Prediction Markets: 13 FAQs from Wealth Management CEOs and CTOs

1. Are prediction markets and event contracts the same thing? 

No, and the difference is in the regulatory framework. “Prediction markets” refers to the broad category which includes regulated and non-regulated events. “Event contracts” specifically means that these contracts are traded on exchanges regulated by the Commodity Futures Trading Commission (CFTC). 

Apex provides access to a wide array of CFTC-regulated event contracts through our prediction markets solution. 

Did you know? There are many common names for prediction markets and event contracts, including binary options, contingent claims, decision markets, event derivatives, event-driven contracts, event futures, idea futures, information contracts, information markets, outcome-based securities, political stock markets (when focused on political outcomes), prediction contracts, and even virtual stock markets. Informally, you may also hear them called speculative markets. 

2. How can we be sure that prediction markets are legitimate and not just a passing fad?

Are prediction markets a legitimate asset class? The answer is a clear yes. Why? Because the Commodity Futures Trading Commission (CFTC) approved the first Designated Contract Market (DCM) in 2020.¹ This approval was not experimental; it brought event contracts under the same rigorous supervisory structure that governs traditional futures markets, including rules for market integrity, financial safeguards, and surveillance.  

This CFTC oversight shows that a compliant, fully supervised event contract exchange can operate legally within the U.S. regulatory framework. 

Are prediction markets a fad? We don’t have a crystal ball, so we honestly don’t know, but we’re seeing the same market trends you are, and we think there’s enough opportunity for the foreseeable future that we’re investing in bringing a tech-forward solution to market.

3. How do prediction markets work?

Prediction markets allow your clients to trade “contracts” based on the outcome of real-world events. These markets aggregate the “wisdom of the crowd” into a price that represents the collective estimate of an event’s probability of occurrence. In some cases, multiple event contracts may be used to predict an outcome — think Best Supporting Actress where each contract represents one actress — and a “parlay” could combine two or more of these different events into one position. 

Binary Outcomes 

All event contracts are binary, meaning they have only two possible results: The event happens (Yes) or it does not (No).  

• Fixed Settlement: These contracts are structured to pay out exactly $1.00 if the prediction is correct and $0.00 if it is incorrect 
• Price as Probability: Because the maximum payout is $1.00, the current trading price directly reflects the market’s perceived probability. For instance, a Yes contract trading at $0.65 indicates the market believes there is a 65% chance the event will occur 

Example: $1 Investment 

Suppose you believe a specific movie has a higher chance of winning an Academy Award than most movie critics do. You decide to invest $1.00 in “Yes” contracts: 

1. Purchase: The current market price for a Yes contract is $0.25. With your $1.00 investment, you purchase four contracts ($1.00 / $0.25 = 4) 
2. The Event Occurs: If this movie wins, each of your four contracts settles at $1.00. 
3. Result: You receive a total payout of $4.00, resulting in a $3.00 profit on your initial $1.00 investment 
4. The Alternative: If the movie loses, the “Yes” contracts settle at $0.00, and you lose your entire $1.00 investment 

Traders can also sell their contracts before the event concludes if the price rises. For example, if your $0.25 contract rises to $0.50 due to positive news, you could sell it immediately to double your money without waiting for the final outcome. 

4. Should my firm consider offering prediction markets? 

Next-gen investors are actively trading prediction markets. On one popular retail trading app, over 3 billion event contracts traded in November 2025 alone, up 20% over the previous month.²  In addition to high volumes of trading, your business could unlock potential revenue opportunities — revenue for exchanges and broker dealers are expected to reach $10 billion by 2030.³

Use this asset class to help your business: 

• Attract new clients 
• Expand wallet share from current clients 
• Start working with investors earlier in their wealth accumulation journeys — so they’re already engaged with you when they’re ready for more diversified investment strategies 

It’s also about what happens when traditional markets are closed. Next-gen investors don’t stop trading at 4:00 p.m. ET — so you can help increase your trading volumes and potential revenue by providing access to 24/7 event contracts, which is propelling this push to all-hours trading.⁴ And, if you’re interested in offering traditional asset classes 24/5, we support after-hours trading, too. 

5. What is the business model for prediction markets? How does my firm make money? 

Depending upon your firm’s fee structure, the most common ways to make money with prediction markets is by charging transaction fees. You can charge a small fee for each contract bought or sold.

6. What are the specific prediction markets regulatory requirements for my firm?

Your business must complete the following steps to offer event contracts through Apex: 

• Integrate with Apex AscendOSTM, our cloud-native clearing, custody, and trading infrastructure 
• Access our Developer Portal to leverage our APIs, SDKs, documentation, code samples, and quick-start guides 
• Build the prediction markets UIs to match the rest of your digital investing experience 
• Complete the National Futures Association (NFA) requirements 
• Employ a person holding an active FINRA Series 3 license 

7. Who is the target audience for prediction markets?

In 2025, the target audience for prediction markets has expanded from niche circles to a mainstream participant base of millions. This audience can be categorized into three primary groups:  

Information Seekers and Forecasters 

In 2025, science and technology markets grew by over 1,600%.⁵ These users participate not just for profit, but to gauge collective sentiment on complex topics that are driving business growth.  

