Event Contract

Event contracts are the fundamental building block of prediction markets. Each contract is tied to a specific, objectively verifiable future event — such as "Will the Federal Reserve cut rates at its March 2025 meeting?" or "Will Team X win the championship?" The contract pays $1.00 (or its equivalent) if the event resolves YES, and $0 if it resolves NO.

Event contracts differ from traditional derivatives in that their value is entirely determined by a binary yes/no outcome rather than a continuous underlying price. They more closely resemble insurance contracts or binary options, though prediction market implementations often allow trading throughout the contract's lifetime before resolution.

The design of event contracts requires careful attention to resolution criteria. Ambiguous or poorly defined resolution conditions can lead to disputes, market manipulation, or outcomes that don't reflect the spirit of the question. Reputable platforms like Kalshi and Polymarket maintain resolution committees and clear methodologies to ensure fair and transparent outcomes.