What Is Polymarket and How Does This Prediction Platform Work?

What Is Polymarket?

Polymarket is a prediction market where you can trade on the outcome of real-world events. So you are not trading directly against a bookmaker or a house. Instead, users buy and sell positions from each other. The platform is not available in every country; for example, Polymarket is blocked for users in the Netherlands.

The basics are simple: each market usually has two possible outcomes, Yes and No. Think of a question like this: will bitcoin reach a certain price before a certain date? If you buy a Yes token, you are betting on Yes. If you buy a No token, you are expecting it not to happen.

A token like this is not bitcoin or a stock. It is a digital proof of your position in one specific prediction. If your side wins in the end, you can redeem the token for pUSD. If your side loses, the token no longer has any redemption value.

Polymarket uses a central limit order book, also called a CLOB. Basically, that is a list of all open buy and sell orders. People use it to show how many tokens they want to buy or sell and at what price. An operator matches compatible orders with each other.

So trading itself is partly handled centrally, but the final settlement happens on-chain through smart contracts on the Polygon chain. Polymarket does not hold your positions for you. You approve transactions with a cryptographic signature from your crypto wallet, after which the smart contracts handle the settlement.

Key Takeaways

• Polymarket is a prediction market where users trade on real-world events.
• You trade in tokens that represent your position in a prediction.
• Orders come together in a central limit order book, while settlement happens on-chain.
• Winning tokens can be redeemed for pUSD after the outcome is determined.
• In the Netherlands, Polymarket is blocked and users cannot trade through the platform.

How Does Polymarket Work?

Polymarket works because users set prices for Yes and No tokens, and then the correct outcome is determined after the event ends. The rules for each market are set in advance. They explain things like when the market closes, which source determines the outcome, and what happens in special cases.

Those rules matter more than just the title of a market. A question may seem very clear at first, but the exact conditions ultimately decide when Yes or No wins.

After the end date, the winning outcome is determined. This process is also called the market's resolution. An outcome is proposed to the UMA Optimistic Oracle. An oracle is a system that passes information from outside the blockchain to smart contracts. If no one challenges the proposed outcome during the challenge period, that outcome is used for settlement.

If someone disagrees, they can start a dispute. If the issue escalates further, UMA token holders vote through the Data Verification Mechanism. Because of that, resolution for a disputed market can take several days. So it is not a fully automatic system that always gives an answer right away.

After resolution, you can normally redeem a winning token for 1 pUSD. A losing token is worth nothing. In the rare case that a market is resolved as Unknown or 50-50, both sides can redeem 0.50 pUSD per token.

You do not always have to wait for the final outcome. You can also sell your position earlier, as long as someone wants to buy it. Your profit or loss then depends on the difference between your buy and sell price, not on what happens to the market later.

How Does Trading on Polymarket Work?

Trading on Polymarket means buying and selling Yes or No tokens through the order book. So you are not only choosing which outcome you expect, but also what price you want to pay for it.

Say a Yes token is priced at 0.65 pUSD. Then you pay 0.65 pUSD for a token that would be worth 1 pUSD if Yes happens. If No ends up being the outcome, you can no longer redeem that Yes token.

In practice, it works like this:

1. Choose a market and read the rules Look at more than just the question. Check the end date and the resolution rules too. Those determine when the market ends as Yes or No.

2. Choose Yes or No Buy Yes if you think the event will happen. Buy No if you expect it not to happen.

3. Set your price and number of tokens Technically, every order is a limit order. So you decide how many you want to buy or sell and at what price.

4. Wait for a match Your order is filled if there is a matching order from another trader in the order book. An order can be filled fully, partially, or not at all.

5. Sell early or wait for resolution You can sell your tokens before the market ends if there is enough liquidity. If you wait for resolution, only winning tokens can be redeemed for pUSD.

An order shown as a market order is technically also a limit order. The only difference is that the limit is set so the order can match immediately with available orders. Keep in mind: you do not automatically get the price you see on the screen. When buying, you normally pay the lowest sell price, the ask. When selling, you normally receive the highest buy price, the bid.

Before an order can be filled, you need enough pUSD as collateral. Your crypto wallet also has to give the needed permission, called an allowance, so the smart contracts can use the tokens for settlement.

How Are Odds and Prices Shown?

The price of a Yes or No token is shown as an implied probability that the market estimates at that moment. If a Yes token costs 0.65 pUSD, that roughly corresponds to a 65% market expectation for Yes.

That is not a reliable prediction or a guaranteed probability calculation. It is simply the price that comes from traders buying and selling. If a lot of people want to buy Yes, the Yes price can go up. If more people want No instead, the Yes price can go down.

The displayed price is usually the midpoint between the best bid and ask. The bid is the highest price someone is willing to pay. The ask is the lowest price someone is willing to sell for.

Example: The highest bid for Yes is 0.60 pUSD and the lowest ask is 0.70 pUSD. The midpoint is then 0.65 pUSD. But if you buy right away, you usually pay 0.70 pUSD. If you sell right away, you usually get 0.60 pUSD.

If the difference between bid and ask, the spread, is larger than 0.10 dollars, Polymarket shows the last traded price instead of the midpoint. That last trade may already be a bit old. In that case, the visible price says less about what you would actually get for your order at that moment.

What Role Do Liquidity and Trading Volume Play?

Liquidity mainly determines how easy it is to buy or sell a position without having to move too far away from the price. In a market with lots of open buy and sell orders around the current price, that is usually easier.

