How prediction markets resolve & how disputes are settled

A plain guide to how Kalshi & UMA-based platforms such as Polymarket settle markets, what happens when an outcome is challenged, & what US regulators have said about settlement.

The rules decide, not the headline

A prediction market’s title is a short summary of the question. The outcome is settled by the written rules behind it: where the answer comes from, when the market can resolve & how unclear cases are handled.

Polymarket’s documentation says every market has pre-defined resolution rules covering a resolution source, an end date & edge cases. Kalshi says the rules, the information used & the source of that information are set out in each contract’s terms & conditions.

In both case studies later in this guide, many traders read the question in its everyday sense. The outcome turned on narrower wording in the rules.

Kalshi: rules, sources & settlement

According to Kalshi’s help centre, each contract’s terms & conditions set out the rules for deciding its outcome, the information that will be used & the source of that information. Once a contract expires, Kalshi applies those rules to information from that source.

Kalshi says this determination can take anywhere from one hour to more than twelve hours after the market closes. The timing usually depends on when Kalshi receives data from the source agency named in the contract.

Kalshi’s rules are filed with the US Commodity Futures Trading Commission (CFTC), the federal derivatives regulator, according to Gaming America’s reporting on the Khamenei market described below.

Polymarket & the UMA optimistic oracle

Polymarket’s documentation says it uses two resolution sources: the UMA Optimistic Oracle for prediction markets & Chainlink TWAP for up-down markets. An oracle is a system that brings real-world information onto a blockchain so that it can settle a contract.

Under UMA, a proposer selects the winning outcome, posts a bond & submits the proposal to the oracle. A bond is a deposit the proposer loses if the proposal is wrong. Polymarket says the bond is typically $750 in pUSD, & a correct, undisputed proposer gets the bond back plus a reward.

Anyone who disagrees can challenge the proposal by posting a counter-bond of the same amount. A first dispute starts a new proposal round. If the second proposal is also disputed, the question goes to UMA’s Data Verification Mechanism (DVM), where holders of UMA tokens vote on the outcome.

Polymarket describes three paths. With no dispute, the market resolves after the proposal, which is the fastest route at about two hours. With one dispute, the second proposal is accepted. With two disputes, the outcome is settled by the DVM vote.

Before a vote there is a 24 to 48 hour debate period, during which evidence can be submitted in UMA’s Discord channels, #evidence-rationale & #voting-discussion.

Polymarket says that in rare cases unforeseen circumstances call for a rules clarification after trading begins. It may then issue an “Additional context” update. Such clarifications cannot change the fundamental intent of the question, are published onchain through a bulletin board contract & should be considered by UMA voters.

Up-down markets work differently. A time-weighted average price (TWAP) is an asset’s average price over a set lookback window. The market resolves Up if the final TWAP is equal to or above the starting TWAP, called the price to beat, & Down if it is lower, without any proposal or dispute.

Once a market resolves, trading stops. Winning tokens can be redeemed for $1.00 each & losing tokens are worth nothing.

Other on-chain markets

Predict.fun says that as of March 2026 all new markets on its platform are served by UMA’s Optimistic Oracle. It describes itself as UMA’s favoured prediction market partner on BNB Chain.

Predict.fun describes UMA (Universal Market Access) as a decentralised oracle protocol built by Risk Labs. It explains that the model is called optimistic because a proposal is treated as correct unless someone challenges it.

On timing, Predict.fun says an undisputed market resolves in roughly two hours. A dispute can extend this by several hours to a day, & escalation to a UMA vote can take as long as a week. It adds that the vast majority of markets resolve without a dispute.

Case study: the Zelenskyy suit market

Decrypt reported on a Polymarket contract asking whether Ukrainian President Volodymyr Zelenskyy would be “photographed or videotaped wearing a suit” between 22 March & 30 June. It attracted more than $237 million in trading volume.

UMA’s oracle decided the outcome under a “consensus of credible reporting” standard. On 24 June Zelenskyy appeared at a NATO event in the Netherlands in a black jacket, matching trousers & a collared shirt, which numerous media outlets described as a suit.

An initial “Yes” outcome was challenged & then overturned in favour of “No” after a second review. On 1 July UMA’s oracle ruled that the reporting consensus had not been sufficiently established & finalised the outcome as “No”.

Critics cited media reports & images, & users compiled more than 40 headlines calling the outfit a suit. Others argued the result followed precedent from a similar market in May, where a nearly identical outfit was judged not to meet the criteria.

Several crypto commentators, journalists & protocol contributors pointed to the potential for token-rich stakeholders to sway UMA outcomes through majority vote. Community proposals asking Polymarket to reassess the decision or form an integrity team were rejected, & Decrypt said Polymarket had not indicated plans to revisit it.

