Event Contract

An event contract is a type of binary contract tied to a specific real-world event with a defined resolution date. Unlike perpetual financial instruments, event contracts have a built-in expiration.

CLI:sf event KXFEDRATE-26JUN

Event Contracts Explained

Event contracts are the basic building blocks of prediction markets. Each contract is tied to a question about the world: "Will X happen by date Y?" The contract has a start date (when trading opens) and an expiration date (when the event must occur for Yes to win).

How They Differ from Traditional Finance

Traditional options also expire, but event contracts are fundamentally different:

Binary payout: Event contracts pay $1 or $0. Options pay the difference between strike and settlement.
No underlying asset: Event contracts reference real-world events, not tradeable securities.
Fixed risk: You can never lose more than you paid. No margin calls.

Event Groups

Complex events are often broken into groups. For example, Kalshi might structure a presidential election as:

KXDEM-28-HARRIS: "Will Kamala Harris win the 2028 Democratic nomination?"
KXDEM-28-NEWSOM: "Will Gavin Newsom win the 2028 Democratic nomination?"
KXDEM-28-PRITZKER: "Will J.B. Pritzker win the 2028 Democratic nomination?"

The sum of all Yes prices within a group should equal approximately $1.00 (minus spread costs).

Time Decay

As the expiration date approaches, contracts tend to move toward either $0 or $1. A contract at 50 cents with 6 months left might still be at 50 cents, but with 1 day left it will likely be near $0.05 or $0.95. This is similar to how options behave, though the dynamics are different since there's no underlying volatility surface.

Example

Kalshi event group: KXFEDRATE-26JUN
"What will the Fed funds rate target be after the June 2026 FOMC meeting?"

Contracts within the group:
  4.25-4.50%  → $0.08  (8% probability)
  4.00-4.25%  → $0.25  (25% probability)
  3.75-4.00%  → $0.38  (38% probability)
  3.50-3.75%  → $0.22  (22% probability)
  Below 3.50% → $0.07  (7% probability)

Sum: $1.00 (must always sum to ~$1.00)

Related Terms

Prediction Market

A prediction market is an exchange where participants trade contracts whose payoff depends on the outcome of future events. The price of a contract reflects the crowd's aggregate estimate of the event's probability.

Binary Contract

A binary contract is a financial instrument that pays out a fixed amount (typically $1) if a specified condition is met, and nothing otherwise. Prediction markets are built on binary contracts.

Settlement

Settlement is the process by which a prediction market contract is resolved to its final value — either $1.00 (Yes) or $0.00 (No) — once the outcome of the underlying event is determined.

Contract Expiration

Expiration is the date and time by which a prediction market contract must resolve. If the event has not occurred by expiration, the contract settles to $0 for Yes holders and $1 for No holders.

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