Settlement

Definition

Settlement is the process that determines the final outcome of a market and triggers payout. Settlement is governed by the market rules, including the exact outcome definition, the source of truth, and the time window.

Why it matters

In prediction markets, settlement is where most true risk hides. Two markets can look identical on price, but have very different settlement risk due to ambiguous wording, unreliable sources, or unclear dispute procedures.

How to assess settlement risk

• Read the outcome definition carefully and check for edge cases.

• Confirm the source of truth, such as a specific publication or data feed.

• Check the timing rules, including deadlines, revisions, and cutoffs.

• Review the dispute process and governance.

Common pitfalls

Assuming common sense: Markets settle based on the written rule, not intent.

Ignoring revisions: Some sources revise numbers after initial release.

Missing time windows: A result can be true later, but not within the defined window.