What five questions should you answer before trading a market?

From the description: what exact event triggers YES, what named source determines the answer, what is the precise resolution date and time (down to the time zone), what happens on a no-show or a revised number, and who is the dispute backstop. If a market answers four cleanly and is fuzzy on one, that fuzzy clause is what you’re actually betting on.

What are the ways a market resolution can go wrong?

Four failure modes, each of which has happened on a major platform: source disagreement (two sources publish different numbers and the description didn’t name one), delayed feed (the data isn’t there when the oracle queries, so funds lock), spec ambiguity (two valid readings, disputes follow), and the market that never resolves (the triggering event doesn’t happen and there’s no clear no-show clause).

What red flags mean you should skip a prediction market?

No named resolution source, subjective triggers (“will the announcement be considered hawkish?”), conditional chains that nest two unknowns, no no-show clause for an event that may never occur, and a resolution date earlier than the source’s normal publication schedule. Edge doesn’t come from outguessing oracle disputes; skipping the market is usually the right answer.

Welcome to PM Academy

Module 06 · Advanced · ~10 min

How a market resolves.

By the end of this module, you’ll know exactly which words in a market description determine whether you get paid, and you’ll walk away from markets where that answer is unclear.

Settlement looks like a switch flipping at expiry. To get there, the market has to consult a resolution source on a specific date by a specific rule. Read that rule wrong, or trust a market whose rule is sloppy, and a winning thesis becomes a losing position.

Quick answer

How does a prediction market resolve?

In four stages: the resolution source publishes its data, an oracle reads that source and posts the result on-chain, a dispute window of roughly 24–72 hours lets anyone challenge, and then the contract settles, $1.00 to the winning side and $0.00 to the other. Every link in that chain can fail: the source can publish ambiguously, the oracle can read a different value than you did, a dispute can lock funds for days, and a contract can resolve technically correctly to an answer the market never intended. That’s why you read the market description before the price. It names the exact YES trigger, the resolution source, the date and time zone, the no-show and revision rules, and the dispute backstop. If a market is fuzzy on any one of those, the price tells you nothing about which interpretation wins, and the right move is usually to walk away.

Section 01

The resolution pipeline.

When a market expires, three things happen in order: the resolution source publishes data, an oracle reports that data on-chain, and the contract pays out based on what the oracle reported. Understanding the chain is how you predict where it might break.

  ┌──────────────────────┐
  │ Resolution source    │   "Did the Fed cut rates by Q4?"
  │ (the oracle's input) │   → Source: Fed FOMC official press release
  └──────────┬───────────┘
             │
             ▼
  ┌──────────────────────┐
  │ Oracle reads source  │   On the resolution date, the oracle
  │ (UMA / human / API)  │   queries the source and posts on-chain.
  └──────────┬───────────┘
             │
             ▼
  ┌──────────────────────┐
  │ Dispute window       │   Anyone can challenge during this window.
  │ (~24-72 hours)       │   No challenge → final.
  └──────────┬───────────┘
             │
             ▼
  ┌──────────────────────┐
  │ Settlement           │   YES contracts pay $1.00, NO pay $0.00
  │ (or the other way)   │   (or the other way around).
  └──────────────────────┘

The whole pipeline can fail. The source can publish ambiguously (“the Fed signaled possible cuts”). The oracle can read a different value than you did. The dispute window can lock funds for days while a question is litigated. The contract can technically resolve correctly to a number that doesn’t match what the market clearly intended. Each of these is a real outcome on real platforms.

Section 02

Read the rulebook first.

Every Limitless market has a description, the small block of text below the title. Read it before you place size. The five questions to answer:

1. What exact event triggers YES?

“Will the Fed cut rates by Q4?” could mean: any cut at all? a 25bps cut? cuts at the Q4 FOMC specifically? cumulative cuts from the start of the year? If the description doesn’t pin this down, walk away.

2. What named source determines the answer?

A specific URL, official body, government release, or exchange feed. “According to news reports” is not a source. If the source is paywalled, behind a login, or geographically restricted, the oracle may not be able to read it on the resolution date.

3. What is the exact resolution date and time?

Down to the time zone. “December 31” is ambiguous, UTC end-of-day or US Eastern? If the source publishes on a different schedule than the resolution date implies (a quarterly release published mid-January for Q4), there’s a gap the oracle has to interpret.

4. What happens on no-show or revision?

If the source doesn’t publish on the expected date, does the market wait, default to NO, or get cancelled and refund? If the source publishes a number then revises it later, which number wins? Good descriptions answer both.

5. Who is the dispute backstop?

If the oracle’s answer is challenged, who decides? UMA, an arbitration committee, a coin-vote? The backstop’s incentives are the final layer of the pipeline. Don’t hold size into resolution on a market with an opaque backstop.

Discipline

If a market answers four of five and is fuzzy on one, that one is the trade. The price you see reflects the average reader’s confidence in their interpretation of the fuzzy clause. The price tells you nothing about which interpretation will win at resolution. Either you can do the work to determine the actual answer, or the trade isn’t for you.

Section 03

Settlement timing.

The price isn’t money in your wallet until settlement clears. There’s a window between “market expires” and “you can withdraw the proceeds.” That window is where most traders are caught off-guard.

Fast settlement

Source publishes immediately.

Markets where the resolution source publishes the moment the event ends, live sports scores, exchange close prices, crypto chain state at a block height. Oracle reads, dispute window opens, settlement is usually within hours.

Examples: Premier League match outcome · BTC price at hourly close · Fed FOMC announcement (real-time press release).

