Prediction markets are platforms where individuals can buy and sell contracts based on the outcome of future events, such as elections or sports games. Participants trade these contracts based on their beliefs about the likelihood of specific outcomes, with prices reflecting the collective wisdom of the crowd. These markets operate similarly to stock exchanges, where the value of a contract rises or falls depending on how likely the event is perceived to occur. Prediction markets can provide insights into public sentiment and are often used in fields like politics, economics, and sports.