A prediction-market contract is a promise to pay $1 if a specific thing happens. Resolution is the moment that promise is judged — the market decides whether the event occurred and pays out accordingly. It sounds straightforward, but the details are where a lot of money is won and lost. This guide explains how it works.
What resolution means
When the event a market is based on is decided, the market resolves: each contract settles at $1 if the outcome happened and $0 if it did not. If you hold Yes contracts and the event occurs, each is now worth a dollar; if it does not, they are worth nothing. Resolution is simply the market turning a probability into a final, binary result.
Resolution criteria are everything
Every market has resolution criteria — the precise rules defining what counts as the event happening, which source decides, and by when. This is the single most important thing to read before you trade, because markets that look identical can settle differently. “Will Candidate A win?” needs to specify what “win” means (the projected winner? certified results?), who is the authority, and what happens in a recount. The classic, painful mistake is being right about the event but wrong about the contract — backing an outcome that happened, only to find the market defined it in a way that settles against you. See common mistakes to avoid.
Settlement and payout
Once a market resolves, settlement credits the payout to contract holders — $1 per winning contract — and the market closes. On most platforms this is automatic and quick once the result is confirmed. Until a market settles, remember you do not have to wait for it: you can usually sell your position at the current price beforehand to lock in a profit or cut a loss.
Resolution sources and disputes
Who decides the outcome depends on the platform. Regulated venues typically resolve against an authoritative official source — an election authority, a government data release, a sports governing body. Crypto-native platforms often resolve on-chain using an oracle and a dispute process, where token holders can challenge an incorrect resolution. Either way, ambiguity in the source or criteria is a genuine risk, and it is reflected in a market’s price. For the bigger picture, see how prediction markets work and how they are regulated.
Frequently asked questions
How does a prediction market settle?
When the event is decided, each contract settles at $1 if the outcome happened and $0 if it did not. The payout is credited to holders of the winning side and the market closes — usually automatically once the result is confirmed.
What are resolution criteria?
They are the precise rules that define what counts as the event happening, which source determines it, and by when. Reading them before trading is essential, because two similar-looking markets can resolve differently based on their criteria.
Can I sell before a market resolves?
Yes. On most platforms you can sell your contracts at the current market price any time before resolution, letting you lock in a profit or cut a loss rather than waiting for the final $1 or $0 outcome.