UK guide
How Prediction Markets Work
From order matching and automated market makers to settlement and market-implied probability.
Published 1 September 2026Reviewed 18 September 2026
From question to contract
A market begins with a question, a closing time and an objective settlement source. Traders then take positions on the possible outcomes.
Trading and price discovery
Exchanges match orders from participants, while automated market makers quote prices using a formula. New trades change the marginal price and therefore the visible implied probability.
Settlement
When the event is resolved, winning contracts pay according to the rules and losing contracts expire without value. Clear wording and a named resolution source are essential.