An event contract is a financial instrument that pays exactly $1.00 if a defined real-world event happens, and exactly $0.00 if it doesn't. "Will the Fed cut rates in December?" or "Will it rain in New York on Friday?" each becomes a tradeable contract priced between $0 and $1.00, where the price reflects the market's implied probability. Event contracts are the building block underneath every market on Kalshi and Polymarket.
In the span of a couple of years they've gone from a niche curiosity to a CFTC-regulated derivatives category — and the reason cross-platform arbitrage exists at all is a direct consequence of how they're structured.
The anatomy of an event contract
Every event contract has four defining parts:
- The question: a yes/no statement about something that will or won't happen by a specific date
- Resolution criteria: the exact evidence that determines YES vs NO — this is the fine print that matters most
- Resolution date: when the contract settles, usually shortly after the event occurs
- Oracle or resolution process: who makes the final call — Polymarket uses UMA's optimistic oracle; Kalshi runs its own regulated resolution process
Because the payout is always $1.00 or $0.00, a YES contract and a NO contract on the exact same event are perfect complements: hold one of each and you're guaranteed $1.00 at settlement, regardless of which side wins. That property — not a prediction about the outcome — is what cross-platform arbitrage is built on. See how prediction market arbitrage works for the full mechanics.
Event contracts vs options and futures
Traditional derivatives — options, futures — derive their value from the price of an underlying asset: a stock, an index, a commodity. An event contract has no underlying price to track. It settles on whether a discrete, verifiable thing happened. That makes the pricing model fundamentally different: instead of modelling volatility around a price path, the market is simply estimating a probability directly, and that probability is the price you see quoted.
Event contracts vs sports betting
The surface similarity to betting is obvious — you're putting money on an outcome — but the structure isn't the same. Sports betting in the US is regulated state-by-state, typically runs against a bookmaker at fixed odds, and is narrowly scoped to sports and some entertainment outcomes. CFTC-regulated event contracts trade on a public, two-sided order book where any participant can take either side of a trade, cover a far broader range of topics — rate decisions, elections, economic data, weather — and sit under a federal derivatives regulator rather than a state gaming commission.
Where event contracts trade: Kalshi and Polymarket
Kalshi is a CFTC-designated contract market (DCM) — the same regulatory category as CME and CBOE — running a traditional order book exchange for event contracts, open to US residents. Polymarket runs a blockchain-based CLOB settled via UMA's optimistic oracle, and re-entered the US in late 2025 as a DCM in its own right after acquiring the CFTC-licensed exchange QCEX. See is prediction market arbitrage legal for the current jurisdiction rules on both venues.
Because the two platforms have separate liquidity pools, separate user bases and separate fee structures, the same event contract is routinely priced differently on each — see why the same event has different prices for the structural reasons that gap doesn't close on its own.
Why resolution criteria are the whole game
Two listings can ask what sounds like the same question and still not be the same contract. "Will the Fed cut rates in December?" resolving through Kalshi's own process, and the same headline resolving through Polymarket's UMA oracle, can diverge on edge cases — a delayed meeting, a split decision, an ambiguously worded announcement. Before treating two listings as a genuine arbitrage pair, the resolution criteria on both sides need to match, not just the title.
The growth of event contracts as an asset class
Regulators now treat event contracts as a real derivatives category rather than a curiosity: Kalshi trades under the same CFTC designation as CME and CBOE, and Polymarket's decision to acquire a licensed DCM rather than stay offshore is a bet that this category keeps expanding in the US specifically. New contracts launch on both platforms continuously, covering more topics than either platform supported a year ago — which is also why the supply of potential cross-platform mispricings doesn't dry up the way a single closed trade does.
Risks specific to trading event contracts
Holding a single event contract directionally means your entire position depends on one outcome — there's no partial credit. Holding a matched pair across two platforms removes that outcome risk, but introduces two others: leg risk (one side fills, the other doesn't, before the price moves) and resolution risk (the two listings turn out not to share identical resolution criteria after all). Neither is eliminated by the complement property above — it only holds once both legs are actually filled on contracts that genuinely match.
Getting started
If you're trading the gap between two listings of the same event contract, you're not betting on anything — you're betting that, after fees, the two sides don't both cost at least $1.00 combined. Net edges run thin (well under 1% per position at the median — see /proof for the live number), and capital stays committed until the contract resolves rather than turning over quickly. Matching the two listings correctly — same event, same resolution criteria — is the hard part; Arbitrage Agent handles that matching and the fee-adjusted edge calculation automatically.
Related articles
- How Prediction Market Arbitrage Works — Complete Guide 2026
- Is Prediction Market Arbitrage Legal? (2026 Guide)
- Polymarket vs Kalshi: Why the Same Event Has Different Prices
- Kalshi vs PredictIt: Fees, Limits and Which Is Better in 2026
Key terms: Event Contract · Binary Event Market · Prediction Market Arbitrage