What are event contracts?
Event contracts pay $1 if an outcome happens and $0 if it doesn't. How they work, where they trade, and how they differ from options and gambling.
Updated November 10, 2026 · Lumina Markets
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An event contract is a contract on a yes-or-no question about the future. It pays $1 if the stated outcome happens, and $0 if it doesn't. Between listing and resolution it trades at a price between those two endpoints, and that price reads as the market's probability for the outcome.
How an event contract works
Every event contract has three parts:
- A defined question
Will the Fed cut rates at its next meeting? Will CPI print above 3.0%? The question names its terms precisely: which meeting, which release, which threshold.
- A binary payoff
The contract settles at $1 if the answer is yes, $0 if it's no. Nothing in between when it resolves normally.
- A named resolution source
Each contract names its resolution source before you trade: an official statistic, a certified result, a designated record.
Because the payoff is fixed, the price carries all the information. A yes contract trading at 38¢ implies roughly a 38% market-priced chance. Buy at 38¢ and be right, and each contract returns $1, a 60.867¢ profit after the 1¢ transaction fee and the 0.133¢ commission. Be wrong, and the contract expires at zero, a 39.133¢ loss. The payout calculator runs the exact numbers, fee and commission included.
- Price of one yes contract
- 38¢
- Roughly a 38% market-priced chance
- Each contract returns if you're right
- $1
- A 60.867¢ profit after the fee and commission
- The contract expires at zero if you're wrong
- $0
- A 39.133¢ loss, fee and commission included
You aren't locked in until resolution. Event contracts trade continuously, so you can sell a position when the price moves or your view changes. Resolution and settlement covers the endgame mechanics.
Position walkthrough
Walk one position through from start to finish. Say the question is Will the Fed cut rates at its next meeting? and the yes contract trades at 38¢.
- EntryYou buy 100 yes contracts at 38¢
Cost: 100 × 38¢ = $38.00, plus the $0.01-per-contract transaction fee ($1.00) and the 0.35% commission ($0.133) = $39.133 total. That's also your maximum loss.
- The middleThe price slips to 33¢, then reaches 51¢
A strong jobs report lands and traders who expect stickier inflation buy no; the price slips to 33¢. Your position marks down, but nothing settles, because the question isn't answered yet. Two weeks later, soft CPI data pushes the price to 51¢. Now you have a live choice: sell here for 100 × 51¢ = $51.00 (minus the second execution's $1.00 fee and $0.1715 commission, charged on the 49¢ no side the sale buys, netting $10.6955 profit), or hold through the meeting.
- ResolutionEach yes contract pays $1 if the Fed cuts
Suppose you hold and the Fed cuts. The named resolution source confirms the outcome, the exchange settles the contract, and each yes contract pays $1: $100.00 against your $39.133 cost, a $60.867 profit. Had the Fed held rates, the contracts settle at $0 and the $39.133 is gone.
Statements and confirmations show these amounts rounded to the cent. You can check every number in that walkthrough yourself, and the payout calculator will run the math for any price or size.
How resolution works
Read the resolution terms closely before you trade, so you know what settles the contract. In practice:
A CPI contract points to the official government print; an election contract points at the results its rules name, and those rules can let it settle before certification once major news organizations have consistently called the race and no recount or legal challenge is under way; a Fed contract points at the announced decision. The source is listed in the contract's terms from day one.
When the source publishes, the exchange determines the outcome against the written criteria and settles every contract automatically. Holders don't file claims or take any action; winning contracts credit $1 each at settlement.
If the data is delayed, resolution waits for it. If the event is canceled, the market's rules say what happens: a canceled election, for example, can resolve No. Where they don't, the exchange can settle early or delay settlement, at the most recent prices or a price it sets, which can be more or less than you paid.
Before you trade, you should be able to answer three things from the contract terms: what settles it, from which source, and by when.
Where event contracts trade
In the United States, exchange-listed event contracts are derivatives regulated by the Commodity Futures Trading Commission (CFTC) and trade on CFTC-regulated exchanges. Lumina's contracts are listed and traded on ForecastEx, a CFTC-regulated designated contract market; Lumina is the introducing broker. Cash in your account is held at Interactive Brokers LLC in accounts subject to CFTC customer funds segregation requirements. Money in an open position is held as collateral at the ForecastEx clearinghouse.
The regulated structure means standardized contract terms, a public rulebook for listing and resolution, and customer-funds protections that come from futures regulation rather than from a platform's own promises.
Event contracts vs options and futures
Event contracts belong to the derivatives family, but the payoff shape is different:
| Event contract | Option | Future | |
|---|---|---|---|
| Question it prices | Will X happen? | What will the asset be worth, relative to a strike? | What will the asset be worth? |
| Payoff | Fixed: $1 or $0 | Variable above/below the strike | Variable, point-for-point |
| Maximum loss (buyer) | The price paid | The premium paid | Can exceed initial margin |
| What the price reads as | A probability | Mostly volatility and direction | The expected asset price |
The fixed payoff is the defining feature. An option's value mixes direction, magnitude, and time; an event contract isolates one question and prices only its probability.
Event contracts and gambling: what's actually different
Both involve risk, and you can lose what you put in. The structural differences are worth stating plainly:
- Counterparty. On an exchange-traded event contract you trade against other participants with different views, at prices set by that trading. A house-run book prices its odds to include its own margin.
- Exit. An event contract position can be closed before resolution, so it can be managed or hedged like any other position. A placed wager is typically locked until the outcome.
- Regulation. These contracts trade on CFTC-regulated exchanges under futures rules, which bring market surveillance, standardized terms and segregated customer funds.
- Information role. Event contract prices are used as public probability estimates, and cited by researchers and journalists, because they aggregate what informed participants will back financially.
What event contracts cost
The transaction fee on Lumina's contracts is $0.01 per contract, per side, charged at execution. Both the yes side and the no side of an executed transaction pay it, regardless of how the contract resolves. Lumina also charges a commission of 0.35% of the trade value (the contract price times the number of contracts) at execution. A sale buys the other side, so its commission is on that side's price. Contracts are priced between $0.02 and $0.99. Full details are in the fee disclosure.
FAQ
Are event contracts gambling?
They are CFTC-regulated derivatives traded on an exchange: you trade against other participants, you can exit before resolution, and customer funds sit under futures segregation rules. Their legal classification is a separate question, and these contracts may be classified as "gaming" under certain state or federal laws. Risk remains real: you can lose what you paid.
Are event contracts legal in the US?
The event contracts Lumina offers trade on CFTC-regulated exchanges for eligible US participants. Availability depends on product structure and jurisdiction; see legal disclosures for current terms. This isn't legal advice.
What happens if the event can't be resolved?
The market's rules say what happens: a canceled election, for example, can resolve No. Where they don't, the exchange can settle early or delay settlement, paying at the contracts' most recent prices or a price it sets. That can be more or less than you paid.
How much can I lose on an event contract?
On a simple bought position, at most what you paid plus the $0.01-per-contract fee and the 0.35% commission. The fixed $1/$0 payoff caps both sides of the trade.