How prediction markets settle, and what happens in a dispute

Settlement is the moment a prediction market stops being a forecast and becomes a payout. Most contracts settle without controversy. When they do not, the outcome turns on how the contract was written, so knowing where those rules come from is the best protection a trader has.

How settlement works

When the event is decided, each winning contract pays $1 and each losing contract pays $0. Robinhood and Polymarket US both describe their contracts this way, and the exchange that listed the contract carries out the settlement.

The outcome is not decided by a vote of traders or by the platform’s judgment in the moment. It is decided by applying the contract’s rules to a named settlement source. Coinbase’s help center states that Kalshi, which operates the markets Coinbase offers, determines the final result based on the source of truth specified in each market’s contract rules.

Typical settlement sources include an official league result for a game or a government data release for an economic contract. The rules also fix the exact question, the deadline and what counts as the event happening.

Where contract rules come from

US exchanges write their own contract terms and list them through self-certification. Under CFTC rules, a designated contract market can certify that a new contract complies with the Commodity Exchange Act, in some cases the day before listing, and the CFTC can stay the contract for review. Kalshi listed its first sports contracts this way in January 2025.

The CFTC has added guidance on how this should work. A March 12, 2026 staff advisory (Staff Letter 26-08) addressed the listing of event contracts, and a July 24, 2026 advisory covered self-certifying a series of event contracts. A proposed rule from June 10, 2026 would set criteria for reviewing contracts that may involve gaming and other enumerated activities; no final rule had been published as of October 4, 2026.

For a trader, the practical point is simple: the filed rules are the contract. The market’s headline is a summary. If the headline and the rules seem to differ, the rules decide.

The CFTC’s role

The CFTC does not settle individual markets. Its role is to oversee the exchanges that do: it can review or stay a self-certified contract, it issues staff guidance on what exchanges should consider before listing, and it brings enforcement actions for fraud, manipulation and misuse of nonpublic information. Exchanges must also comply with the Commodity Exchange Act’s core principles, which the CFTC cited when it used emergency authority on August 11, 2026 to direct Kalshi to keep operating. Whether states can also regulate sports contracts is a separate fight, tracked on our state-by-state legal page.

What happens when an outcome is ambiguous

Ambiguity usually comes from one of three places:

• Wording. “Will X say Y?” depends on whether a variant, a plural or a quotation counts.
• Source problems. A data release is delayed, revised or discontinued.
• Timing. The event happens just after the stated deadline, or a game is postponed.

In each case the exchange applies the contract’s rules. We have not found a single, standardized settlement-appeals process published across US platforms, so read the rules page before you trade, keep a copy or screenshot of the terms as they stood, and raise any dispute with the exchange directly.

Mention markets: the CFTC’s September 2026 warning

Mention markets ask whether a person will say a specific word or phrase. The person being watched, or people close to them, can influence or know the outcome in advance.

On September 22, 2026, CFTC staff issued an advisory on mention markets (Staff Letter 26-27), warning of a “heightened risk of manipulation” and requiring exchanges to analyze such contracts under Core Principle 3. Kalshi voluntarily pulled its sports mention contracts in August 2026, according to secondary reports.

Insider trading and manipulation: recent enforcement

The CFTC treats event contracts like other regulated derivatives when it comes to fraud and misuse of information. Its enforcement division issued a prediction-markets advisory on misuse of nonpublic information and fraud on February 25, 2026. Two orders followed, according to the CFTC’s press releases:

These cases matter for settlement as well as fairness. A contract that can be steered by someone with inside access is a contract whose result other traders cannot rely on.

Polymarket US vs the offshore Polymarket

The two products share a name but not a settlement system.

Polymarket US is operated by QCX LLC, a CFTC-designated contract market and clearinghouse. Its contracts are binary $1/$0 contracts on a central limit order book and settle under the same federal framework as the other US exchanges.

polymarket.com, the global platform, is a separate offshore product that is restricted for US users. It uses a different, crypto-based resolution process. US traders using the regulated app are not subject to it. Our guide to Polymarket US vs Polymarket covers the other differences.

How to protect yourself before you trade

• Open the market’s rules page and identify the settlement source, the exact question and the deadline.
• Be cautious with markets that hinge on wording, such as mention markets, or on a single person’s actions.
• Avoid trading on information you obtained through your job or from someone with inside access; the CFTC has penalized exactly this.
• Keep records of the terms and your trades in case you need to raise a dispute.