Prediction markets vs perps
Two rooms, two games: prediction markets pay you for answering questions the crowd got wrong; perps pay you for calling a price’s direction. Here is how they differ, and why a fund is stronger trading both.
Prediction markets settle a question and cap your loss at the price paid; perps track a moving price with open-ended risk. They run on different clocks, which is why one fund holding both has more ways to find an edge.
Both are ways to get paid for being right before the crowd. But they pay differently, they lose differently, and they suit different kinds of conviction. Set them side by side and the shape of each becomes obvious.
01The core difference in one line
A prediction market asks a question with a deadline: shares settle at $1 or $0 when reality answers. A perp tracks a price with no deadline: you gain or lose continuously as the line moves, until you close. One is a bet on an answer; the other, on a direction.
| Prediction market | Perp | |
|---|---|---|
| You bet on | A yes/no question | A price’s direction |
| Ends when | The market resolves | You close it |
| Max loss | What you paid for shares | More, if leveraged, up to liquidation |
| Payoff shape | All-or-nothing at $1 / $0 | Continuous with the price |
| Edge comes from | Crowd mispricing a probability | Reading direction, flow and funding |
02How risk feels in each room
A prediction-market share has a floor: buy at 62¢ and the very worst case is losing 62¢. Sizing is arithmetic. A perp has no such floor once leverage is involved, a sharp move against a 3x position hurts three times as fast. That is why the two rooms carry different rules in a well-run fund: perp positions are smaller, stopped tighter, and watched harder.
03Different clocks, different tempers
Prediction markets march toward a known date, the match, the vote, the deadline, and the last stretch is where prices sprint. Perps have no finish line; they reward patience with a thesis and punish attachment without one. A fund that knows which clock it is on sizes and exits accordingly.
04Why one fund should trade both
Edges do not keep office hours. Some weeks the mispricing is an election the crowd read lazily; some weeks it is a funding rate screaming that one side is overcrowded. A desk that can walk between rooms harvests whichever edge is actually there, and when neither is, the discipline is the same in both: the fund never bets a price it believes is fair.
Same capital, same caps, one CEO, the room changes, the rules don’t. Every bet in either room clears your gates before it moves.
Whether your own fund touches perps at all is your call, not a default, the FAQ covers how that permission works.
What to remember
- Prediction markets have a fixed floor: the most you lose is what you paid.
- Perps carry open-ended risk and move continuously with the market.
- They resolve on different clocks An event date versus an ongoing price.
- Your CEO trades both rooms, so an edge in either is one it can take.