HOW CONTRACT PRICES REFLECT PROBABILITY
Plain English
A prediction market contract is priced in cents. If a contract costs $0.60, the market is saying there's a 60% chance the event happens. The 'No' side costs $0.40 (since probabilities must sum to 100%). This makes market prices directly readable as crowd-sourced probability estimates.
Going deeper
In efficient prediction markets, the contract price converges to the true probability of the event as determined by the collective knowledge of all participants. A Yes contract at $0.60 and No contract at $0.40 both reflect the same $1.00 payout on a correct bet. If you think the true probability is actually 80%, the Yes contract at $0.60 is underpriced — you're getting $1.00 for $0.60 when you should be paying $0.80. The complement rule (Yes price + No price = $1.00, minus fees) always holds. When prices deviate significantly from this, arbitrage brings them back. Over many events, well-calibrated prediction market prices have historically been more accurate than expert forecasts.
Examples
Reading Probability Directly
Contract: 'Will the S&P 500 close above 5,000 on December 31?' trading at $0.72. This means: 72% market-implied probability of Yes, 28% probability of No. You don't need to convert — the price IS the probability. You simply decide if you agree with 72%.
Calibration Over Time
Kalshi research shows that events priced at 70% on their platform resolve as 'Yes' approximately 70% of the time across hundreds of contracts. This calibration — where the price accurately reflects reality — is what separates high-quality prediction markets from pure gambling.