the way to go. But that also means more personal responsibility for security.

The Risks You Need to Know About

Let's be straight here. Prediction markets are not free money. Here are the real risks:

1. You can simply be wrong—the most obvious risk. You buy "Yes" on something that doesn't happen. Gone.
2. Oracle manipulation: Bad actors have successfully manipulated Oracle systems to trigger incorrect payouts, which is a real and documented risk in decentralized markets.
3. Smart contract bugs: Your funds are only as safe as the code. Even audited contracts have had bugs that led to losses.
4. Low liquidity: In smaller or newer markets, limited numbers of buyers and sellers can make it easy for a single large trader to move prices and harder for you to exit a position.
5. Regulatory crackdowns: Many countries are still writing the rules around prediction markets. A legal platform today might not be tomorrow.
6. Custody risk: If you use a hot wallet or leave funds on an exchange, you remain exposed to hacks and platform failures, which makes your wallet setup especially important.

How to Get Started: A Step-by-Step Guide

Here's the practical path from zero to your first prediction market trade.

Step 1: Get a Wallet

You need a crypto wallet that can hold USDC (the stablecoin most platforms use) and connect to dApps. 

Step 2: Buy USDC

You can buy USDC on any major exchange. It's a stablecoin pegged 1:1 to the US dollar, so the price doesn't fluctuate. You're not speculating on the coin itself, just using it as your "chips" in the prediction market.

Step 3: Transfer USDC to Your Wallet

Send your USDC to your self-custody wallet so you control the funds rather than an exchange, which matters because exchanges can freeze accounts, get hacked, or go bankrupt, as history has shown more than once.

Step 4: Connect to a Prediction Platform

Go to a platform like Polymarket. Click "Connect Wallet," select your wallet type, and authorize the connection. You'll typically need USDC on the Polygon network, since most decentralized platforms run on it.

Step 5: Find a Market and Trade

Browse markets, pick one you have a view on, decide on Yes or No, enter the amount you want to spend, and confirm the transaction.

Step 6: Monitor and Exit

Watch your position. If the price moves in your favor before the event resolves, you can sell for a profit. If you want to hold until resolution, just wait.

Why Your Wallet Choice Actually Matters Here

Many people use hot wallets, which are software wallets on their phones or in their browsers that stay connected to the internet. MetaMask is the most well-known example. It works, and it's fine for dipping your toes in. But it's also the most targeted type of wallet by hackers and phishing scams. You're one dodgy link away from losing everything.

 

Other people use custodial wallets, where a company holds your keys. The arrangement creates additional risk for prediction market users because account freezes or platform failures can block access to funds.

 

What you actually want is self-custody with hardware security. That means your private keys never touch the internet, but you can still connect to dApps and move quickly when you need to.

Why Tangem Is the Best Setup for Prediction Market Traders

Tangem is a hardware wallet that looks and feels like a credit card. You tap it against your phone via NFC to sign transactions. No cables, no USB, no seed phrase written on a napkin somewhere; just a card in your wallet. For someone who wants to participate in prediction markets, Tangem hits a rare combination of needs:

Hardware-Level Security

Your private keys are generated and stored in the card's secure element chip, which is rated EAL6+, the same certification level used in biometric passports. The keys never leave the card. Ever. Not when you're browsing Polymarket. Not when you're confirming a trade. The card signs the transaction locally, and only the signature goes to the network.

Full dApp Access via WalletConnect

Tangem connects to prediction markets like Polymarket via WalletConnect, a secure protocol that enables your hardware wallet to communicate with dApps. You scan a QR code on Polymarket, the Tangem app asks you to confirm, you tap your card, and the transaction is complete. As of app version 5.27, Tangem added real-time scam detection powered by Blockaid. Every time you try to connect to a dApp, the app vets it against a live database of malicious sites and flags anything suspicious before you sign a single thing. 

 

For prediction markets specifically, where phishing sites mimicking real platforms are a known threat, this is genuinely valuable. Supported networks include Ethereum, Polygon, Avalanche, BNB Smart Chain, Base, Arbitrum, Optimism, and many more, basically covering every chain that major prediction platforms run on.

No Seed Phrase to Lose

Most hardware wallets give you a 24-word recovery phrase and tell you to write it down and store it somewhere safe. That phrase, if found, gives anyone complete access to your wallet. Tangem takes a different approach; the keys are stored across your physical cards (you get multiple as backups), and there's no written seed phrase to steal. Your backup is another card, not a piece of paper. For beginners, especially, this removes one of the most stressful parts of using crypto.

Hold USDC and Earn Yield While You Wait

Prediction markets are event-driven. You're not always actively trading. While you wait for your positions to resolve, Tangem lets you earn passive yield on USDC through its Yield Mode powered by Aave — meaning your funds are working even when you're sitting on the sidelines. You can send, receive, or swap your USDC at any time without locking it up.

Spend Your Winnings Anywhere

Through Tangem Pay, winners can connect a virtual Visa card directly to their self-custody wallet and spend USDC at any Visa-accepting merchant globally, including via Apple Pay and Google Pay. The balance stays on-chain until the moment of purchase; no need to cash out to an exchange first.

Other Wallets Comparison

MetaMask and Trust Wallet are free and convenient. But "free" in crypto often means you're the product, or more precisely, you're more exposed. Prediction markets involve real money.

Are Prediction Markets Legal?

This is a genuinely complicated question that depends on where you live. In the United States, the CFTC regulates "event contracts." Kalshi is fully regulated and legal. Polymarket, however, has explicitly blocked US users due to its decentralized, unregulated structure. In 2022, Polymarket settled with the CFTC for $1.4 million and blocked US access.

