There's often confusion between prediction markets and gambling, but they're fundamentally different animals. Prediction markets operate on information and incentives—participants stake capital based on research, data analysis, and genuine belief in outcomes. The mechanism itself creates price signals that aggregate knowledge across crowds, making them valuable tools for discovering truth and assessing probabilities.

Gambling, by contrast, relies on chance and odds manipulation favoring the house. Prediction markets reward accuracy and punish poor judgment; there's no house rake in the traditional sense. When people understand this distinction, they recognize prediction markets as legitimate financial instruments—similar to options markets or futures—rather than games of pure chance. They're infrastructure for better decision-making.