Implied probability
Last reviewed 2026-08-07
Implied probability — definition
The probability of an event happening as inferred from its market price — for binary contracts, simply the YES price.
For a binary contract that pays $1 on YES, the YES price (e.g. 0.32) is interpreted as the market's implied probability of YES (32%).
Implied probabilities can be distorted by fees, liquidity, and trader incentives, but they tend to be more accurate than expert forecasts in well-traded markets.
Learn more: How prediction markets work
See also
Frequently asked questions
What does implied probability mean in prediction markets?
The probability of an event happening as inferred from its market price — for binary contracts, simply the YES price.
How does implied probability work in practice?
For a binary contract that pays $1 on YES, the YES price (e.g. 0.32) is interpreted as the market's implied probability of YES (32%).
Sources & further reading
- CFTC — Event contracts explainedU.S. Commodity Futures Trading Commission
- Kalshi — how prices and settlement workKalshi
- UMA Optimistic Oracle documentationUMA Protocol
Last reviewed 2026-08-07 · CollegePredictionMarkets.com