How Do Prediction Markets Work? Contracts, Fees and Payouts (Kalshi & Polymarket)

Before you fund a prediction-market account, it helps to understand exactly what you’re buying, how you get paid, and what it costs. The mechanics are simpler than they look.

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The short version: A prediction-market contract is a Yes/No bet on an outcome, priced between $0.01 and $0.99 — and that price is the market’s implied probability. Buy “Spain to win” at $0.16 and it pays $1.00 if Spain win (an $0.84 profit) or $0.00 if they don’t. You can sell before the event settles as the price moves, so you’re never locked in. Fees are small per trade but vary, and you withdraw to the bank account you funded with. Your maximum loss is whatever you paid — no leverage, no owing more than your stake.

How a contract works

Every market is a question with a Yes and a No side. “Will Spain win the 2026 World Cup?” Each side is a contract priced somewhere between one cent and 99 cents, and the two sides always add up to roughly a dollar. The price is the probability: a contract at $0.16 means the market prices that outcome at about 16%.

When the event resolves, the winning side pays exactly $1.00 per contract and the losing side pays $0.00. So your profit is the gap between what you paid and a dollar:

• Buy Yes at $0.16 → if it happens, you collect $1.00, a profit of $0.84 per contract.
• Buy Yes at $0.70 → if it happens, you collect $1.00, a profit of $0.30 per contract.

A cheaper contract pays more if it hits, because it’s less likely — exactly like longer odds at a sportsbook. If you understand how betting odds convert to probability, you already understand prediction-market pricing.

You can sell before it settles

This is the feature that makes a prediction market behave like trading rather than betting. You don’t have to hold a contract until the event ends. If you buy Spain at $0.16 and they win their group convincingly, the contract might reprice to $0.24 — and you can sell for the difference without waiting for the final. Likewise you can cut a position that’s moving against you. That continuous, two-sided market is the core difference from a fixed-odds bet slip.

How Kalshi works specifically

Kalshi is the simplest on-ramp for US traders. You verify your identity, link a US bank account, and fund in dollars — no crypto. From there you browse markets (World Cup winner, group winners, individual matches, the Golden Boot), buy Yes or No on the outcomes you have a read on, and either hold to settlement or trade out early. Because it settles in dollars, the money you withdraw is the money you see — no conversion step.

How Polymarket works specifically

Polymarket works on the same Yes/No contract principle, with the deepest liquidity of any platform — its World Cup winner market alone traded over $1.8 billion early in the tournament. The main practical differences for US users: you access it through the regulated app (not the website), and it historically ran on crypto, though the US entity is built to onboard you without holding USDC yourself. The deeper the market, the tighter the price you get filled at, which is Polymarket’s main edge on headline markets.

Fees and withdrawals

Two costs to understand:

1. Fees. Both platforms take a cut, usually via trading fees and sometimes a withdrawal fee. The amounts are generally small per trade but the structure changes over time, so check the current fee page on each platform before trading in size. In practice, the bigger hidden cost on a thin market is the spread — the gap between buy and sell prices — not the headline fee. Trade liquid markets and the spread shrinks.
2. Withdrawals. You withdraw available funds back to the bank account you funded with, from the cash section of the app. Money locked in open positions isn’t withdrawable until you close them or the market settles. On Kalshi this is a straightforward dollar transfer; processing time and any fee are shown when you request it.

What you can’t do: lose more than your stake

A basic Yes/No contract has no leverage. If you pay $0.30 for a contract and it settles wrong, you lose $0.30 — full stop. You can’t owe more than you put in, which makes prediction markets less dangerous than leveraged derivatives or accumulator-style betting where losses compound. That doesn’t make it risk-free — you can still lose your whole stake on a bad call — but your downside is always capped at what you paid.

Putting it together

The whole model in one line: buy a Yes/No contract at a price that equals the implied probability, collect a dollar if you’re right, sell early if you want, and never risk more than you staked. Once that clicks, the only questions left are which platform to use and which markets to trade.

FAQ

Is the contract price the same as the odds? Effectively, yes. A contract price of $0.25 corresponds to roughly 25% implied probability, or 3-to-1 odds. The advantage of the price format is that it’s intuitive: a contract that costs more is more likely; one that costs less pays more if it hits.

Do I get my stake back if I win? You collect $1.00 per winning contract, which includes your stake. So if you paid $0.30 and win, you receive $1.00 — your $0.30 back plus $0.70 profit. If you lose, you keep nothing from that contract.

What happens to my money in an open position? It’s tied up until you sell the contract or the market settles. You can withdraw only your available (uncommitted) balance, so if you want cash out, close the positions first or wait for resolution.

Are prediction-market fees higher than a sportsbook’s? Not usually — the explicit fees tend to be modest. The fairer comparison is total cost including the spread, where liquid prediction markets are often competitive with or better than a sportsbook’s built-in margin. On thin markets, though, the spread can cost you more than any fee.