# Prediction market glossary

URL: https://tomorrowalpha.com/learn/prediction-market-glossary
Updated: 2026-10-12

Key prediction-market terms: an event contract pays $1 if an outcome happens; its price is the implied probability; makers post orders, takers fill them; an oracle or exchange rulebook decides resolution; AMMs price trades automatically; and futarchy is a governance idea where decisions follow market forecasts.

## Terms A–Z

| Term | Meaning |
| --- | --- |
| AMM (automated market maker) | Algorithm that quotes prices from a formula instead of an order book (e.g. Manifold's Maniswap, LMSR). |
| Binary option | Contract paying a fixed amount or nothing; how event contracts are classified in some countries. |
| Betting exchange | UK term for a peer-to-peer market (Betfair, Smarkets). |
| CFTC | US Commodity Futures Trading Commission, the federal regulator of event contracts. |
| DCM | Designated Contract Market — the CFTC licence Kalshi and Polymarket US hold. |
| Event contract | A contract whose payout depends on whether an event occurs. |
| Futarchy | Governance concept (Robin Hanson) where policies are chosen by what prediction markets forecast will work best; 'futarchy AMMs' implement it on-chain. |
| Implied probability | Contract price divided by payout: 62¢ / $1 = 62%. |
| Liquidity | How much can be traded without moving the price. |
| Maker / taker | Makers post resting orders; takers fill them. Fees usually fall on takers. |
| Mana | Manifold Markets' play-money currency. |
| Oracle | Mechanism that reports outcomes on-chain (Polymarket international uses UMA's optimistic oracle). |
| Order book | List of open buy and sell orders at each price. |
| PredictIt | Academic-origin US political market with low position limits. |
| Resolution | The official determination of YES or NO, per the market's rules. |
| Spread | Gap between best bid and best ask. |
| USDC | Dollar stablecoin used to settle Polymarket international. |
| Zeitgeist | Blockchain project for decentralised prediction markets and futarchy. |

## Frequently asked questions

### What is futarchy?

A governance model proposed by economist Robin Hanson in which a group votes on goals but uses prediction markets to choose the policies expected to achieve them.

### What does DCM mean?

Designated Contract Market — a US exchange licensed by the CFTC to list futures and event contracts.

## Sources

1. [CFTC — designated contract markets](https://www.cftc.gov/IndustryOversight/IndustryFilings/TradingOrganizations)