Guides·8 min read
What Are Event Contracts? A Plain-English Guide
By Catie Di StefanoPublished May 14, 2026Updated July 3, 2026
Event contracts are CFTC-regulated financial instruments that pay $1 if a real-world event happens and $0 if it doesn't. They're not bets, not stocks, and not options — and they're legal in California. Here's how they actually work.
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Frequently asked questions
What is an event contract?
- An event contract is a binary financial contract that resolves to $1 if a specified real-world event happens by a specified date, and $0 if it doesn't. The price you pay (between $0 and $1) is your maximum loss per contract. The market's price reflects its collective estimate of the event's probability.
How is an event contract different from a sports bet?
- Counterparty: a sportsbook is the house and sets the line; an event contract is matched against another trader on an exchange. Pricing: sportsbooks book vig into every line; event-contract markets charge explicit fees and prices move with order flow. Exit: sportsbook bets typically settle at outcome; event contracts trade like stocks and can be sold any time. Regulator: sportsbooks are state-licensed gambling; event contracts are federally regulated commodities.
Who regulates event contracts?
- The Commodity Futures Trading Commission (CFTC) — the same federal regulator that oversees CME interest-rate futures, wheat futures, and crude-oil derivatives. Event contracts trade on CFTC-designated contract markets (DCMs). Federal commodities regulation preempts state-level gambling restrictions for products listed on a DCM.
Are event contracts legal in California?
- Yes. Federal commodities regulation preempts state gambling law for CFTC-listed contracts. California residents over 18 can legally open accounts and trade event contracts on Kalshi, Polymarket, Sleeper, Chalkboard, Novig, and Rebet — even though traditional online sportsbooks (DraftKings, FanDuel, BetMGM, Caesars) remain illegal in California.
What can event contracts be written on?
- Politics and elections (presidential, congressional, gubernatorial, mayoral, ballot measures); macro/economic data (Fed rate decisions, CPI, jobs reports, GDP); sports (outright winners, match outcomes, season win totals, player props); climate and weather (temperature thresholds, hurricanes, wildfires); culture and entertainment (Oscars, Emmys, Grammys, box office).
Where do event contracts trade?
- Kalshi (CFTC-registered DCM since 2021, USD funding, broadest contract coverage), Polymarket (CFTC-regulated since acquiring QCEX in 2025, USDC funding), Sleeper and Chalkboard (specialized in sports/player props), Novig (peer-to-peer exchange), and Rebet (group-chat trading). All are legal for California residents.
How do you make money trading event contracts?
- Two ways. Hold to resolution and collect $1 per contract if your side wins. Or sell into the order book before resolution at a higher price than you paid (mark-to-market profit). Most active traders use both modes, exiting positions when the price moves substantially in their favor.
Are event contract winnings taxable in California?
- Yes. Gains are taxable as ordinary income at both federal and California state level. Platforms issue Form 1099-MISC for net annual gains over $600. California's top marginal rate is 13.3%. Consult a California-licensed CPA for your specific situation.
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