Sports betting is nothing new — predicting sports results and wagering on the outcome.
But what if you could wager on the outcome of any event? Say, if it’s going to rain tomorrow? Or if the Federal Reserve is going to lower interest rates?
With event contracts, you can do just that.
Prediction markets, which specialize in event contracts trading, let you speculate on the outcome of a specific event, and these contracts are quickly growing in popularity. But like any investment, event contracts aren’t without risk. So, learn how these assets work and their pros and cons before you get started.
Event contracts are a type of financial derivative that lets you trade on the outcome of future events, spanning everything from political elections to sporting events to economic indicators, and almost everything in between.(1) Prediction markets are the platforms that let you make these wagers using event contracts.
Derivatives are financial contracts whose value depends on the price of an underlying asset and also include options, futures, forwards and swaps.(2)
"I first tried Kalshi in 2022 and, though I lost money, was impressed by how simple it was to trade event contracts — just Yes or No. Now, I trade on both Kalshi and Robinhood. While the platforms differ, trading event contracts remains consistently straightforward and accessible. I might add that my success rate has since improved, but I’m still aware of the risks."
Prediction market traders primarily use event contracts for speculative trading on information or news before it happens. Event contracts are typically structured around Yes or No outcomes, such as:
You can also use these contracts for hedging risks. For example, a trader may use event contracts to hedge against the potential impact of an upcoming election result on their investment portfolio.
When you buy a ‘Yes’ contract, you’re wagering yes to the event question, and vice versa.
Each contract reflects a probability between $0.01 and $0.99, with each cent corresponding to a 1% chance that the event will occur. For example, a contract priced at $0.48 can be interpreted as a 48% chance that it will occur according to the then-current odds of that market.
This price can fluctuate over time as new information emerges. For example, a ‘Yes’ contract for “Will the Phillies beat the Mets?” that you purchase at $0.50 per contract before the game starts might trend to $0.95 per contract by the bottom of the eighth inning because the Phillies are up 9-0. The odds are now higher that the Phillies will win.
The event contract pays out if you hold a position that matches the correct outcome. Otherwise, it expires worthless. Each correct contract is typically worth $1.00 upon settlement. You can typically also close your position before the contract resolves.
Back to that Phillies example, you could sell your position at the bottom of the eighth and get $0.95 per contract or hold your position until the game ends and earn the full $1 per contract. When the results finalize, your profit is the amount you earn per contract, minus the contract cost and any fees.
Prediction markets are on track for massive growth. According to a report from Eilers & Krejcik, these markets could reach $1 trillion in annual trading volume by the end of the decade, fueled by events in sports, politics and culture.(3) Platforms like Kalshi, Robinhood, Polymarket and Fanatics are already driving billions in trading volume, signaling that this asset class is moving from early speculation toward mainstream adoption.
If you’re ready to trade, several platforms let you participate in these markets. Each offers different event types, features and fees, so it’s worth comparing your options.
Event contracts offer a fun and unique way to speculate on the outcomes of real-world events, from elections to sports and economic indicators. Platforms like Robinhood, Kalshi and Polymarket make it simple to start with low minimums and an easy-to-use interface. These markets are highly speculative, so it’s important to do your research and only invest what you’re willing to lose. By exploring different platforms and understanding their features, you can trade smarter and take advantage of this rapidly growing market.
A solid market year hid extreme winners, losers and concentration risks.
Prediction markets let you trade event contracts on elections, economics, sports and more. Here’s where you can trade them and how each platform compares.
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