Event contracts explained: what they are and how they work
Published May 21, 2026 · Last updated: September 29, 2026
TL;DR
- An event contract is a derivative whose payout depends on whether a specific real-world event occurs.
- Each contract pays $1 on YES and $0 on NO (binary), so the current price (e.g. 32¢) equals the implied probability (32%).
- Kalshi and Polymarket US are both CFTC-regulated US venues for event contracts.
New to this? Read this first
Prediction markets price events in cents, not odds. Here is the vocabulary used on this page, in plain English.
- Price = probability
- A contract that pays $1 trading at 12¢ means the market thinks there's a 12% chance.
- YES / NO share
- YES pays $1 if it happens. NO pays $1 if it doesn't. You can never lose more than you paid.
- Implied chance
- Just the price read as a percentage. A contract at 14¢ implies a 14% chance.
- Vig
- A built-in margin some venues charge. On prediction markets you pay the spread and fees instead.
- Liquidity
- How much money is in the market. More money means you can get in and out at the price you see.
Event contracts are the legal name for the thing your group chat calls "betting on the news." Same energy, very different regulator.
The legal definition
An event contract is a derivative listed on a CFTC-regulated exchange that pays out based on the occurrence (or non-occurrence) of a defined event. The CFTC's formal term is "event-based contract." Each contract specifies:
- The exact event being measured (e.g. "Harvard's Class of 2031 admit rate < 3.5%").
- The resolution source (a specific URL, press release, or government data series).
- The resolution window (the date range during which the answer becomes final).
- The payout: $1 per share for the winning side, $0 for the losing side.
Why the price equals the probability
Because the payout is exactly $1 on YES and $0 on NO, a risk-neutral price is the probability of YES. If the market thinks an event has a 32% chance, a YES share should trade near 32¢ and a NO share near 68¢ — the two sum to $1 (minus a tiny spread).
Event contracts vs sports betting
| Dimension | Event contracts | Sportsbook |
|---|---|---|
| Regulator | CFTC (federal) | State gaming commissions |
| Counterparty | Another trader | The sportsbook itself |
| Price discovery | Order book | House-set odds |
| Cost model | Disclosed per-contract trading fee | Margin built into the house odds |
| Early exit | Trade out anytime | Cash-out offered at the house's discretion |
Where they're listed
Kalshi is, as of 2026, the leading fully CFTC-regulated US venue offering a broad menu of event contracts. They self-certify new contracts under CFTC rules and segregate customer funds. Open a Kalshi account (opens in a new tab).
Polymarket offers economically similar contracts. US traders use its Polymarket US app, which runs on a CFTC-regulated exchange and trades in dollars. See Polymarket (opens in a new tab).US traders: Polymarket is available via the app in 49 states + D.C. Deposit $10 and use code COLLEGEPM for a $25 bonus. See where Polymarket is available and is Polymarket legal? before signing up.
What makes a contract "good"
An event contract is well-designed if:
- The resolution source is public, specific, and tamper-resistant.
- The resolution date is bounded and known.
- Edge cases (ties, postponements, no-data scenarios) have explicit rules.
Poorly defined contracts produce disputes. The college-admissions contracts we cover sometimes leave gaps — Harvard's decision to withhold Class of 2030 data, for example, forced markets to resolve N/A.
Further reading
Price → probability → payout
Contract price in cents (e.g. 14)Amount you put in ($)- Implied chance
- 14.0%
- Contracts
- 143
- Pays back
- $142.86
- Profit if right
- $122.86
A contract settles at $1 if the event happens and $0 if it doesn't, so the price is the market's probability. Every contract you buy at this price pays $1 — the cheaper the price, the less likely the market thinks it is.
Your first trade, step by step
- Fund a small balanceOpen an account, verify your ID, and deposit $10–$20 by debit or ACH. You must be 18+ and in an eligible state.
- Find the marketSearch the event by team, player or headline. Check the price and the volume — thin markets move a lot on small orders.
- Read the price as a probabilityA 23¢ YES contract means the market gives it about a 23% chance. If you think it is higher than that, YES is the value side.
- Place a limit orderEnter the price you want rather than taking the market. You buy shares, not a bet slip — the most you can lose is what you paid.
- Decide your exitYou can sell any time before the event resolves, or hold to settlement where each winning share pays $1.
