How prediction market resolution works
Resolution is the process of deciding which outcome actually happened and paying out winners. Every prediction market contract must eventually resolve, and the mechanism used determines how trustworthy the outcome is and how quickly traders get paid.
How prediction market resolution works
Centralized resolution
On regulated venues like Kalshi, the operator's own data team decides the outcome. When a market asks "Will the Fed cut rates at the May meeting?", Kalshi staff review the official Fed statement and mark the market YES or NO. This is fast and predictable for well-defined questions, and the operator's regulatory licence gives traders recourse if they disagree. The trade-off is that you are trusting a single entity whose interests could, in theory, conflict with a correct resolution.
Decentralized oracles: UMA on Polymarket
Polymarket uses UMA, an optimistic oracle protocol. When a market closes, anyone can propose a resolution outcome by staking UMA tokens. If no one disputes within the challenge window (typically 48 hours), the proposed outcome is accepted automatically. If someone disputes, UMA token holders vote on the correct outcome, with economic incentives designed so honest voting is the dominant strategy. The system trades speed for decentralization: most markets settle without dispute, but contested ones can take several days.
Why resolution criteria matter
The single biggest source of disputes is ambiguous question wording. A market asking "Will X happen by year-end?" without specifying a time zone or which official source counts will produce arguments at resolution. Well-run platforms write resolution criteria into the market description before trading opens, naming the exact data source (e.g., BLS CPI release, official electoral commission result) and the exact condition. Traders should read those criteria before buying, because the market resolves on the written criteria, not on common-sense interpretations.
What happens to funds at settlement
Winning YES shares pay $1.00 each at resolution; losing shares pay $0.00. On Kalshi the payout arrives in your USD account balance within one business day. On Polymarket it arrives as USDC in your connected wallet, usually within hours of the oracle confirming the outcome. If a market is voided (e.g., the event never had a chance to occur because the question was flawed), both sides typically receive their original investment back, minus any fees already charged.
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