Case study: Kalshi’s Khamenei market

According to Gaming America, the most prominent disputed settlement in Kalshi’s history was a February market on whether Ali Khamenei would step down as Iran’s Supreme Leader. About $54 million was traded before his reported death on 28 February.

Traders holding “Yes” expected $1.00 per contract, since Khamenei was no longer Supreme Leader. Kalshi instead settled at the last traded price before the death, citing a “death carveout” in the contract terms.

The CFTC-filed rules referred to “the last traded price (prior to the death)”, while the market page said “last traded price prior to confirmed reporting of death”. Gaming America says this ambiguity covered hours of active trading.

Kalshi acknowledged the inconsistency, reimbursed all trading fees & compensated net losses. A class action was filed in the Central District of California a week later, & Gaming America reported it was still pending.

Gaming America contrasted this with a Kalshi market on who would attend Donald Trump’s inauguration. Jimmy Carter, who died in late December 2024, was settled to “No” because he did not attend, which the outlet called uncontroversial.

Kalshi has since said it will refund trading fees, in proportion to losses, to affected users who lose on disputed settlements. The policy covers only “qualifying self-clearing members”, who hold positions directly on the exchange. Users who clear through a Futures Commission Merchant (FCM), an intermediary firm, are excluded.

Gaming America says Kalshi’s rules for early settlement have changed three times in roughly 18 months. The current version lets Kalshi set the settlement price “in its sole discretion” when no last traded price represents a fair value.

What US regulators now expect

A Lowenstein Sandler client alert dated 24 March 2026 says that on 16 March 2026 the CFTC published an Advance Notice of Proposed Rulemaking (ANPRM), an early request for public comment, alongside Staff Advisory No. 26-08 from its Division of Market Oversight.

The advisory addresses designated contract markets (DCMs), the exchanges the CFTC has designated to list contracts such as event contracts. The law firm says it sets out staff expectations on manipulation analysis, settlement data sources & product submissions, & recommends rigorous settlement protocols. It is informative rather than binding.

The ANPRM asks what factors should guide DCMs in setting resolution criteria & dispute procedures, & how surveillance should handle markets whose outcomes small groups or individuals may control. Comments were due by 30 April 2026.

On 22 September 2026 the CFTC announced a staff advisory, linked as Staff Letter No. 26-27, on mention markets. These are contracts on whether a person will say certain words, attend or appear at an event, or interact with someone else.

The CFTC said such contracts “present a heightened risk of manipulation because their settlement turns on the discrete conduct of a person that may be neither independently generated nor externally verifiable.” It reminded DCMs of their duty under Core Principle 3 to list only contracts not readily susceptible to manipulation. These statements concern CFTC-regulated US exchanges as of those dates.

What to check in a market’s rules

The sources point to a few things readers can check. The first is the full rules rather than the title, including the resolution source, the end date & the edge cases, which Polymarket says every market specifies.

Standards that call for judgement, such as a “consensus of credible reporting”, leave room for disagreement, as the Zelenskyy market showed. A death clause can change a payout, as the Khamenei market showed, & that dispute also turned on a gap between the filed rules & the market page.

Timing varies too. Kalshi says settlement can take more than twelve hours, Predict.fun says a UMA vote can take up to a week, & Polymarket can add clarifications after trading has begun.

Questions

How long does Kalshi take to settle a market?

Kalshi says determination can take from one hour to more than twelve hours after a market closes. The timing usually depends on when it receives data from the source agency named in the contract.

What bond does a Polymarket resolution proposer post?

Polymarket’s documentation says the bond is typically $750 in pUSD. A challenger posts a counter-bond of the same amount.

Who decides a Polymarket outcome if a proposal is disputed twice?

The question goes to UMA’s Data Verification Mechanism, where UMA token holders vote. A 24 to 48 hour debate period, with evidence posted in UMA’s Discord, comes before the vote.

Can Polymarket change a market’s rules after trading starts?

Polymarket says it may issue an “Additional context” clarification in rare cases. Such clarifications cannot change the fundamental intent of the question & are published onchain.

Does Kalshi refund fees when a settlement is disputed?

According to Gaming America, Kalshi now refunds trading fees, in proportion to losses, to qualifying self-clearing members who lose on disputed settlements. Users clearing through a Futures Commission Merchant are excluded.

Sources

• docs.polymarket.com
• help.kalshi.com
• docs.predict.fun
• decrypt.co
• gamingamerica.com
• lowenstein.com
• cftc.gov

Sources checked 9 October 2026. Information only. 18+.