Slow settlement

Source needs days or weeks.

Markets that depend on official data releases, court rulings, certified vote counts, or third-party reports that take time to publish or be certified. Settlement may be days or weeks after the apparent event.

Examples: BLS jobs report (revised the next month) · election outcomes (certified weeks later) · earnings reports requiring SEC filings.

Capital is locked the entire time. A position that “won” on Tuesday but doesn’t settle until Friday is dead capital you can’t redeploy. For most markets that’s a footnote; for active size-rotating traders or anyone using Kelly across many markets, it’s a real cost. Always know whether your bankroll will be back in three hours or three weeks before you commit it.

Section 04

When resolution goes wrong.

The four failure modes you should be able to spot before placing size. None are theoretical, each has happened on a major prediction-market platform in the last two years.

Source disagreement

Two major sources publish different numbers for the same metric (different exchanges quoting different settlement prices, official body vs. journalist count). Which one wins? If the description doesn’t name the exact source, you’re betting on which one the oracle picks.

Delayed feed

The resolution source has a publication delay. The oracle queries on the resolution date but the data isn’t there yet. Some platforms wait; others default to a fallback rule (often NO). Funds locked, position uncertain.

Spec ambiguity

The market description allows two valid readings. The oracle picks one. Half the holders feel cheated. Disputes get filed. The dispute backstop adjudicates, sometimes correctly, sometimes by majority vote of token holders who didn’t even read the question.

The market never resolves

The triggering event doesn’t happen by the deadline (the bill never gets voted on, the merger never closes by the date). What does the market do, void? default? extend? Read the description for the no-show clause before entering. Markets without a clear no-show clause are roach motels.

Common questions

PM resolution and settlement: what people ask

Each answer also ships invisibly as schema.org FAQ data for search engines and AI assistants. Tap a question to expand.

What is a resolution source in a prediction market?

The named input the oracle consults to decide the outcome: a specific URL, official body, government release, or exchange feed. “According to news reports” is not a source. If the source is paywalled, behind a login, or geographically restricted, the oracle may not be able to read it on the resolution date, and that gap becomes your problem, not the platform’s.
What five questions should you answer before trading a market?

From the description: what exact event triggers YES, what named source determines the answer, what is the precise resolution date and time (down to the time zone), what happens on a no-show or a revised number, and who is the dispute backstop. If a market answers four cleanly and is fuzzy on one, that fuzzy clause is what you’re actually betting on.
How long does prediction market settlement take?

It depends on the source. Fast-settlement markets, live sports scores, exchange close prices, crypto chain state at a block height, usually settle within hours. Slow-settlement markets, official data releases, court rulings, certified vote counts, can take days or weeks after the apparent event. Your capital is locked the entire time, so know whether your bankroll comes back in three hours or three weeks before committing it.
What are the ways a market resolution can go wrong?

Four failure modes, each of which has happened on a major platform: source disagreement (two sources publish different numbers and the description didn’t name one), delayed feed (the data isn’t there when the oracle queries, so funds lock), spec ambiguity (two valid readings, disputes follow), and the market that never resolves (the triggering event doesn’t happen and there’s no clear no-show clause).
What red flags mean you should skip a prediction market?

No named resolution source, subjective triggers (“will the announcement be considered hawkish?”), conditional chains that nest two unknowns, no no-show clause for an event that may never occur, and a resolution date earlier than the source’s normal publication schedule. Edge doesn’t come from outguessing oracle disputes; skipping the market is usually the right answer.

Section 05

Walk-away signals.

Read every market description in less than a minute. If you see any of the following, the right answer is usually to skip the market, not to find a clever way to trade around the ambiguity. Edge does not come from outguessing oracle disputes.

No named resolution source. “According to news reports,” “widely reported,” “based on consensus.” If the source isn’t a specific URL or official body, walk away.
Subjective triggers. “Will the announcement be considered hawkish?” “Will the team be widely seen as the favorite?” Subjective language requires interpretation; interpretation invites dispute.
Conditional chains. “Will X happen if Y happens?” nests two unknowns. Each layer of conditionality is another way the market can resolve in a way the description didn’t anticipate.
No no-show clause. The description doesn’t say what happens if the triggering event never occurs. Capital can lock indefinitely.
Resolution date sooner than the source publishes. If the resolution date is before the source’s normal publication date, the oracle either guesses or waits. Neither is what you want.

Module checklist

Five confirmations.

Tick each item once you’ve actually done it. The Continue button unlocks at 5/5.

I can name the four stages of the resolution pipeline (source → oracle → dispute window → settlement).

I can run the five rulebook questions on a real Limitless market description without prompts.

I know whether each market in my current watchlist is a fast-settlement or slow-settlement market.

I can name the four resolution failure modes (source disagreement, delayed feed, spec ambiguity, no-resolution).

I have walked away from at least one market because its description failed a red-flag check.

Module 06 complete

You read the rulebook first.

The cheapest edge in prediction markets is not having a position in markets that shouldn’t exist. Every dispute, every funds-locked-for-three-weeks story, every “but the description clearly meant…” thread starts with a market that didn’t pass a rulebook check.

Concretely, three habits the rest of the academy assumes you have:

Reading the description before the price, in that order, every time.

Knowing settlement timing before sizing, capital locked for three weeks is a real cost, not a footnote.

Walking away from markets with red flags rather than trying to be clever about them.

Next up: Module 07 turns from mechanics to thesis-building, the EV calculation, sources of edge, and the research process that decides which well-formed markets are actually worth your time.

Continue to Module 07

Complete the checklist above to unlock