What Are Resolution Criteria?
Resolution criteria are the exact rules that determine how a prediction market settles — who decides the outcome, what source they use, and what happens in edge cases. Every contract has them, usually posted in a “rules” or “details” section, and they matter more than almost anything else in the market. Two markets that look identical on their headline question can resolve completely differently based on wording most traders never read.
Why This Is a Source of Mispricing
Most traders price a market off the headline question alone. If the fine print narrows or widens that question, the crowd’s price reflects the wrong thing — and that gap is tradeable. This happens in three recurring ways.
1. Narrow or unexpected definitions. A market asking “Will inflation exceed 3%?” might resolve only on one specific government release, on one specific date, using seasonally adjusted figures — not the headline number most people are watching. If you check which exact data series and date the rules specify, you may find the crowd is pricing a different (and less likely) outcome than the one that actually resolves the contract.
2. Ambiguous or discretionary resolution sources. Some markets resolve based on a moderator’s judgment call rather than a hard data feed. Where the rules leave room for interpretation — “resolves YES if credible major news outlets report X” — the effective probability includes not just “will X happen” but “will it be reported in a way that satisfies the resolution source.” That’s a second, often-overlooked layer of uncertainty the market price may not fully account for.
3. Deadline and extension clauses. A market might resolve NO by default if the event doesn’t happen by a stated deadline — even if it happens a week later. Traders pricing the market on “will this eventually happen” instead of “will this happen by this exact date” are answering the wrong question entirely.
A Direct Process for Checking Resolution Criteria
- Read the full rules section before forming any opinion on price. Do this before you look at the current odds, so your read isn’t anchored by what the market already believes.
- Identify the exact resolution source — a named data series, a specific government body, a moderator vote, or a named news standard. Write it down in one sentence.
- Check the deadline mechanics. Does the market resolve NO by default if unresolved by the deadline, or does it extend? This single detail changes the true probability significantly for close-call timing events.
- Look for discretion clauses. Any language like “in the moderator’s judgment” or “as widely reported” introduces a layer of interpretation risk that a headline-only read will miss.
- Compare your reading to the market price. If the crowd’s price looks like it’s answering a broader or different question than the actual rules specify, that gap is your potential edge.This is one of the most reliable ways of finding mispriced prediction markets.
A Concrete Example
A market titled “Will the bill become law in 2026?” might specify in the rules that it resolves based on the bill being signed, not merely passed by both chambers — and that a pocket veto or year-end expiration resolves it NO regardless of later action. A trader who only reads the headline might overprice YES based on strong momentum in Congress, missing that the actual resolution bar is signature, not passage.
The Takeaway
The headline question is marketing; the resolution criteria are the contract. Reading them fully, before you look at price, is one of the simplest and most repeatable ways to find a gap between what the crowd is pricing and what will actually determine the payout.
Colin is a long-time digital media channel operator and content creator with an intense interest in sports gaming, prediction markets, and artificial intelligence, and how they are shaping the social, entertainment, and economic landscapes.
