Anatomy of a Contract
Every contract has: a precisely defined event ('X wins the 2026 election'), a resolution source (the named authority that decides), an expiration/resolution date, and Yes/No sides that always sum to $1.00. Buying No at 70¢ is identical to believing the event is under 30% likely. The complementary structure means every market is simultaneously a market on the event and its absence.
Where Prices Come From
Centralized exchanges (Kalshi) and Polymarket run order books — bids and asks from traders, matched continuously. Some on-chain protocols use automated market makers instead, where a formula prices trades against a liquidity pool. Order books give tighter pricing on liquid markets; AMMs guarantee execution on thin ones at the cost of slippage. Either way, the last traded price is the crowd's live probability.
Versus Options and Sports Bets
An event contract is functionally a binary option — but exchange-traded, transparently priced, and (on regulated venues) legally distinct from the OTC 'binary options' industry that earned its scam reputation. Versus a sports bet: no bookmaker margin baked into every price, sellable before resolution, and your counterparty is another trader, not the house. The tradeoff is liquidity — a big book takes any bet instantly; a thin market needs a counterparty.