Prediction Markets Glossary: Core Terms and Mechanisms
Prediction markets use a compact vocabulary. New readers quickly run into terms like AMM, oracle resolution, scalar market, and conditional market. If those labels stay fuzzy, it becomes much harder to read probabilities, compare market structures, or understand why prices move.
This glossary explains the core language behind modern event trading in plain English. It works as a foundational hub for readers who want to learn how prediction markets work, how market makers support trading, and why automated market makers changed liquidity.
Instead of repeating the same definitions across many pages, this page gives each concept a precise role. That helps reduce cannibalization, supports a central glossary hub, and creates clean paths for deeper supporting articles. Last reviewed: April 2026.
Prediction Market
A prediction market is a market where traders buy and sell contracts tied to future events. The price reflects the collective probability that a given outcome will happen. If a contract trades at 0.65, the market is effectively pricing a 65% implied probability.
Unlike static forecasts, these prices update as new information arrives. Polling, economic data, regulation, injuries, and earnings releases can all move the curve in real time.
Supporting article opportunity: a dedicated beginner guide on reading prices, ranges, and market depth.
Information Market
An information market is a market designed to aggregate dispersed knowledge. The idea is simple: people trade on what they know, and the price becomes a summary of collective belief.
In practice, information market and prediction market are often used almost interchangeably. The difference is mostly emphasis. Prediction market highlights the tradable contract. Information market highlights the knowledge-aggregation function behind the price.
Supporting article opportunity: a comparison of markets, polls, and expert panels as forecasting tools.
Event-Driven Market
An event-driven market is built around a specific future event and a defined settlement rule. Common examples include elections, central bank decisions, sports finals, regulatory approvals, and product launches.
The key feature is that the contract value depends on a verifiable event, not on a vague narrative. That makes this format useful for traders who want exposure to a single catalyst.
Binary Option
In prediction-market language, a binary option usually means a contract with two possible outcomes, such as Yes or No. If the event happens, the Yes side settles at full value and the No side settles at zero. If the event does not happen, the reverse occurs.
Some platforms use binary option, while others prefer yes/no contract or binary contract. These terms overlap heavily, but legal definitions can differ by jurisdiction, so it is useful to keep that nuance in mind.
Supporting article opportunity: a page comparing event-based binary contracts with regulated financial binary options.
Outcome Market
An outcome market is any market whose contracts settle according to one or more defined event outcomes. It is a broad category that includes binary, categorical, scalar, and multi-outcome structures.
The term is useful because it separates event-linked contracts from financial instruments whose value does not depend on a single resolution event.
Conditional Market
A conditional market is a market where payout depends on a prior condition being met. For example, a contract might ask who wins an election only if a candidate officially enters the race, or what policy passes only if a bill clears committee.
This structure helps traders separate base-case forecasting from scenario-specific forecasting.
Supporting article opportunity: a guide to scenario trees and branching probabilities in politics and macro.
Parimutuel Betting
Parimutuel betting pools all stakes together and distributes payouts based on the final share of the pool after fees. The payout is not fixed at entry. It depends on how everyone else positions before the pool closes.
That differs from many event-trading systems, where price discovery continues throughout the life of the contract and traders can often exit before settlement.
Supporting article opportunity: a side-by-side comparison of parimutuel betting, exchange betting, and AMM-based markets.
Fixed-Odds Market
A fixed-odds market offers a quoted price at the time a position is taken, and that quote locks in the payout ratio for that trade. Traditional sportsbooks often use this model.
Event trading usually works differently. Prices move as traders buy and sell exposure, which creates a live probability curve instead of a static line.
Market Resolution
Market resolution is the process that determines the official result after the event deadline or trigger condition is reached. A resolved contract identifies the correct outcome and settles value accordingly.
Clear rules matter. If the question is vague, traders cannot price it well. Strong resolution criteria define the source, timing, tie-break logic, and handling of delays or ambiguity.
Supporting article opportunity: a practical guide to writing resolution criteria that reduce disputes.
Oracle Resolution
Oracle resolution uses a designated source, system, or authority to determine the final result. The oracle might be an election authority, a government data release, a sports feed, or an on-chain source.
The main question is trust. Traders need to know who controls settlement, how quickly the source updates, and how resistant the process is to manipulation.
Supporting article opportunity: a comparison of centralized resolution committees, API-fed oracles, and decentralized oracle networks.
Market Maker
A market maker is a participant or system that helps keep a market tradable by quoting prices or supplying liquidity on both sides. In traditional finance, market makers narrow spreads and reduce the risk that traders cannot enter or exit positions.
