Prediction markets are based on 'the efficient markets hypothesis.' This states that all relevant information concerning the likely outcome of a future event is dispersed among the many people interested in that event and the most efficient way of assimilating all that information is through a market mechanism – for financial events, the stock market.
It can also be considered as ‘the wisdom of the crowd’: if you have enough people, with diverse opinions, all operating independently of each other, then their collective knowledge will be consistently more reliable than the opinion of any individual.

The wisdom of such a crowd is extremely powerful. In prediction markets (a betting or stock exchange), the participants have a vested interest in trying to be right. They take their information from all available sources – some of those sources not available to the wider public - and their opinion is based on what they think will happen. Contrast this with an opinion poll where samples are usually small (1,000 people is deemed acceptable) and those questioned have no motivation to be right – they are purely talking about what they want to happen.
Betstacker reads the odds from the Betfair betting exchange – a place where people bet against each other, not the bookmaker. On Betfair, just like any stock exchange, the market decides the price. Just as the buyers and sellers on a stock market use external events to determine a price, on Betfair buyers and sellers use external events to determine what they think will be the outcome of the market (or event) that they are trading on.