# What is a prediction market? How YES and NO pay out

> A prediction market prices contracts on real events between $0 and $1. How YES and NO pay out, a worked example, and how it differs from gambling.


What is a prediction market? It is a market where people trade contracts on the outcome of a real-world event, such as an election. Each contract is priced between 0 and 1 US dollar, and the price reads as the market's running estimate of how likely the outcome is. When the event is decided, a contract on the outcome that happened pays 1 dollar and a contract on the other side pays nothing. Cherry (cherry.fun) is a wallet-to-wallet messenger and community app for crypto, and its users trade prediction markets via the Polymarket mini app inside Cherry chats, where these contracts are called shares.

## How a prediction market works

A binary market has two sides, YES and NO, and their prices add up to about 1 dollar. If YES trades at 40 cents, NO trades near 60 cents. Traders set those prices among themselves. Polymarket's help center says a YES order and a NO order are matched when they add up to $1.00, and that its displayed price, the midpoint of the best bid and ask, reads as a probability.

The arithmetic in round numbers, as an illustration, not a forecast or a live price:

| Step | Figure |
|---|---|
| YES price | 40 cents a share, read as a 40% chance |
| Amount spent | 10 dollars |
| Shares bought | 25 (10 ÷ 0.40) |
| If YES happens | 25 shares pay 25 dollars |
| If NO happens | 25 shares pay nothing; the 10 dollars is gone |

All figures are before any fees. Each market's published rules decide its outcome; once it resolves, positions settle and holders of the correct side claim 1 dollar per share.

## Example on Cherry

In the Polymarket mini app, you open an event, read its "RULES", and pick YES or NO. The trade sheet takes an amount in USDC, and its receipt, opened from a summary line, listed four rows in October 2026: "Side", "Price per share", "Est. shares" and "Max payout". With these figures, a 10 dollar YES trade shows $0.40 per share, 25.00 estimated shares and a $25.00 maximum payout, and the button reads "Buy YES · $10.00". Pressing it shows "Confirm in your wallet…" while you sign the transaction in your Solana wallet.

Under "My positions", a position moves to the "Settled" tab once its market resolves, and the correct side shows a button such as "Claim $25.00".

The sheet links to the Terms of Use, and its tooltip read, in October 2026: "By trading, you agree to the Terms of Use, including that you are not (i) a U.S. person and (ii) located in the United States, France or other restricted territory."

[Polymarket on Cherry](https://chat.cherry.fun/@predict)

Its room had 1,485 members and 4.8 stars from 4 reviews in October 2026.

## Prediction market vs gambling

The difference is who sets the price. A bookmaker sets the odds and takes the other side of your stake. In a prediction market, traders on both sides set a price that moves as the event unfolds, and you can sell a position before the market resolves. Money still rides on an outcome, and a share on the wrong side pays nothing.

What is legal depends on the venue and the country. Kalshi's help center said in October 2026 that Kalshi is regulated by the US Commodity Futures Trading Commission (CFTC) as a Designated Contract Market. Polymarket keeps its US exchange apart from its international one: in October 2026 polymarket.com stated "Trading is blocked in the United States on polymarket.com", while Polymarket US described itself as "operated by QCX LLC d/b/a Polymarket US, a CFTC-regulated Designated Contract Market." Check the rules where you live. Nothing here is financial advice.

Open the Polymarket mini app at chat.cherry.fun/@predict to read a trade sheet before you put money in.

## Related terms

- [Prediction markets on Solana](https://cherry.fun/learn/features/prediction-markets-on-solana/): the Polymarket mini app in full.
- [Polymarket on Solana](https://cherry.fun/learn/guides/polymarket-on-solana/): a first trade, step by step.
- [Perps](https://cherry.fun/learn/glossary/perps-crypto/): contracts on a price, with no expiry.
- [Crypto mini app](https://cherry.fun/learn/glossary/crypto-mini-app/): a web app inside a chat.
- [Mini apps on Cherry](https://cherry.fun/learn/features/mini-apps/): what runs inside Cherry rooms.
- [Are crypto mini apps safe?](https://cherry.fun/learn/guides/are-crypto-mini-apps-safe/): checks before you sign.

## FAQ

### Can you sell a prediction market share before the event resolves?
Yes. While the market is open you can sell a share at the price other traders will pay, which fixes your gain or loss. In the Polymarket mini app, an open position has a "Close" button that sells it, signed in your own wallet like the purchase.

## Sources

- [Polymarket help center: How are prices calculated?](https://help.polymarket.com/en/articles/13364488-how-are-prices-calculated)
- [Kalshi help center: How is Kalshi regulated?](https://help.kalshi.com/en/articles/13823765-how-is-kalshi-regulated)
- [Polymarket US](https://polymarket.us)
- [Polymarket Terms of Use](https://polymarket.com/tos)
- [The Polymarket mini app on Cherry](https://chat.cherry.fun/@predict)