In event trading, the term can refer to a human liquidity source or to the trading engine itself. Readers who want the full mechanics can go deeper in the guide to market makers.
Automated Market Maker (AMM)
An automated market maker, or AMM, is an algorithmic pricing system that uses a formula instead of a traditional order book. In event trading, an AMM lets traders buy or sell outcome exposure even when no direct counterparty is waiting on the other side.
This matters because liquidity is one of the hardest problems in these markets. AMMs help solve it by turning trade demand into dynamic pricing. Readers who want the deeper mechanics can continue with automated market makers.
Supporting article opportunity: a standalone explainer on LMSR, slippage, and liquidity sensitivity.
Liquidity Provider
A liquidity provider is any participant or treasury source that contributes capital so a market can absorb trades more smoothly. In an order book, liquidity providers post bids and offers. In AMM systems, they may fund pools or otherwise support the pricing engine.
The practical result is tighter trading conditions. Better liquidity usually means less slippage, steadier prices, and a market that stays usable when attention spikes.
Supporting article opportunity: an explainer on fees, inventory exposure, and adverse selection for liquidity providers.
Market Creation
Market creation is the process of designing and launching a new event contract. That includes writing the question, defining outcomes, setting dates, selecting a resolution source, and choosing the trading format.
Good market creation is editorial work as much as product work. A weak framing creates confusion, thin liquidity, and settlement disputes. A strong framing improves price discovery.
Supporting article opportunity: a workflow guide for writing precise, tradable market questions.
Event Contract
An event contract is a tradable contract tied to the result of a future event. It is the core instrument in event trading. Each contract has a settlement rule, a payoff structure, and a triggering event or deadline.
Event contracts can be binary, categorical, or scalar. What unifies them is that they settle according to what happens in the real world.
Yes/No Contract
A yes/no contract is the simplest event contract. The market asks a direct question, such as whether a candidate wins, whether inflation exceeds a threshold, or whether a team qualifies.
If the answer is yes, the Yes side settles at full value. If the answer is no, the No side does. Because the format is so simple, yes/no contracts are often the cleanest entry point for new readers.
Multi-Outcome Market
A multi-outcome market contains more than two possible results. An election with several candidates, an awards race with multiple nominees, or a tournament winner market are common examples.
This format reveals more nuance than a binary contract because it shows how probability is distributed across the whole field.
Supporting article opportunity: a dedicated explainer on fragmented probability, normalization, and overround.
Scalar Market
A scalar market resolves to a number or numeric range rather than to a named discrete outcome. Examples include inflation at year-end, total seats won, GDP growth, or the closing value of an asset on a specific date.
Scalar structures are useful when the forecast target is continuous or ordinal. They often carry more information than a yes/no contract because they show both direction and magnitude.
Supporting article opportunity: a guide comparing scalar structures, range markets, and probability bands.
Categorical Market
A categorical market resolves to one result from a defined list of labels. Unlike scalar structures, the possible answers are not numbers. Unlike binary contracts, there are more than two possible selections.
Examples include which party wins an election, which country signs a treaty first, or which product launches ahead of the others. This format works best when the event has a known list of mutually exclusive outcomes.
How the Terms Fit Together
The easiest way to read this glossary is as a stack. Prediction market and information market describe the overall system. Event contract and outcome market describe the instrument. Yes/no, multi-outcome, scalar, and categorical structures describe the contract format. Market maker, AMM, and liquidity provider describe how trading stays active. Market creation, resolution, and oracle resolution describe how contracts are launched and settled.
We use that layered approach because it prevents a common mistake: mixing up contract type, liquidity mechanism, and settlement logic. When those layers stay separate, the whole ecosystem becomes easier to understand.
How to Use This Glossary Without Creating Cannibalization
A glossary hub works best when it defines terms clearly, then routes readers to deeper pages for advanced questions. This page should stay focused on concise but useful definitions, concept relationships, and navigation logic across the cluster.
Standalone articles should go deeper into specific search intents like what is a prediction market, what is a market maker, what is an AMM, how market resolution works, or parimutuel betting versus event trading. That lets the glossary rank for broad educational intent while focused pages answer narrower questions.
Final Takeaway
Once the language is organized, the ecosystem becomes much easier to read. The main terms fall into three jobs: how contracts are structured, how liquidity works, and how outcomes are resolved. That is the foundation this glossary is meant to provide.
From here, the strongest follow-up pages are the ones that unpack a single mechanism in full detail, especially market resolution, oracle design, AMM pricing, and the trade-offs between binary and multi-outcome contracts.