A small spread usually points to better liquidity. There is then little difference between what buyers want to pay and what sellers want to receive. With a wide spread, a direct buy or sell can be relatively unfavorable.

Trading volume and liquidity are not the same thing:

• Trading volume shows how much trading happened during a certain period.
• Liquidity is about the orders currently available in the order book.
• Open interest shows how many positions are still open.

So a market may have had a lot of trading volume earlier, but still have few available orders right now. That is why you should not look only at volume if you want to know whether you can get in or out quickly.

Polymarket encourages market makers to place limit orders in the book. Market makers are traders who offer buy and sell prices at the same time. That can create more available liquidity and smaller spreads.

Is Polymarket Legal in the Netherlands?

Polymarket is not available to users in the Netherlands. The Netherlands is listed as a fully blocked country, and using a VPN or a similar method to get around that restriction is forbidden.

On January 20, 2026, the Dutch Gambling Authority determined that online gambling was being offered through Polymarket from the Netherlands without a Dutch license. The regulator sees these event markets as gambling, because the final payout depends on an external event with an uncertain outcome.

According to the Dutch Gambling Authority, the fact that users can buy positions in advance or sell them to each other does not change that gambling character. The regulator also said that organizing bets on events in the Netherlands is not allowed, even with a license.

The decision targeted Adventure One QSS Inc., which was identified as the responsible owner of the website. The company had to stop participation from the Netherlands within four weeks. After that, a penalty payment of 420,000 euros per week or per violation could follow, up to a maximum of 840,000 euros.

In short: Polymarket is blocked for users in the Netherlands, and trading through the platform is not allowed from the Netherlands. This is about the platform's status and access from the Netherlands, not personal legal advice.

Rules around prediction markets and Polymarket's availability can change. Always check the latest information from Polymarket and the Dutch Gambling Authority before using the platform.

What Markets and Predictions Does Polymarket Offer?

Polymarket offers markets on a wide range of events, and each tradable market is basically a separate Yes/No question. A larger event can consist of one question, but it can also include multiple related markets.

There are categories for crypto, sports, finance, politics, economics, culture, weather, tech, geopolitics, mentions, and general topics. A crypto market, for example, might be about the price of bitcoin before a certain date. In a market like that, you are not buying bitcoin itself, but tokens that settle based on the outcome of the question.

Some events have multiple possible outcomes that exclude each other. Polymarket can group those into a negative-risk group. Simply put: if exactly one possible outcome can be Yes, all the other options must be No.

The market lineup changes all the time. Markets have a category, start date, end date, active status, volume, liquidity, and a source for resolution. That also means a category can exist even if there are no active markets in that category at a given moment.

What Role Does Crypto Play in Polymarket?

Crypto is the technical foundation of Polymarket, but you are not automatically trading directly in well-known crypto like bitcoin. The platform runs on Polygon and uses tokens on the Polygon chain.

Blockchain is useful for a prediction market because positions can be issued and traded as tokens, while final settlement can happen through smart contracts. That also lets users sell their position to someone else before the outcome is known.

The Yes and No positions are ERC-1155 tokens. That is a token standard that allows different kinds of tokens to exist within one smart contract. The collateral you trade with is called pUSD and is an ERC-20 token on Polygon.

pUSD is the collateral for all trading on Polymarket and is backed by USDC. Converting between pUSD and USDC happens through on-chain smart contracts. A full set of one Yes token and one No token is backed by 1 pUSD locked in a contract.

Here is how that works: for each market, one Yes token and one No token can exist together, but together they represent at most 1 pUSD at final settlement. After resolution, only the winning side can normally be redeemed for 1 pUSD.

You can deposit crypto from multiple networks and with multiple crypto assets through the bridge. For trading, that is automatically converted into pUSD on Polygon. A bridge is a way to move crypto from one blockchain network to another.

Important to know: pUSD is meant for use within Polymarket and is not a generally tradable stablecoin. There are also still risks, such as getting the market wrong, smart contract risks, and risks when using a bridge.

How Does Polymarket Make Money?

Polymarket makes money on certain markets through taker fees when an order is matched. A taker is someone who immediately executes an existing order from the order book. Makers, meaning traders who place new limit orders in the book, do not pay a maker fee.

The size of the taker fee depends on the market. The calculation looks at the number of tokens traded, the fee rate, and the price. Different fee rates apply to different categories, such as crypto, sports, finance, politics, and tech.

Part of this system is meant to improve liquidity. Taker fees fund the Maker Rebates Program, where market makers can receive daily compensation for placing useful buy and sell orders. There is also a taker rebate program.

No trading fees are charged for markets about geopolitics and world events. According to its own rules, Polymarket does not profit from trading activity in those markets.

Polymarket does not charge its own fee for depositing or withdrawing USDC. External services you use for that, such as MoonPay, may charge fees.

Conclusion

Polymarket is a prediction platform where users trade Yes and No tokens around real-world events. The price of a token shows how the market estimates the odds at that moment, but it is not a guarantee that the prediction will come true.

The technology combines a central order book with settlement through smart contracts on Polygon. That means you can sell a position before the end, but you still depend on available liquidity and on the rules used to determine the final outcome of a market.

For Dutch users, the legal situation is especially important: the Netherlands is blocked and you should not assume that trading from the Netherlands is possible. If you understand how prices, spreads, resolution rules, and risks work, it also becomes clearer what Polymarket is and is not: not a place to buy bitcoin directly, but a market for predictions with crypto as its technical foundation.