How Contracts and Dispute Resolution Works at Prediction Markets

A trader buys YES. The event happens. They get paid. That’s how most people think event contract settlement works — and for the majority of markets, it does. But when the outcome is ambiguous, when contract language doesn’t match what actually happened, or when two prediction markets are looking at the same event and reaching different conclusions, settlement becomes the most important part of the trade.

It’s also the part with the least protection if something goes wrong. This article breaks down how settlement actually works, where it’s broken and what traders need to know.

What settlement actually means

Every event contract follows the same lifecycle: a market opens, you buy and sell YES and NO contracts that sum to roughly $1, the market closes to new trades at expiration, and then a resolution process determines which side won. Winners receive $1 per contract. Losers receive nothing.

Settlement is what happens after resolution — the actual transfer of funds from the losing side to the winning side. On Kalshi, settlement typically occurs within a few hours after resolution is determined. On Polymarket, settlement occurs after the UMA oracle process completes, which takes a minimum of two hours if uncontested but can stretch to days or weeks if a dispute escalates.

The critical point you may not have considered is that settlement is not automatic. Someone or something has to determine the outcome first, and that’s where the two dominant platforms take fundamentally different approaches.

Before a contract settles, it has to be matched. Here’s how prediction market order books pair buyers and sellers.

How Kalshi determines outcomes

Kalshi operates a centralized resolution model. Every market you trade on Kalshi lists named “Source Agencies” in its contract terms, which are filed with the CFTC as part of the exchange’s self-certification process. These are the entities whose data determines whether you get paid.

The source agencies vary by market category:

The actual decision, though, sits with Kalshi’s internal markets team. As the platform’s help center puts it, outcomes are determined “when decided that resolution criteria has been met.” Traders can submit a “Request to Settle” through the platform interface, but this functions as a suggestion, not a binding action. Kalshi’s team makes the final call.

When outcomes are ambiguous or disputed, Kalshi’s rulebook provides for an Outcome Review Committee — a committee of the board that can make binding determinations. The platform can also invoke Rule 6.3(c), which allows it to settle a market at its last traded price if the outcome is deemed unresolvable. That rule became nationally relevant during the Super Bowl.

There is no formal arbitration process, no independent appeal mechanism, and no external ombudsman.

As one trader on Manifold Markets documented after losing money on an incorrectly resolved Oscars market, the only recourse is informal: “Yell at them in discord.”

Kalshi settlement disputes

The centralized model means that when Kalshi’s team makes mistakes, there’s no structural check to catch them unless traders like you raise enough noise on social media.

Kalshi’s internal team determines outcomes, and when errors occur, corrections require external pressure — typically social media exposure — rather than any built-in review mechanism.

Kalshi appears to be addressing the gap. The company expanded its surveillance and enforcement framework — including an independent advisory committee, external analytics partnerships, and a dedicated head of enforcement — and was actively hiring for a dedicated Sports Operations team focused on market determinations, edge case handling, and automated settlement — roles that didn’t exist during most of the incidents above.

The Massachusetts Attorney General’s complaint against Kalshi framed the structural concern directly: Kalshi “writes the rules for the contract, determines the basis for settlement,” and the entire process “functions entirely within Kalshi’s corporate structure and does not serve as an independent intermediary.”

How Polymarket US settles contracts

Polymarket US settles contracts after the market resolves under its CFTC-regulated exchange rules. Once the resolution criteria have been met, winning contracts automatically settle for $1.00, while losing contracts settle at $0.00. Every market includes published resolution criteria, qualifying requirements, a resolution timeframe and one or more official sources used to determine the outcome. Unlike the international version of Polymarket, Polymarket US does not rely on blockchain or UMA oracle voting. Settlement is handled centrally through Polymarket Clearing in accordance with the Polymarket US Rulebook and each market’s published contract rules.

What happens if there is a disputed outcome?

Polymarket US markets typically settle shortly after the official result is confirmed by the designated resolution source listed in the contract. However, settlement may be delayed if that source has not yet published a final determination or if the outcome does not clearly satisfy the market’s resolution criteria. Each Polymarket US contract explicitly defines the conditions required for a Yes or No outcome, the official sources used for verification and any fallback or alternative resolution procedures. If an event is cancelled, significantly altered or otherwise fails to meet the stated criteria, the market is resolved according to the specific contract rules set forth under the Polymarket US Rulebook. Once settlement is completed, the outcome is final and binding under those rules.

How Gemini settles contracts

Gemini settles prediction contracts after trading closes and the official outcome has been confirmed using the resolution source identified in each market. Trading ends at the scheduled market close, but contracts do not settle until Gemini verifies the outcome against the official source listed in the contract rules. Once confirmed, winning contracts automatically settle for $1.00 per share, while losing contracts expire worthless. If the official result is delayed or disputed, settlement remains pending until Gemini can determine the outcome under its published market rules.

What happens if there is a disputed outcome?

Gemini resolves contracts using the official source identified in each market’s rules. If that source has not yet published a final result or the outcome remains unclear, settlement is delayed until Gemini can verify the official outcome. Unlike decentralized prediction markets, Gemini does not use community voting or blockchain-based oracles to resolve disputes.

How DraftKings Predictions settles contracts

DraftKings Predictions settles binary event contracts using the official resolution criteria published for each market. Once an event has been resolved, winning contracts settle for $1.00, while losing contracts settle at $0.00. Traders may also exit a position before settlement by selling their contracts if there is available liquidity. Settlement follows the exchange’s published rules and official contract specifications rather than traditional sportsbook grading procedures.