Institutional Hedgers 

For institutional investors, prediction markets act as “real-world oracles,” allowing institutions to use the crowd-sourced probability of a risk, such as interest rates rising, that can allow them to adjust their traditional portfolios before the event happens. 

General Public and Mass Media 

Retail investors, particularly digital natives, view event contracts as a way to trade on personal knowledge about celebrities, culture, and other trending topics for potential profit. Furthermore, many major financial news networks have started embedding prediction tickers into their news feeds, exposing more of the public to these trading opportunities. 

8. How are investor accounts structured to ensure compliance? 

For regulatory reasons, CFTC-regulated event contracts must be held in a separate account from FINRA-regulated securities such as stocks and ETFs. 

So, when an investor decides to trade prediction markets, our AscendOS system can open a new, segregated account specifically for these assets. This process can leverage their existing account data to make the process as smooth as possible for the end user. 

9. How does prediction markets order management work?  

With Apex acting as the clearing Futures Commission Merchant (FCM), here’s how it works: 

• Your client places an event contract order 
• The order is routed to the appropriate prediction market exchange, known as the Designated Contract Market (DCM) 
• The DCM “matches” and executes the trade 
• The Derivative Clearing Organization (DCO) clears the trade and sends Apex a confirmation 
• Apex books the trade on the Ascend Ledger, clears the trade, sends investors daily trade confirmations and monthly statements, updates the position in investors’ portfolios, and custodies the event contracts 

From an API perspective, your firm will use the Ascend Orders API to send orders, the Ascend Events API for order updates, and the Ascend Position and Activity APIs for tracking — the same API pattern as other asset classes on Ascend. 

10. How are prediction markets structured?  

Event contracts use a three-level structure to organize a vast array of complex topics into specific, tradable questions that allow investors to take a position on a very precise outcome with defined risk. Each event contract has a unique symbol, and our Asset Master API provides the details you need. Here is a brief overview of the three levels: 

 

Series (Broad Category) 

The Series acts as the overarching theme or broad category that defines the general topic or area of interest within which specific events and markets are created. It groups related events together, making it easier for traders to find relevant opportunities. 

• Example: “Which songs will be #1 on the Billboard Hot 100?” covers all potential outcomes related to which songs will reach the number one spot 

Event (Time-Bound Occurrence) 

The event is a specific, time-bound occurrence within a series. It narrows the focus to a particular point in time or a specific condition that will be met on or by a certain date. 

• Example: “In February” takes the broad “Which songs will be #1 on the Billboard Hot 100?” series and applies a deadline when the outcome is measured. A contract on this event will settle based on Billboard Hot 100 rankings at that exact time 

Market (Specific Yes/No Question) 

The Market is the final, most granular level. It translates the event into a simple binary (Yes or No) question that has a fixed payout. 

• Example: “Will Taylor Swift’s ‘The Fate of Ophelia’ be #1 on the Billboard Top 100 in February?” is the specific, tradable question related to the “in February” event within the “Which songs will be #1 on the Billboard Hot 100?” series 

11. What is the launch timeline for prediction markets with Apex? 

There are many factors that can affect your go-to-market timeline, including the time required to complete the National Futures Association (NFA) registration process, identify or hire an employee with a Series 3, build your UIs, and establish firmwide policies and procedures — such as defining investor suitability — for your event contracts business. 

However, we’ve done the heavy lifting, so you don’t have to. With our turnkey API-based solution, Apex has significantly reduced the time it would take you to build an entire solution from scratch. We help you fast-track your prediction markets launch by: 

• Reducing your time-to-market with a simplified integration instead of a start-from-scratch build 
• Simplifying how you connect with additional prediction market exchanges (called DCMs) as Apex expands our integrations 
• Bypassing the heavy lift required to build and maintain separate, complex integrations with each prediction market exchange 

12. How do prediction markets help position my firm competitively? 

If you’re hoping to expand the number of up-and-coming investors you serve, offering prediction markets is a signal that you offer modern digital assets and are, therefore, more likely to welcome their business even if they are earlier in their wealth accumulation journeys. 

From a longer-term perspective, integrating with Apex’s prediction markets now means that you can also have future access to additional leading prediction market exchanges as we add them to AscendOS — expanding your offerings without additional development work. 

13. How do I get clients who are already using dedicated prediction markets platforms to move their activity to my firm?

We recommend that your company develop a standardized policy on how to discuss event contracts with your clients, including suitability considerations and risk disclosures. As part of this planning, give your advisors talking points about: 

• Including event contracts in holistic diversified investment plans 
• Seeing traditional and prediction markets positions in side-by-side accounts to help manage the “big picture” 
• Using trusted account funding rails that they already use to move money into their traditional brokerage account to fund their digital assets account 
• Consolidating investments with one firm to reduce the number of apps and logins your clients need to keep up with

Curious About Prediction Markets? Let’s Talk. 

Let us answer your questions to help you determine if offering prediction markets through Apex is the right fit for your growth strategy. 

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