Prediction Market Resolutions: The Good, Bad, and Ugly

by PredictionNews Editorial Staff

May 13, 2025

Trade on Prediction Markets » Prediction Market Resolutions: The Good, Bad, and Ugly

Prediction markets can be offered for any event, but there always has to be a third party that confirms the event occurred. Some of the details a prediction market must clarify for traders include:

Who defines what the event is?
Which time zone is the resolution deadline in?
What’s the data source for deciding the value of an event being traded on?

These questions are foundational to understanding how prediction markets work and how to tell which markets are best avoided. Resolution disputes have led many traders who bet correctly to lose their money anyway.

Here’s how market resolutions work, some high-profile resolution disputes, and how to identify reliable settlement rules.

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How market resolutions work

A market is resolved – or settled – when a decision is made about whether the market outcome is ‘Yes’ or ‘No.’ Some platforms use a board of traders to settle their markets, like Polymarket’s use of UMA Optimistic Oracle.

Commercial prediction markets, like Kalshi and ForecastEx, publish resolution criteria with new markets. The rules include definitions of key terms, settlement deadlines, and some events that won’t settle the market to ‘Yes.’ For example, Kalshi’s market on when Elon Musk would leave DOGE included this paragraph in its ‘Payout Criterion’ section of the market’s full rules:

“The Payout Criterion for the Contract encompasses the Expiration Values that Elon Musk has left his role leading the Department of Government Efficiency before <date>. If DOGE is shut down, is disbanded, or is defunct, the market resolves to Yes. Taking temporary leave from the role also is encompassed within the Payout Criterion. If DOGE is renamed, restructured, or absorbed into another entity, then that does not trigger the Payout Criterion. Musk leaving his role for a successor role in a changed or absorbed version of DOGE would not be encompassed within the Payout Criterion.”

By itself, the word “leave” in Kalshi’s market title is ambiguous. The rules had to clarify that Musk had to remove himself or be removed from his role at DOGE, including DOGE’s elimination. Crucially, Kalshi’s rules clarified that Musk moving into a similar role would not settle the market to ‘Yes.’ That removes a potential source of confusion that could make this market appear illegitimate.

Resolution Disputes

Market resolution terms that leave even a small amount of ambiguity create opportunities for markets to resolve incorrectly. Polymarket has struggled with its settlement methods, causing some markets to resolve with the wrong result.

However, Kalshi also faced blowback from its 2025 Oscar viewership market. Even though Kalshi’s terms were clear, customers were outraged when the initial figures settled the market instead of the updated figures that came out a few hours later.

Contrasting the two cases shows how even clear settlement terms can rile customers.

Polymarket’s UMA Problem

On September 30, 2024, Israel sent ground troops into Lebanon. It should’ve been a clear resolution for Polymarket’s market on whether Israel would invade Lebanon by the end of September.

Israel Minister of Defense Yoav Gallant announced that morning that the next phase of the war against Hezbollah in Lebanon would begin soon. Within an hour, CNN reported on the beginning of Israel’s “ground incursion” into Lebanon.

Instead, after a series of resolution disputes, the market resolved to ‘No,’ the opposite of what occurred.

Polymarket uses UMA Oracle to resolve its markets. Someone can stake UMA, a cryptocurrency, to propose a resolution to the market. That stake also acts as a reward for anyone who can disprove the proposed resolution.

In a dispute over one of Polymarket’s resolutions, UMA token holders can vote on how the market should be resolved. Each trader’s votes are decided by how much UMA they hold. So, a few traders with large UMA holdings can outvote a larger number of smaller UMA holders.

That’s how a subset of UMA Oracle users switched the ‘Will Israel Invade Lebanon by the end of September’ outcome. It also occurred in two other markets: one on whether Israel would invade Syria and whether the United States and Ukraine would agree to a rare minerals deal.

Most of Polymarket’s markets resolve without incident, but high-profile reversals of their own settlement terms have proven to be a systematic problem that requires improved settlement terms for markets that resolve within hours of the settlement deadline.

Kalshi’s data source for Oscars viewership

In February 2025, Kalshi launched a market on the number of people who would watch the Oscars. The New York Times initially reported that 18 million people watched the Oscars, resolving two contracts to ‘No.’ Revised viewership figures showed 19.7 million people watched the Oscars, which would have resolved both contracts to ‘Yes.’

Some Kalshi customers were angry that the initial lower figures were used to settle the market instead of the later higher figures. One commenter considered it unfair.

However, Kalshi was clear from the beginning that it would resolve its markets based on the initial published viewership numbers. Its full rules stated that “Revisions to the Underlying [initial viewership figures] made after Expiration will not be accounted for in determining the Expiration Value.”

Noah Sterling, a member of Kalshi’s operations team, spelled out Kalshi’s full reasoning in that market with Domer, a prominent political bettor who took issue with Kalshi’s use of the initial data instead of revised figures.

Hey Domer. I know we already talked about this but I wanted to make sure the entire context of this market was provided here.
While I agree that it is unfortunate that this market does not account for data revisions, this market was determined correctly. As you know, our number…
— Noah (@noahatkalshi) March 5, 2025

Kalshi’s Oscar viewership market is an important lesson in understanding what prediction markets are really on. Yes, this market was on viewership figures, but more specifically, it was on the initial estimate rather than the final figure.

Kalshi was consistent with its settlement terms, but that didn’t make all of its customers happy about the market’s resolution.

What makes great prediction market resolution terms

The bottom line for prediction market settlement terms is they should be clear enough to eliminate ‘what if’ questions about how a market could be resolved. Three criteria include:

Specificity
Sources
Prohibited Users
Position Limits

Each of these sections is important for understanding the market and its underlying events.

Specificity

Prediction market terms should be clear about what the event is. If it’s on a term that can be ambiguously defined, like an invasion, then additional details should clarify what key words mean. Specific language protects both the platform and its traders, so it’s a must-have for resolution terms.

Sources

A prediction market should be able to tell its traders which third party will decide how the market resolves. They often list media sources that will report an event’s occurrence. Markets based on data, like financial or economic measures, often include sources from the Fed or other official data sources. Not only must sources be listed, but they must also be authoritative.

Prohibited Users

Regulated prediction markets like Kalshi and ForecastEx include a list of prohibited users who cannot trade in their markets. For example, Kalshi’s election markets listed paid campaign staffers and current officeholders from trading in its 2024 presidential election market. Rotten Tomatoes reviewers are prohibited from trading in Kalshi’s Rotten Tomatoes score markets. These measures are designed to prevent the most egregious insider trading and conflicts of interest from undermining a market.

Position Limits

Prediction markets should move based on new information instead of one large trade creating its own center of gravity. Setting a maximum amount of money on a position keeps one user from buying so many contracts that the price moves on its own. Maintaining accurate pricing is why CFTC-regulated companies must submit position reports so the market’s largest users can be monitored, too.

Prediction Market Websites

Kalshi

Polymarket

PredictIt

Manifold

ForecastEx

Metaculus

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PredictionNews Editorial Staff

Articles published by PredictionNews editorial staff reflect contributions from three or more writers. We explore prediction industry trends, keeping you informed about prediction market data, price movements, and information that inform trading strategies. This rapidly evolving industry produces news 24x7, and our editorial team distills it for you.