> For the complete documentation index, see [llms.txt](https://prismnetwork.gitbook.io/prismnetwork-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://prismnetwork.gitbook.io/prismnetwork-docs/1.-introduction/1.1-prediction-markets-a-pricing-mechanism-for-the-probabilities-of-future-events.md). # 1.1 Prediction Markets: A Pricing Mechanism for the Probabilities of Future Events A prediction market is a market mechanism for trading, pricing, and settling contracts on the outcomes of future events. Participants express their judgments by buying or selling contracts on a particular event outcome, and market prices, through continuous trading, reflect the collective probability expectations of future outcomes. For example, when the "Yes" contract for a given event trades near $0.70, the market is effectively pricing the probability of that event occurring at approximately 70%. Unlike traditional opinion polls, expert forecasts, or media narratives, participants in prediction markets are required to back their judgments with real capital and bear the associated risks. Market prices, therefore, are not merely expressions of opinion — they represent a collective signal refined by capital constraints, risk appetites, and trading behaviors. They distill dispersed information, diverse judgments, and forward-looking expectations into a single observable, tradable, and continuously updated probabilistic price. As market mechanisms mature, prediction markets are evolving from early-stage information experiments into a new form of asset class. Under this framework, political elections, sporting events, macroeconomic data releases, corporate events, AI breakthroughs, war risks, entertainment outcomes, and public policy changes can all be decomposed into probabilistically priced, tradable, and settleable contracts. Real-world events are being financialized; future outcomes are being probabilized; and information once scattered across news, opinions, and analyses is now being continuously expressed through market mechanisms. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://prismnetwork.gitbook.io/prismnetwork-docs/1.-introduction/1.1-prediction-markets-a-pricing-mechanism-for-the-probabilities-of-future-events.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.