Definition
An event contract is a conditional claim that pays a fixed amount ($1.00) upon verification that a predefined real-world event has occurred. The contract specifies: what event must occur, what evidence confirms it, when resolution happens, and who (which oracle or arbiter) makes the determination.
Anatomy of an event contract
- Question: The yes/no question the contract resolves (e.g., "Will the Fed cut rates in June 2026?")
- Resolution criteria: The specific conditions for YES (e.g., "Resolves YES if the FOMC announces a rate cut at its June 2026 meeting")
- Resolution date: When the contract settles (typically shortly after the event)
- Oracle source: Who or what confirms the outcome (Polymarket uses UMA's optimistic oracle; Kalshi has its own regulatory process)
Why resolution criteria matter for arbitrage
Two contracts with the same question but different resolution criteria are not the same contract. "Fed cuts rates in June" resolving on Polymarket via UMA and "Fed cuts rates in June" resolving on Kalshi via their internal process may have subtle differences in interpretation. These differences are the source of resolution risk in cross-platform arbitrage.
Event contracts vs traditional derivatives
Traditional financial derivatives (options, futures) settle based on asset prices. Event contracts settle based on whether a specific thing happened — a binary, non-price-based outcome. This makes them uniquely suited to prediction markets and distinct from financial instruments regulated as securities.