// GLOSSARY

Oracle resolution

How a market learns the real-world outcome it settles on. Kalshi resolves via its own rules and cited sources as a regulated exchange; Polymarket resolves through UMA's optimistic oracle, where proposed outcomes can be disputed onchain.

A binary contract is a claim about the world, and something has to decide whether the claim came true. That something is the resolution mechanism — loosely, the oracle — and it's where prediction-market risk differs most from ordinary market risk.

Two models

Kalshi (a CFTC-regulated exchange) defines resolution in each market's rules: the data source, the measurement time, the edge cases. Determination follows those rules, with the exchange's processes behind it.

Polymarket uses UMA's optimistic oracle: someone proposes an outcome with a bond; if nobody disputes within a window, it stands; disputes escalate to a vote of UMA token holders. Details of bonds and windows change — check current UMA and Polymarket docs.

Why traders should read the rules

Most resolution risk is really specification risk: the market resolves exactly as written, not as you assumed. Ambiguous wording, source revisions, and timing edge cases have all produced fills that felt wrong but resolved correctly. Before sizing up, read the resolution criteria as carefully as the book — and treat settlement timing as part of the trade.