Reference

Prediction Markets Glossary

Plain-English glossary for Florida prediction-market traders. The jargon you'll meet on Kalshi, Polymarket, and any FL-legal event contract — from a Heat moneyline to an Atlantic-basin hurricane contract — defined in one or two sentences.

1099: IRS form Kalshi/Polymarket may issue if your net winnings clear reporting thresholds. You owe federal tax on net profits.
ACH: Automated Clearing House — the standard US bank-transfer rail. Most prediction-market deposits/withdrawals run on ACH.
Amendment 3: The 2018 Florida ballot measure requiring statewide vote for new casino expansion. Doesn't apply to federally regulated CFTC exchanges.
AML: Anti-Money-Laundering rules. Why exchanges ID-verify you and report large or suspicious transactions.
Arbitrage: Locking in a guaranteed profit by trading the same event across two venues at mispriced odds.
Ask: The lowest price a seller is currently willing to accept for a Yes (or No) contract.
Bid: The highest price a buyer is currently willing to pay for a Yes (or No) contract.
CFTC: Commodity Futures Trading Commission — federal regulator that licenses prediction-market exchanges as DCMs.; Read more
Contract size: The notional value of one event contract. On Kalshi and Polymarket each Yes contract pays $1 at resolution.
Cost basis: What you paid (in cents) for a contract, used to compute your taxable gain or loss at resolution.
DBPR: Florida Department of Business & Professional Regulation. Oversees pari-mutuel and gaming licenses; does not regulate CFTC event contracts.
DCM: Designated Contract Market — a CFTC-licensed exchange (Kalshi, CME, etc.). The legal basis for US prediction markets.; Read more
Depth: The total volume of resting orders at each price level. Deep books absorb large trades without moving price.
Election contract: An event contract on an election outcome. Kalshi won the right to list these in 2024 after a federal court ruling.
Event contract: A binary Yes/No contract that settles to $1 if the event happens, $0 if it doesn't. The price is the implied probability.; Read more
Expected value: Average profit per trade if repeated infinitely: (probability × payout) − (probability of loss × stake).
FDLE: Florida Department of Law Enforcement — Florida's investigative agency. Has not pursued action against Kalshi or Polymarket users.
Fill: The execution of a buy or sell order, in full or in part, at one or more price levels.
FinCEN: Financial Crimes Enforcement Network. Sets the AML/KYC rules every US prediction-market exchange must implement.
Gasless: A transaction model where the platform sponsors blockchain fees so users don't need ETH/MATIC. Polymarket trades are gasless for end users.
Hedge: Opening an offsetting position to lock in a profit or cap a loss before the market resolves.
Implied probability: The market price read as a probability — a Yes contract trading at 65¢ implies a 65% chance the event happens.
Kalshi: The largest US-licensed event-contract exchange. Operates as a CFTC DCM and is available in 47 states plus D.C.; Read more
Kalshi Pro: Kalshi's advanced trading interface with full order book, market depth, and API access for higher-volume traders.
Kelly criterion: A position-sizing formula that maximises long-run growth by betting a fraction proportional to your edge.
KYC: Know-Your-Customer — the ID verification step every regulated US exchange must run before you can trade.
Limit order: An order that only fills at your specified price or better. Slower but protects you from bad fills in thin markets.
Liquidity: How easily you can enter/exit a trade without moving the price. Tighter bid/ask = better liquidity.
Mark-to-market: Repricing your open positions to the current market price so unrealized P&L is always visible.
Market maker rewards: Incentives exchanges pay to traders who post tight two-sided quotes that improve market liquidity.
Market order: An instruction to buy or sell immediately at the best available price. Faster than a limit but exposes you to slippage.
MetaMask: A crypto wallet historically used to fund Polymarket's international site. US residents now sign up and fund in dollars in the Polymarket US iOS app.
Mid: The midpoint between the best bid and best ask — the fairest single-number quote when the spread is tight.
NFA: National Futures Association — the SRO Kalshi and other DCMs belong to. Handles registration, audits, and customer disputes.
No-action letter: A CFTC staff letter saying the agency will not pursue enforcement against a specific activity. A common precursor to formal approval.
No-arb: A pricing condition where Yes + No prices sum to ~$1, leaving no risk-free arbitrage opportunity.
OFAC: Office of Foreign Assets Control — the US sanctions list exchanges screen against before letting you trade.
Order book: Live list of every resting buy/sell order. Reading depth tells you where real money is sitting.
Ordinary income: The default federal tax treatment for prediction-market profits if Section 1256 doesn't apply — taxed at your marginal bracket.
Partial fill: When only part of your order executes because there isn't enough liquidity at your price.
Polymarket: The world's largest prediction market. US residents trade through the Polymarket US iOS app, a CFTC-regulated exchange that trades in dollars, available in 49 states plus D.C.; Read more
Polymarket Earn: Polymarket's market-making rewards program that pays traders for posting resting liquidity in eligible markets.
Privy wallet: An embedded wallet provider Polymarket uses so US iOS users can fund accounts via Apple Pay without holding crypto themselves.
Prohibited event: A contract type (assassination, terrorism, certain gaming events) the CFTC bars under §40.11. Excludes most sports/politics today.
Resolution: The moment a market's outcome is officially decided by the exchange's resolution source.
Section 1256: An IRS tax treatment for regulated futures (60% long-term / 40% short-term capital gains). Kalshi event contracts may qualify; consult a CPA.
Self-certification: The process where a DCM lists a new contract by filing it with the CFTC; the contract goes live unless the CFTC objects.
Seminole Compact: The 2021 tribal-state agreement giving the Seminole Tribe exclusivity over Florida sports betting via Hard Rock Bet — a separate legal regime from CFTC contracts.
Settlement: The post-resolution payout: winning Yes contracts pay $1, losing contracts pay $0.
Slippage: The difference between the price you expected and the price you actually got — a hidden cost in thin markets.
Sports event contract: An event contract resolving on a sports outcome — legal on Kalshi as a CFTC-regulated derivative, separate from state sports betting law.
Spread: The gap between the best bid and best ask. Narrow spread = cheap to trade.
SRO: Self-Regulatory Organization — an industry body (like NFA) that polices member exchanges under federal oversight.
Sweepstakes model: A workaround used by some social-casino apps (PrizePicks, Fliff) that sidesteps gaming law. Distinct from CFTC-regulated event contracts.
Tick size: The smallest price increment a market allows — typically $0.01 on Kalshi and Polymarket.
True odds: Your own modeled probability of an outcome, used to compare against the market's implied probability.
USDC: A US-dollar-backed stablecoin used on Polymarket's international site. US residents trade in dollars through the Polymarket US app instead.
Vig: The implicit fee built into a market's spread, similar to a sportsbook's juice. Tighter prediction-market spreads usually mean less vig than retail books.
W-9: IRS form Kalshi collects at signup so it can issue a 1099 if your activity crosses reporting thresholds.
Wash sale: An IRS rule that disallows a loss if you re-enter the same position within 30 days. Generally does not apply to event contracts but worth tracking.
Withholding: Tax pre-collected by an exchange from large payouts. US prediction-market exchanges generally do not withhold; you're responsible at filing time.