Event contracts explained: what they are and how they work
Published 2026-05-21 · Last reviewed 2026-05-21
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 is the CFTC-regulated US venue. Polymarket offers similar contracts on-chain but is restricted to US users.
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 |
| Vig / fee | Trading fee (~1–7%) | ~5–10% built into the line |
| Early exit | Trade out anytime | Cash out at the book's price |
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.
Polymarket offers economically similar contracts but operates on Polygon outside the CFTC framework, and is restricted to US users. See Polymarket.US residents: Polymarket geo-blocks US IPs and its terms of service prohibit US users. See 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
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?
Yes, when listed on a CFTC-registered Designated Contract Market like Kalshi. 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.
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