An event contract is a contract that pays a fixed amount, usually $1, if a stated event happens and nothing if it does not, so its price reads as the market's estimate of the chance. Prediction markets such as Polymarket and Kalshi are made of event contracts: on Polymarket each outcome is a Yes share and a No share, and on Nimb each circle on the map is one market of such contracts.
How does an event contract work?
Take a market at 41%. A Yes contract costs $0.41 and pays $1 if the event happens, so $100 buys about 243 contracts and pays about $243 if right, before fees; if wrong, you lose the $100. A No contract costs about $0.59 and pays $1 if the event does not happen. A Yes and a No together always pay exactly $1, which is why their prices add up to about $1. Polymarket odds explained.
| Part | Meaning |
|---|---|
| Question | The event, with a deadline: "Will X happen by 31 December 2026?" |
| Payout | $1 per contract if Yes; $0 if No (or the reverse for No contracts) |
| Price | Between $0 and $1, set by trading; reads as a chance |
| Rules | What counts, which source decides, what happens if it is unclear |
| Settlement | After the deadline, by the venue or an oracle; how markets resolve |
What is the difference between an event contract and a binary option?
Economically they are close relatives: both pay a fixed amount or nothing. The words differ by context and regulator. "Binary option" usually means a contract on a financial price (an exchange rate above a level at a time), sold by brokers, and is banned for retail clients in the EU and the UK. "Event contract" is the term US law and the CFTC use for contracts on events, including non-financial ones such as elections or weather; regulated exchanges such as Kalshi list them under CFTC rules. Polymarket's international platform offers them as on-chain tokens. In 2022 the CFTC described the markets Polymarket then offered to US users as "event-based binary options" (CFTC 8478-22).
| Event contract (prediction market) | Retail binary option | Sports bet | |
|---|---|---|---|
| Counterparty | Other traders, via an order book | Usually the broker | The bookmaker |
| Can sell before the end | Yes, at the market price | Sometimes | Cash-out, at the bookmaker's price |
| Underlying | Any well-defined event | Mostly prices | Sport |
| Price is public | Yes | Set by broker | Odds set by bookmaker |
Are event contracts legal?
It depends on where you live and on the event. In the US, CFTC-regulated exchanges list them, while several states argue that contracts on sport are gambling, and federal courts have split on the question in 2026. Elsewhere the rules vary from licensed to banned. Are prediction markets legal?
Why do event contracts work as forecasts?
Because the price is what people with money at stake will pay. Over many markets, prices have tended to match how often things happen, with known biases at the extremes. Are prediction markets accurate? · Polymarket calibration.
Frequently asked questions
What is an event contract in simple terms?
A $1 bet-like contract on a yes-or-no question, traded between people, whose price is the market's estimate of the chance.
Can you lose more than you pay for an event contract?
Not when you buy one: the most you lose is the price paid plus fees.
Who sets the price of an event contract?
Traders, through buy and sell orders. On Polymarket no house sets it.
What is a Yes share?
The Polymarket form of an event contract that pays $1 if the outcome happens. Glossary.
Last reviewed 8 November 2026 · Data from Polymarket · Not financial advice · Nimb is not affiliated with Polymarket.