 

In the European Union, prediction markets exist in a gray zone. MiCA, the EU's new crypto framework, may clarify some of this. Australia, the UK, France, Germany, Singapore, and several other countries also restrict or ban access to certain platforms.

 

The bottom line: always check the terms of service for the specific platform you want to use, and be aware of the laws in your country. This article is for educational purposes only and is not legal or financial advice.

A Real-World Example: Walking Through a Trade

Let's say you believe the Federal Reserve will cut interest rates at its next meeting in 2026, and you want to bet on it.

1. You open Polymarket and find the market: "Will the Fed cut rates at the June 2026 meeting?"
2. "Yes" shares are trading at $0.42 (42% probability according to the market)
3. You think the market is underestimating the chance; you believe it's closer to 65%
4. You buy 100 "Yes" shares for a total of $42.
5. Over the next few weeks, economic data will come in soft, and more traders will agree with you.
6. The "Yes" price moves up to $0.61
7. You sell all 100 shares for $61, pocketing $19 before the event even resolves.
8. Or you hold until the Fed meeting — if they cut, you get $100 (a $58 profit). If they don't cut, you lose your $42

 

The whole trade happens through your Tangem wallet. Your keys never leave the card. You sign the transaction with a tap.

Prediction Markets vs. Regular Betting vs. Trading

Glossary of Key Terms

• Smart Contract: Self-executing code on a blockchain that automatically handles trades and payouts—no intermediary needed. Learn more glossary terms on Tangem.
• Oracle: A system that feeds real-world data to a blockchain. Prediction markets need oracles to determine whether an event occurred.
• USDC: A stablecoin always worth $1 USD, used as the main currency on most prediction platforms.
• WalletConnect: A protocol that lets your crypto wallet securely communicate with dApps like Polymarket.
• Liquidity: How easy it is to buy or sell in a market without moving the price. Low liquidity = harder to trade without impact.
• EAL6+: A security certification level for chips. The higher the number, the more rigorous the testing. Tangem's chip meets this standard.
• Polygon: A fast, low-fee blockchain that most decentralized prediction platforms (including Polymarket) run on.
• Self-custody: Owning your own private keys. Nobody else can freeze or access your funds.

Frequently Asked Questions

Do I need a lot of money to start?

Not at all. Most prediction platforms have no minimum bet beyond a few dollars. You can buy a fractional share on Polymarket for as little as $1–2. Starting small while you learn the mechanics is the smart approach.

Is this gambling?

It depends on who you ask. Economically, prediction markets function differently from gambling because prices reflect real information and collective wisdom rather than fixed odds set by a bookmaker. Legally, the answer varies by jurisdiction; some countries treat it as gambling, while others treat it as financial trading. Do your own research on local laws.

What happens if a platform shuts down?

If you use a decentralized platform and hold funds in your own wallet (not in the platform's custodial account), you retain ownership of those funds. If a centralized platform shuts down, you could lose access to your funds, which is another reason self-custody matters.

Can I lose more than I put in?

No. Prediction markets price shares between $0 and $1. The maximum you can lose is the amount you paid for the shares. There's no leverage or margin involved in standard prediction markets.

How does Tangem specifically connect to Polymarket?

Open Polymarket in your browser. Click "Connect Wallet" and choose WalletConnect. Open your Tangem app, go to WalletConnect, tap the "+" button, and scan the QR code. Tangem will ask you to confirm the connection. Tap your card to authorize. You're connected. All future trades on Polymarket will prompt your Tangem app for confirmation, which you authorize with a tap.

Is my USDC safe in my Tangem wallet between trades?

Yes. When funds are sitting in your Tangem wallet and not deposited into a prediction market, they're fully under your control. The private key is on your card, not on any server. You can even earn yield on idle USDC through Tangem's Aave integration while you wait for your next trade.

Do I pay taxes on winnings from a prediction market?

Likely yes, depending on your country. In the US, the IRS generally treats gains from prediction markets as ordinary income or capital gains. Consult a tax professional familiar with crypto for your specific situation.

What's the difference between buying shares and providing liquidity?

When you buy shares, you're taking a position on an outcome. When you provide liquidity (on AMM-based platforms), you're acting as the market maker, taking the other side of trades. Providing liquidity is more complex and involves different risks, including something called "impermanent loss." Stick to buying shares when you're starting.

Can I use Tangem on any prediction market platform?

Any platform that supports WalletConnect, including Polymarket, most other decentralized platforms, and many DeFi protocols, is compatible with Tangem. Centralized platforms like Kalshi work differently and typically require a direct account login rather than a wallet connection.

Final Thoughts

Prediction markets are one of the most genuinely interesting applications in crypto. They turn information into a tradable asset. They reward people who do their research. And when structured well on a blockchain, they're more transparent and fair than most traditional betting systems. The barrier to entry is low. The tools are available. But the risks are real, from getting your prediction wrong to getting your wallet compromised.

 

The setup that makes the most sense for anyone serious about participating: use a self-custody hardware wallet so your funds stay yours, pick platforms that have proven liquidity and a track record, start small, and understand what you're betting on before you commit any real money. Tangem handles the security side better than anything else at this price point. Tap to connect. Tap to trade. Your keys stay on a card in your pocket. Everything else, the markets, the odds, the outcomes, is up to you.

 

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This article is for educational purposes only and does not constitute financial or legal advice. Prediction markets involve risk. Always research the legal status of prediction markets in your jurisdiction before participating.