On 5 November 2024, at some point in the early hours, a Polymarket contract that had been trading at 96 cents for hours quietly clicked to 100. The market on Donald Trump winning the presidency had resolved YES. Traders who held that contract did not need to sell it, did not need to find a counterparty, did not need to do anything at all. The platform simply credited their balances at a dollar a share and the position closed itself out.
That moment, the click from 96 to 100, is market resolution. It is the part of prediction markets that gets the least attention and matters the most. Every probability you see on Kalshi or Polymarket, every implied odds figure on Betfair Exchange, is ultimately a claim about what will happen at resolution. If the resolution criteria are sloppy, the price is meaningless. If they are clear, the market becomes a forecasting instrument worth taking seriously.
The mechanic in one paragraph
A prediction market contract pays out either 100 cents or zero. There is no middle ground, no partial credit, no "close enough." When the event the contract describes either happens or fails to happen by the deadline written into the rules, the platform's resolution process kicks in, declares the outcome, and settles every position automatically. If you bought YES at 30 cents and the event happened, you receive 100 cents per share. If it did not happen, you receive nothing and the 30 cents you paid is gone. The person on the other side of the trade had the mirror experience.
That binary structure is what makes the maths of implied probability from prediction market prices work cleanly. A 30 cent price means the market thinks there is roughly a 30% chance of resolution at 100 cents. No payout structure, no expected value calculation.
Where the resolution source actually comes from
Every serious contract names a resolution source before it opens for trading. Kalshi's rulebook for a contract on US monthly jobs numbers will specify the exact Bureau of Labor Statistics release, the exact field within that release, and the exact threshold. Polymarket's contract on a Federal Reserve rate decision will point at the FOMC statement and the specific language to look for. Betfair's market on the Premier League winner resolves on the final league table as published by the Premier League itself.
This matters because the source is the whole game. If a contract says "resolves YES if Bitcoin closes above $100,000 on 31 December," the next question is: closes where? Coinbase? Binance? An index? At what timestamp? In which timezone? A well-written rulebook answers all four questions before anyone places a bet. A badly written one leaves room for argument, and argument is the enemy of a market that has to pay out cleanly.
The contracts that get into trouble are usually the ones where reality refuses to fit the box the rule-writer built. A football match abandoned at halftime. A political candidate who withdraws after voting has started. A company that gets acquired before its earnings call. Good platforms write rules that anticipate these edge cases. Less mature platforms find out about them the hard way.
The three resolution models you will encounter
Not every platform decides outcomes the same way, and the differences matter more than most users realise.
The first model is centralised resolution. The platform itself makes the call, usually through an in-house committee or operations team reading the resolution source and applying the rules. Kalshi works this way, because as a CFTC-regulated venue it has to. The regulator wants a single accountable party for every settlement. The same logic applies to Betfair Exchange under the UK Gambling Commission. Centralised resolution is fast, predictable, and creates a clear complaints process if a user thinks the platform got it wrong.
The second model is oracle-based resolution. Polymarket uses UMA, an optimistic oracle that lets anyone propose a resolution outcome, with a challenge window during which other UMA token holders can dispute it. If no one disputes, the proposal becomes the official answer. If someone does, a vote settles it. The system is designed to be censorship-resistant and to avoid any single party holding the resolution power. It also occasionally produces controversies, particularly when the underlying question is ambiguous and the dispute mechanism gets gamed.
The third model is hybrid. Some platforms use an oracle for most markets but reserve the right for human moderators to override in exceptional cases, or use a panel of named experts for contracts where automatic sources do not exist. The right model depends on the market. A contract on a Federal Reserve decision is easy to resolve from a public document. A contract on "will Taylor Swift announce a new album by year-end" is harder, and harder questions need more human judgment.
What happens when the rules and reality disagree
Here is the awkward truth. Sometimes the event the market was written about does not happen in a form the rules anticipated. A common example: a contract resolves on "the candidate inaugurated as President on 20 January." What if the inauguration is delayed by a day? What if there is no clear inauguration at all? The contract has to resolve somehow, because traders are owed an outcome.
Platforms handle this in three ways. Some default to NO when the specified event fails to occur in the specified form, on the principle that the YES condition was not literally met. Some refund all positions at the price they were trading at when the ambiguity became clear, which sounds fair but creates obvious gaming opportunities. Some convene a resolution committee and make a judgment call.
The single most controversial Polymarket resolution to date involved a Ukraine ceasefire contract where traders disagreed sharply about whether a particular diplomatic event counted as the trigger. The UMA dispute process eventually settled it, but not before considerable noise. The lesson is not that one resolution model is broken and another is fine. The lesson is that resolution is hard, and edge cases reveal the seams.
Why this is the part most traders ignore
The attention asymmetry is striking. Traders spend hours studying probabilities, reading research, debating mid-market trades, and then place a position without reading the resolution rules. This is the prediction-market equivalent of buying a house without checking the deed. The contract you are trading is the resolution rule. Everything else is commentary.
