How Polymarket Works

Polymarket is the largest crypto based prediction market. People use it to trade on the outcomes of elections, economic decisions, sports, crypto prices and many other events. Each market asks a question with defined outcomes, and traders buy and sell shares that pay $1 if their outcome happens. This lesson explains the mechanics: what a share is, how trading works, where prices come from and how markets are settled. If you are new to the idea, start with What Are Prediction Markets?.

Shares and payouts#

Every market has outcome shares, most often Yes and No. A winning share pays $1 when the market resolves; a losing share pays $0. Prices move between 0¢ and 100¢ and reflect the market's view of the probability. See Reading Odds as Probabilities.

Polymarket's shares are tokens built on the Conditional Token Framework, originally developed by Gnosis. One Yes and one No share together can always be redeemed for $1, which is why their prices add up to roughly $1. A pair can be created by depositing $1 of collateral, and a pair can be merged back into $1.

Money and network#

Trading uses USDC, a dollar stablecoin, on the Polygon network. Users deposit funds into a wallet connected to their account; the platform handles most of the blockchain steps in the background. See Stablecoins and Blockchain Basics.

The order book#

Polymarket uses a central limit order book, much like a stock exchange. Orders are matched off chain for speed and settled on chain.

• Bids are offers to buy shares at a price; asks are offers to sell.
• Limit orders rest in the book at your chosen price. See Limit Orders.
• Market orders fill immediately against the best available prices. See Market Orders.
• The spread between the best bid and best ask is a cost to anyone trading immediately. See Bid-Ask Spread.

Because Yes and No are linked, a bid for Yes at 40¢ is equivalent to an offer to sell No at 60¢. The book shows both views of the same liquidity.

Fees#

Most Polymarket markets have historically charged no trading fee, though some fast moving markets have used taker fees with rebates for liquidity providers. Fees can change, so check the platform's current fee page. Even without fees, the spread and slippage are real costs. See Transaction Costs.

How markets resolve#

Each market has written rules stating how the outcome is decided, the source and the time. Two systems are used:

• UMA's optimistic oracle for most markets: after the event, someone proposes the outcome and posts a bond. If no one disputes it within the challenge window, it becomes final. If disputed, UMA token holders vote. See Oracles.
• Automated price feeds for short crypto markets: up or down rounds settle on Chainlink price data at fixed times, with no human proposal needed. See Up or Down Markets Explained.

Rules matter. Traders have lost money because a question resolved on a technicality they did not read. Always read the market rules before trading.

Selling before resolution#

You do not have to hold until the end. If you bought Yes at 40¢ and news lifts it to 70¢, you can sell for a 30¢ profit per share. Many traders never hold to resolution; they trade changes in probability. When a market resolves, winning shares can be redeemed for $1 each.

Who can use it#

Polymarket's international platform is not available everywhere, and the rules differ by country. In 2025 Polymarket acquired a CFTC licensed exchange to offer a regulated version to US users. Availability changes over time, so check the platform's terms and your local laws.

Risks#

• Total loss per share if your outcome does not happen.
• Resolution and rules risk.
• Liquidity: thin markets have wide spreads.
• Smart contract, wallet and custody risk from crypto infrastructure. See Bridge and Smart Contract Risk.
• Behavioural risk: fast markets invite overtrading. See Overtrading.

Frequently asked questions#

How does Polymarket make money?#

Polymarket has historically charged no fees on most markets; some markets carry taker fees. Its business model and fees can change, so check its current documentation.

What currency does Polymarket use?#

USDC, a stablecoin pegged to the US dollar, on the Polygon network.

How are Polymarket markets resolved?#

Most resolve through UMA's optimistic oracle, where a proposed outcome can be disputed; short crypto up or down markets settle automatically on Chainlink price data.

Next, learn to judge whether a price is good value in Reading Odds as Probabilities.

Sources#

• Polymarket, Documentation
• Wikipedia, Polymarket