Comment by superfrank

I'm not saying this as an argument for or against prediction markets, but that's essentially what the vig is at traditional sportsbooks.

Someone calculates what they think the odds of an outcome happening are and then they allow people to take positions on either side at worse odds than what they think the real odds are. As long as their prediction is correct, over time they make money. It's why putting $1 on a 50/50 bet on a sportsbook will usually only pay out around $1.91 instead of $2 if you win.