Market Explainer

Predictive Contract Outcomes: Binary, Scalar and Categorical

How prediction markets convert real-world events into settlement rules and quoted prices.

By Top Prediction Markets EditorialReviewed September 14, 20264 min read

Answer first

Predictive contract outcomes are written as one of three types: binary (Yes/No), scalar (a number) or categorical (one choice from several). Each type defines how the market maps the real-world result to a settlement value and therefore how quoted prices imply probabilities or expected values. Read the contract wording carefully for thresholds, measurement windows and data sources — those details determine how the price should be interpreted.

Before you start: the single most important thing to read

Every contract includes a short settlement rule and a source or method for resolving. Read that sentence first. The contract’s type (binary, scalar, categorical) tells you the format of the settlement value. The settlement rule tells you exactly what will be measured, the time or window for that measurement, any rounding rules, and which official source will be used.

In simple terms: a Yes contract — an event contract that pays $1 if the event happens — is binary. A scalar contract resolves to a number (for example, 0–100) and pays that number in dollars per contract. A categorical contract picks one option (for example, a winner) and pays $1 if the chosen option is correct.

Step-by-step: read the wording and map it to price behavior

Identify the outcome type.

Read the headline and the resolution clause. If it asks a yes/no question, it’s binary. If it asks for a measured number, it’s scalar. If it lists options (Team A, Team B, Other), it’s categorical.

What you see: a short label like “Yes / No,” “Scalar (range 0–100),” or a list of named options.

What can go wrong: loose language (e.g., “likely to win” rather than “wins”) can hide ambiguity.

Find the exact settlement definition.

Look for items such as the measurement date/time, window (single moment or averaging window), rounding, and official source (e.g., census data, NFL stat provider). These determine the final numeric outcome for scalar contracts and tie-breaking for categorical ones.

What you see: a sentence like “Resolves to the official reported value from [SOURCE] as of 11:59 pm UTC on DATE.”

What can go wrong: unspecified time zone, multiple possible sources, or no rounding rule.

Map the contract type to the market price.

Binary prices are quoted between $0 and $1 and are most naturally read as an implied probability. Scalar prices (often quoted in dollars) represent the market’s expected numeric value. Categorical prices are like several linked binaries; each option’s price is the market’s probability estimate that that option will be the winner.

What you see: a price like $0.62 on a Yes contract, $37.50 on a scalar contract, or Option A $0.65, Option B $0.35 on categorical.

What can go wrong: prices may not sum to exactly $1 on categorical markets because of fees, liquidity, or market-maker spread.

Convert price to outcome interpretation with a worked example (buying a Yes contract).

If a Yes contract costs 62¢ and pays $1 if the event happens, buying one contract costs $0.62. If the event happens, the contract pays $1, so the gain before fees is $0.38. If the event does not happen, the contract expires at $0, so the loss is $0.62.

This example shows the simple mapping from quoted price to payoffs for a binary outcome.

Check dispute, amendment, and resolution rules.

Markets often include a dispute window and a defined process for ambiguous results. Read how to raise or resolve disputes and whether event organizers can change the wording.

What you see: an arbitration or dispute section, or a named resolution authority.

What can go wrong: the resolution authority’s choice can be subjective or slower than you expect.

How each outcome type maps in practice (numbers you can use)

Binary: Prices run from $0 to $1. Treat them as implied probabilities. Example: $0.62 ≈ 62% implied probability of the event occurring.

Scalar: The contract pays the numeric measurement. Example: a scalar contract ranges 0–100 and trades at $37.50. If it resolves at 40, each contract pays $40, so a buyer at $37.50 gains $2.50 per contract.

Categorical: Each option is its own contract paying $1 if that option happens. Example: Team A priced $0.65 and Team B $0.35. Those prices suggest the market assigns 65% and 35% probability respectively. If total exceeds or falls short of $1, consider fees or the market maker’s inventory.

Where people get stuck: common edge cases and traps

Threshold wording: “≥ 50%” vs “> 50%” changes whether exactly 50 counts. That single symbol changes settlement for binary questions.
Measurement windows: “on Nov 30” vs “between Nov 30 and Dec 1” can flip the result if the measurement moves.
Multiple sources: if the contract says “first reported by X or Y,” differences in reporting methodology can produce different settled values.
Rounding and precision: scalar contracts often round to whole numbers or decimals. A value of 49.6 might round to 50 and change a binary threshold result.
Ties and “other” options: categorical lists that omit plausible options can lead to an “other” outcome; check whether that pays $1 or $0.
Amendments after launch: some platforms allow wording changes; check the amendment policy and whether new wording applies retroactively.

Keep reading

Frequently asked questions

If a binary price is $0.00, can it still resolve yes?

Yes. A market price of $0.00 reflects current market belief but does not change the contract’s settlement rules. The outcome depends only on the defined resolution conditions.

How does rounding affect scalar contracts?

The contract should state rounding rules. If it does not, the platform’s standard rounding policy applies. Missing rounding rules are a common source of dispute.

What if two sources report different values?

Rules vary by platform; many contracts name a single official source or specify a tie-break order. If not, disputes can decide which source is authoritative.

Do categorical option prices always add to $1?

Not always. Prices often approximate probabilities; differences from $1 arise from fees, market-maker spreads, or unsettled inventory.

Are there limits on changing contract wording after launch?

Rules vary by location and platform. See our dedicated guide on whether prediction markets are legal in the US.