Ready to try it: open Polymarket (opens in a new tab). 18+, eligible states only. Trade what you can afford to lose.
Sources & further reading
- CFTC: contracts and products (opens in a new tab)U.S. Commodity Futures Trading Commission (CFTC)
- Designated Contract Markets (DCMs) (opens in a new tab)CFTC
Related reading
How prediction markets workPrediction markets let you buy shares in YES/NO outcomes of real-world events. The price is the probability. Here's h…Read → Are Prediction Markets Gambling? (2026 Explainer)Are prediction markets gambling? How event contracts differ from sports betting legally and economically, and why the…Read → Is Kalshi legal in your state? A 2026 guideKalshi is a CFTC-regulated event-contract exchange, legal in almost every US state. Here's the federal framework and …Read → Kalshi Taxes: Are Your Winnings Taxed? (2026)Kalshi profits are taxable, but the IRS hasn't said how event contracts are classified. What Kalshi actually sends yo…Read →
Deposit $10, Get a $25 Trading Bonus! on Polymarket with code COLLEGEPM
Trade on Polymarket → (opens in a new tab)18+ Only. Restrictions and eligibility requirements apply. Not available in all jurisdictions. Trading is risky. 100% loss can occur. See polymarket.com/tos for more information. The Polymarket US App serves as an independent software provider and affiliate of Polymarket US and Polymarket Clearing, the CFTC-regulated exchange and clearing organization.
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Trade on ProphetX → (opens in a new tab)18+ only. New traders only. Offer terms are set by ProphetX and may change. Event contract trading involves risk, including loss of the funds you commit. ProphetX is a CFTC-regulated designated contract market and derivatives clearing organization. Not available in all states.
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Trade $25 and Get $25! on Kalshi with code COLLEGEPM
Trade on Kalshi → (opens in a new tab)Certain limitations apply. The offer is available to new users only, subject to the terms and conditions at kalshi.com/tc/500. 18+ only. Restrictions and eligibility requirements apply. Event contract trading involves significant risk and is not appropriate for everyone. Please carefully consider if it is appropriate for you in light of your personal financial circumstances. Kalshi products are not available in all jurisdictions. See kalshi.com/regulatory for more information.
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Frequently asked questions
What is an event contract?
A standardized derivative listed on a regulated exchange that resolves based on whether a defined real-world event happens. Payout is binary: $1 if YES, $0 if NO. Examples include 'Will the Fed raise rates in June?' or 'Will hurricane Idalia make landfall in Florida?'
Are event contracts the same as prediction markets?
In practice yes — they describe the same product from two angles. 'Event contract' is the legal/regulatory term used by the CFTC and Kalshi. 'Prediction market' is the colloquial term used by academics and the press.
Are event contracts legal in the US?
Available to eligible residents when listed on a CFTC-registered Designated Contract Market like Kalshi (as of October 3, 2026); check current state rules. Off-exchange event-based wagering is generally not legal. Some specific contracts (notably election contracts) have faced CFTC challenges.
How are event contracts different from sports betting?
Sportsbooks are licensed state-by-state under gambling law and act as the counterparty to your bet. Event contracts trade peer-to-peer on a federally regulated derivatives exchange — the exchange isn't taking the other side.
What's the maximum I can lose on an event contract?
The price you paid per share, up to $1. No margin, no leverage, no negative balance.
Who regulates event contracts?
The Commodity Futures Trading Commission (CFTC). Designated Contract Markets like Kalshi must register, post audited financials, segregate customer funds, and have rules for self-certifying new contracts.
What does the price actually mean?
A contract settles at $1 if the event happens and $0 if it doesn't, so the price is the market's probability. A contract at 23¢ means roughly a 23% chance, and $1 buys about 4.3 shares.
How much money do I need to start?
You can place a real trade with $10–$20. Contracts are priced in cents, so a $20 balance buys dozens of shares on a cheap market. Start small until you have seen a position settle.
21+ · T&Cs apply · Terms
Certain limitations apply. The offer is available to new users only, subject to the terms and conditions at kalshi.com/tc/500. 18+ only. Restrictions and eligibility requirements apply. Event contract trading involves significant risk and is not appropriate for everyone. Please carefully consider if it is appropriate for you in light of your personal financial circumstances. Kalshi products are not available in all jurisdictions. See kalshi.com/regulatory for more information.
