What is a prediction market? A clear guide for 2026
A prediction market is an exchange where people trade on future events, and the price works as a probability. How it works, who runs them, why they matter.
Read the articleEvent contracts, explained: prediction markets vs. sports betting
An event contract pays out if a specific event happens, like a rate cut or an election. How they work, how they differ from sports bets, who regulates them.
By Kristian FagerlieFounder & CEO, Sikt Intelligence
An event contract is a contract that pays out based on whether a specific event happens, for example "Will the Fed raise rates in October?" or "Will the Democrats win the House?" It is the basic building block of every prediction market. In the US, it is regulated as a derivative, which is exactly why the line between event contracts and sports betting became one of the biggest legal fights of 2026.
How an event contract works
Most event contracts are binary: they pay a fixed amount, usually $1, if the answer is Yes, and nothing if it is No.
- A clear question with written rules: what counts as Yes, which source decides, and by when.
- A price between 0¢ and $1, set by traders buying and selling. The price works as a probability: 30¢ means about 30% (see odds, explained).
- Settlement: when the event resolves, Yes holders get $1 per contract, or No holders do.
Some events are split into several contracts, such as one per candidate, one per price range, or one per deadline ("by December 31", "by June 30"). You can see all three kinds on our odds pages.
What event contracts cover
- Economics: Fed decisions, inflation and jobs reports, recessions. See Fed rate odds and recession odds.
- Politics: elections, nominations, legislation. See the 2026 midterms.
- Geopolitics and world events: treaties, leadership changes, conflicts.
- Markets and companies: price levels, IPOs, product launches.
- Culture, science and weather, and, on the largest platforms, a great deal of sports.
Event contracts vs. sports betting
| Event contract on an exchange | Bet with a sportsbook | |
|---|---|---|
| Who sets the price? | Traders, through supply and demand | The bookmaker |
| Who is on the other side? | Another trader | The bookmaker |
| Can you sell before the end? | Yes, at the current price | Sometimes, via "cash out" at the book's price |
| US regulator | Federal: the CFTC | State gaming regulators |
| Price includes | Fees and a bid–ask spread | The bookmaker's margin (overround) |
| Topics | Economics, politics, world events, sports | Mostly sports |
The practical difference is the exchange model. A sportsbook profits from its margin; on an exchange, you trade against other people and the platform earns fees.
Why the difference matters legally
In the US, event contracts are overseen by the Commodity Futures Trading Commission (CFTC), and exchanges that list them are designated contract markets. Kalshi was the first built for event contracts, approved in 2020 (CFTC).
Kalshi began listing sports contracts in early 2025, and sports now make up most of its trading volume (Covers). States argue that a contract on a football game is simply a sports bet under their gambling laws. In 2026 the federal appeals courts split on that question: the Third Circuit sided with Kalshi, while the Sixth Circuit, in September, sided with Ohio and Tennessee (CoinDesk). The CFTC has also proposed new rules for which event contracts are in the public interest.
Why forecasters care about event contracts
Event contracts turn opinions into prices that can be checked. A contract either pays or it doesn't, so its price history is a record of how well the market forecast the event, which is exactly what calibration and the Brier score measure.
That is also why Sikt Intelligence compares its AI superforecaster with market prices on clear, checkable questions. Nothing here is financial advice.
Key takeaways
- An event contract pays out if a specific event happens; most pay $1 or nothing.
- Its price works as a probability and is set by traders, not a bookmaker.
- Event contracts cover economics, politics, world events, markets, culture and sports.
- In the US they are regulated by the CFTC; sportsbooks are regulated by the states.
- Whether sports event contracts are federally regulated or state-regulated gambling is being decided in the courts.
FAQ
What is an event contract?
A contract whose payout depends on whether a specific event happens, such as an election result or a rate decision. Binary event contracts pay a fixed amount, usually $1, if the event happens and nothing if it doesn't.
Are event contracts the same as sports betting?
Not structurally. Event contracts trade on exchanges between users at prices set by supply and demand, and are regulated federally by the CFTC. Sports bets are placed with a bookmaker that sets the odds, under state regulation. Whether sports event contracts count as betting under state law is disputed in court.
Who regulates event contracts in the US?
The Commodity Futures Trading Commission (CFTC). Exchanges that list event contracts must be designated contract markets.
Sources
- CFTC: CFTC Designates KalshiEX LLC as a Contract Market
- Covers: Polymarket vs. Kalshi
- CoinDesk: Another appeals court rules against Kalshi (September 2026)
- Bürgi, Deng and Whelan (2026): Makers and Takers: The Economics of the Kalshi Prediction Market