What happens if there is a disputed outcome?

DraftKings Predictions follows the settlement procedures published for each market. If an official result is delayed or revised before settlement is finalized, the contract remains unresolved until the designated source confirms the outcome. Markets are settled according to the exchange’s published contract specifications and applicable rules.

How FanDuel Predicts settles contracts

FanDuel Predicts offers CFTC-regulated event contracts that settle after the official outcome has been confirmed using the source identified in the market rules. Winning contracts settle for $1.00, while losing positions settle at $0.00. Traders can close a position before settlement by selling their contracts if there is available liquidity. Settlement is determined under the exchange’s published rules rather than sportsbook house rules.

What happens if there is a disputed outcome?

If an official result is unavailable or delayed, FanDuel Predicts waits until the designated resolution source confirms the outcome before settling the market. Where contract rules provide for alternative settlement procedures, those rules govern the final result. Once settlement has been completed, winning contracts pay $1.00, while losing contracts expire worthless.

When the same event settles differently

The most consequential risk if you trade across platforms is settlement divergence, where Kalshi and Polymarket resolve what appears to be the same event in opposite directions.

The Cardi B Super Bowl halftime market is the clearest recent example. Both platforms asked whether Cardi B would perform during the halftime show. Both saw significant volume ($47.3 million on Kalshi, over $10 million on Polymarket, per DeFi Rate’s volume tracker). After Cardi B appeared on stage, danced, and appeared to mouth lyrics during Bad Bunny’s set, the platforms reached opposite conclusions.

Kalshi determined the outcome was ambiguous and invoked Rule 6.3(c), settling at the last traded price. YES holders received $0.26 per contract. NO holders received $0.74. Polymarket resolved YES at $1, paying out YES holders in full.

The divergence wasn’t caused by different information — both platforms had access to the same broadcast footage. It was caused by different resolution criteria, different interpretation standards, and different institutional incentives.

Kalshi’s rules distinguished between dancing that qualifies as performing and dancing that doesn’t. Polymarket’s rules relied partly on a “consensus of credible reporting,” and most major media outlets described Cardi B as having performed.

If you’re running arbitrage — long YES on one platform, short YES on the other — settlement divergence turns what looks like a risk-free spread into a potential total loss.

Platform fees compound the problem: Kalshi and Polymarket use different fee structures that can erode thin arbitrage margins even before divergence risk enters the picture.

You can lose on both sides if the platforms resolve in the same direction, or produce wildly different P&L if they resolve in opposite directions. The assumption that “same event = same outcome” breaks down when resolution criteria, timing windows, and decision-making processes differ across platforms.

Centralized vs decentralized settlement: the real tradeoff

Neither model has earned a clean track record.

The honest framing is not regulated vs unregulated, or centralized vs decentralized. It’s that centralized settlement carries operational risk — humans make mistakes and the platform has structural conflicts of interest in adjudicating outcomes on its own exchange.

If you’re trading on an app that isn’t Kalshi or Polymarket, your settlement process is determined by the underlying exchange, not the app. PrizePicks, Sleeper, Coinbase, and Robinhood all route trades through Kalshi as futures commission merchants, so they inherit Kalshi’s resolution criteria, source agencies, and dispute process (or lack of one). DraftKings Predictions and FanDuel Predicts route through CME Group. Fanatics Markets runs on Crypto.com’s Derivatives North America (CDNA) exchange. For a full breakdown of which apps route through which exchanges, see our list of prediction markets. The app you’re trading on doesn’t determine how your market settles — the exchange it routes through does.

Decentralized settlement carries governance risk — token economics can be gamed, resolution criteria can be reinterpreted after the fact, and the cost of disputing outcomes is prohibitive for most retail traders.

If either platform gets your market wrong, you don’t have great options on either side.

What to check before holding through settlement

Resolution criteria deserve the same attention as your entry price. For any market you plan to hold through expiration:

• Read the actual contract language — not the market title. On Kalshi, resolution criteria are in the contract terms (CFTC-filed PDFs and the market page). On Polymarket, they’re in the market description and the ancillary data stored on-chain.
• Identify the resolution source — Kalshi names specific source agencies for each market. Polymarket names resolution sources in the market description. If the source is ambiguous or undefined, treat that as a risk factor.
• Compare cross-platform criteria — if the same market exists on both platforms, read the resolution language side by side. Differences in wording, even subtle ones, can produce different outcomes when real-world events don’t fit neatly into YES/NO categories.
• Know which resolution process applies — on Polymarket, whether you’re on the US or International version determines whether the Markets Team or the UMA Oracle resolves your market. On Kalshi, resolution is always handled by the internal team with the Outcome Review Committee as a backstop for disputed cases.
• Understand your recourse — on Kalshi, if the team determines the outcome incorrectly, your options are email support and Discord. On Polymarket International, you can dispute a resolution by posting a $750 USDC bond and going through the UMA process. Neither platform offers formal arbitration.
• For arbitrage positions, factor in divergence risk — settlement divergence is not theoretical. It happened with the Cardi B Super Bowl market. Price spreads between platforms may reflect genuine differences in resolution probability, not just market inefficiency. Use a cross-platform arbitrage calculator to model net returns after fees before committing capital.

Settlement is where the trade actually happens. Everything before it is positioning.