If you cannot answer three questions about a contract before you trade it, you should not be trading it. What event triggers YES? What is the deadline? Who decides, and based on what source? On Kalshi these are spelled out clearly in each event contract rulebook, one of the genuine advantages of regulated venues. On Polymarket the rules sit in the market description, and the discipline of reading them before clicking buy is what separates traders who do well from those who file disputes.
The payoff for this discipline is real. Mispriced markets are often mispriced precisely because the resolution rules are tighter than the market is treating them, or looser. A contract that looks like a 60% chance based on the news might actually be a 90% chance based on what the resolution source will read. That gap is where money is made.
How resolution interacts with closing time
A market closing and a market resolving are different events, and confusing them costs people money.
Closing is when trading stops. After the close, no new positions can be opened or sold. Resolution is when the outcome is declared and balances are settled. There is often a gap between the two, sometimes minutes, sometimes weeks. A contract on a US election closes when polls close, but resolves when the result is officially called, which can be days later. A contract on a quarterly earnings figure closes before the announcement and resolves when the company files its report.
During the gap, the contract sits at whatever its last traded price was, but you cannot exit. If you wanted to lock in profit at 95 cents and the market closes at 95, you hold that position through to resolution. If the resolution then comes in against you, the 95 cents was theoretical money and the zero cents is the real money. Understanding this gap is essential for managing risk in the final hours of any market.
The bottom line for newer traders
Market resolution is the part of prediction markets that determines whether the entire enterprise is honest. A platform that resolves cleanly, on clear rules, from authoritative sources, with a transparent dispute process, is a platform you can trust. A platform that fudges resolutions, changes rules after the fact, or hides the resolution criteria in vague language is one to avoid. The quality of resolutions is the deepest signal of whether a venue is serious about being a forecasting market or just a casino with a politics theme.
iPredicta tracks markets across Kalshi, Polymarket, Betfair Exchange and the regulated UK venues, and the resolution criteria for each contract are one of the things we surface when evaluating whether a market is worth your attention. The probability on the screen is only as good as the rule that settles it.
Frequently asked questions
How long does it take for a prediction market to resolve after the event?
Resolution can take anywhere from minutes to several weeks, depending on the contract. A market on a Federal Reserve interest rate decision will typically resolve within an hour of the FOMC statement, because the source is a single public document. A market on an election can take days, because results need to be officially called and certified. Contracts that rely on UMA's optimistic oracle on Polymarket have a built-in challenge window, usually 24 to 48 hours, before resolution becomes final. The window exists so that disputes can be raised. If you are holding a position close to expiry, check the rulebook for the expected resolution timeline so you are not surprised when your balance does not update immediately.
What happens if the resolution source goes offline or changes its data?
Well-written contracts name a backup source or a fallback procedure for exactly this scenario. If a contract resolves on, say, a specific Bloomberg ticker and Bloomberg suspends that ticker, the rulebook should specify what happens next: a secondary source, a resolution committee decision, or a refund. Less mature platforms sometimes write rules that assume the primary source will always exist, which causes problems when it does not. This is a real risk on contracts that depend on third-party data feeds, crypto exchange prices, or niche statistical releases. Before trading any contract with a thin or unusual resolution source, check whether the rules anticipate the source disappearing. If they do not, treat that as a hidden risk built into the price.
Can a prediction market resolution be disputed or overturned?
Yes, but the mechanism varies by platform. On Polymarket, UMA's optimistic oracle has a formal dispute process where token holders vote on contested outcomes during the challenge window. On Kalshi and other CFTC-regulated venues, traders can file a formal complaint with the platform, and ultimately escalate to the regulator if they believe the resolution violated the rules. On Betfair Exchange, the in-house rules committee can be petitioned, with appeal routes through the UK Gambling Commission for serious cases. Overturning a settled resolution is rare. Platforms strongly prefer to get it right the first time, because retroactive changes destroy trust. Most disputes are about ambiguous rule interpretation rather than clear errors, and most are resolved in favour of the platform's original call.
Why do some prediction market contracts resolve at prices between zero and 100 cents?
Standard binary contracts always resolve at either 100 cents (YES) or zero (NO), with no middle ground. However, some platforms offer scalar contracts or range markets that resolve to a value somewhere along a spectrum. A scalar contract on the closing price of the S&P 500 on a given date, for example, might pay out proportionally based on where the actual close falls within a predefined range. These are less common than binary contracts because they are harder to design and harder for traders to intuit. If you see a contract that promises to resolve at "30 cents" or some other specific intermediate value, read the rulebook carefully. It is either a scalar product or a refund condition triggered by an ambiguous outcome.
Does market resolution affect tax treatment of prediction market profits?
Yes, because resolution is the moment a profit or loss is crystallised for tax purposes. Until a contract resolves or you sell out of the position, any paper gains are not yet taxable income in either the UK or the US under most interpretations. Once resolution settles your balance, the realised profit or loss enters the tax calculation for that tax year. The exact treatment depends on whether the platform classifies the activity as gambling, investment, or something else, and on the user's jurisdiction. Our guide to prediction market tax in the UK and US walks through the specifics. Track every resolution date and the corresponding gain or loss, because reconstructing it later from platform statements alone is harder than it sounds.