Guides·8 min read
What Are Event Contracts? A Plain-English Guide
By Catie Di StefanoPublished May 14, 2026Updated August 25, 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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Sources & further reading
Every figure and legal claim on this page traces back to a primary source. These are the ones we checked, open them and verify us.
- CFTC: Commodity Futures Trading Commission
The federal regulator that authorizes and supervises every event-contract exchange we cover.
- CFTC designated contract markets registry
Official list of registered exchanges, where we verify a platform's DCM status.
- Commodity Exchange Act (7 U.S.C. § 1 et seq.)
The federal statute that preempts state gambling law for event contracts.
- National Council on Problem Gambling
Free, confidential help and self-assessment tools (1-800-522-4700).
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.
Why do event contracts avoid the California sports betting ban?
- Event contracts are legally classified as financial derivatives rather than gambling. They are regulated by the Commodity Futures Trading Commission under the Commodity Exchange Act. Since Propositions 26 and 27 only addressed tribal and commercial sports wagering, they did not affect the federal legality of trading CFTC-regulated contracts on inflation, weather, or political outcomes.
Which platform is best for trading political event contracts in California?
- Polymarket is currently ranked as the top platform for volume and liquidity in political event contracts. For users who prefer a platform that provides automated tax documentation like a 1099-B, Kalshi is the primary regulated domestic option. Prediction markets allow Californians to hedge against real-world outcomes by buying contracts that pay out if a specific event occurs.
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Top platforms Californians are using:
Polymarket
The world's largest prediction market, now live on iPhone in the US.
OG (by Crypto.com)
CFTC-regulated event contracts. Get up to $100 in bonuses.
Sign up at OG (by Crypto.com)