What is an event contract?

An event contract is a binary financial instrument that resolves to $1 if a specified event occurs and $0 if it doesn't. They are regulated by the CFTC as commodities derivatives.

How is price related to probability?

The price of a Yes contract, in cents, equals the market's implied probability of the event occurring as a percentage. A contract at 62¢ means the market thinks there's a 62% chance the event happens.

Can I sell my contract before the event resolves?

Yes. On all major prediction market platforms, you can sell at any time at the current market price, locking in profit or limiting loss without waiting for resolution.

What fees do prediction markets charge?

Most platforms charge a small per-contract fee, typically a fraction of a cent or 1-2% of the trade. This is dramatically lower than the 5-10% vig built into sportsbook lines.

How is this different from sportsbook betting?

Sportsbooks set the price, build in margin, and pay only at resolution. Prediction markets are exchanges where prices are set by traders, fees are transparent, and you can exit any position at any time.

What happens if there's no liquidity in a market?

Bid-ask spreads widen and you may not be able to enter or exit at favorable prices. Always check spread depth before trading thinly traded markets.

Can I lose more than I invested?

No. Your maximum loss on a long event contract is the price you paid. A contract bought at 40¢ can fall at most to 0¢, capping your loss at 40¢ per contract.

Basics·10 min read

How event contracts work

By Catie Di StefanoPublished January 10, 2026Updated July 16, 2026

Price equals probability. A contract at 40¢ means the market thinks there's a 40% chance. Here's the full mechanic, with a Lakers walk-through.

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Basics

Frequently asked questions

What is an event contract?: An event contract is a binary financial instrument that resolves to $1 if a specified event occurs and $0 if it doesn't. They are regulated by the CFTC as commodities derivatives.
How is price related to probability?: The price of a Yes contract, in cents, equals the market's implied probability of the event occurring as a percentage. A contract at 62¢ means the market thinks there's a 62% chance the event happens.
Can I sell my contract before the event resolves?: Yes. On all major prediction market platforms, you can sell at any time at the current market price, locking in profit or limiting loss without waiting for resolution.
What fees do prediction markets charge?: Most platforms charge a small per-contract fee, typically a fraction of a cent or 1-2% of the trade. This is dramatically lower than the 5-10% vig built into sportsbook lines.
How is this different from sportsbook betting?: Sportsbooks set the price, build in margin, and pay only at resolution. Prediction markets are exchanges where prices are set by traders, fees are transparent, and you can exit any position at any time.
What happens if there's no liquidity in a market?: Bid-ask spreads widen and you may not be able to enter or exit at favorable prices. Always check spread depth before trading thinly traded markets.
Can I lose more than I invested?: No. Your maximum loss on a long event contract is the price you paid. A contract bought at 40¢ can fall at most to 0¢, capping your loss at 40¢ per contract.

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