How Prediction Markets Resolve
Prediction markets only work if everyone knows how the contract will settle at the end.
That is why resolution rules matter so much. A good market has clear wording, a clear source for the final answer, and a process for handling disputes or edge cases.
What it means
Resolution is the process that decides whether a contract pays out at 1.00 or 0.00, or which outcome wins in a multi-outcome market.
The key question is not just what happened in the real world. It is what the contract says counts as the official result.
How it works
Most markets define:
- the event being measured
- the deadline or cutoff
- the official source used for settlement
- what happens if the event is delayed, canceled, or disputed
Why it matters
A trader can be directionally right but still lose if they misunderstood the wording or the settlement source.
Resolution risk is one of the most underappreciated parts of prediction markets.
Example
A market might ask whether a company will launch a product before a certain date.
If the company previews the product but does not make it commercially available, the contract may still resolve NO depending on the wording. That difference matters more than the headline.
What to check before trading
- The exact event wording
- The source named for settlement
- The deadline and timezone
- The rules for delays, revisions, or ambiguity
If any of those points are unclear, the trade is less clean than it looks. Many bad outcomes in prediction markets come from misunderstood settlement, not misunderstood forecasting.
FAQ
Do all platforms resolve markets the same way?
No. Different platforms use different rules, sources, and dispute processes.
What is resolution risk?
Resolution risk is the chance that the settlement outcome differs from your expectation because of wording, source selection, or dispute handling.
What should I read next?
Read Resolution Oracles and KYC, VPNs, and Access Risk if you want to understand both settlement and platform risk.