What is an event contract? The yes/no trade, explained

A contract that pays one dollar if something happens and nothing if it does not is the simplest instrument in finance and the most legally contested. Here is how event contracts work, where the price comes from, who is allowed to list them, and why regulators still cannot agree whether they are derivatives or bets. Summary An event contract is a binary derivative that settles at $1 if a stated outcome occurs and $0 if it does not, so its price between one cent and ninety-nine cents reads directly as the market’s implied probability. The buyer never owns an underlying asset: the contract references a real-world outcome, an election result, a rate decision, a match, a data release, and settles in cash against a named resolution source. Maximum loss is the purchase price, which makes the risk profile closer to a bought option than to a leveraged futures position, with no margin call and no liquidation. In the United States they trade on exchanges licensed by the Commodity Futures Trading Commission as designated contract markets, including Kalshi, Polymarket’s domestic venue, Crypto.com’s derivatives arm, ForecastEx, and Robinhood-affiliated Rothera. The unresolved question is categor...