How does settlement and resolution work, and why do rules matter more than headlines?

Prediction markets settle based on the contract’s written resolution criteria, not what people “meant” or what headlines imply. A market can resolve against popular intuition if the rules are strict or the outcome is defined narrowly.

Detailed Explanation

Resolution source: contracts usually specify a data source (e.g., an official agency, court filing, or governing body).
Resolution criteria: must match specific conditions (date cutoffs, definitions, measurement method).
Why it matters: “Real-world outcome” and “contract outcome” can diverge due to wording.

Common Scenarios

Economic indicator releases (final vs preliminary numbers)
Election results (certification vs election night reporting)
Legal/policy outcomes (announced vs enacted vs effective date)
Corporate events (announced vs completed vs filed)

Exceptions & Edge Cases

If the specified source is delayed, then settlement can lag the real-world event.
If the source changes methodology, then interpretation disputes can arise.
If multiple outcomes are possible (Yes/No/Void), then you must price all branches.

Practical Examples

Contract: “Will a bill be signed into law by March 31?”
- Bill passes legislature March 20 (headline says “done”)
- Not signed until April 2 → resolves “No” under strict wording

Actionable Takeaways

✅ Read the exact resolution language (dates, definitions, sources)
✅ Identify the single authoritative source the market uses
✅ Model “timeline risk” (what if it happens late?)
✅ Avoid trading ambiguous contracts unless you’re pricing the ambiguity

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