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 October 26, 20266 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.
Read the contract first
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.
The core difference in one paragraph
Binary outcomes encode a yes/no probability and are quoted $0–$1, scalar outcomes encode a measured numeric value and are quoted in the same units the contract will pay (often dollars), and categorical outcomes are multiple mutually exclusive options where each option’s price reflects its probability of being the chosen winner.
That single distinction drives how you interpret price, how you map the settlement wording to the final payout, and which wording details (time, source, rounding) matter most.
Side-by-side: price, payout, examples, and practical notes
| Feature | Binary | Scalar | Categorical |
|---|---|---|---|
| Quoted price range | $0 to $1 | Often $0 to the max of the range (e.g., $0–$100) | $0 to $1 for each option |
| Typical interpretation | Implied probability | Market expectation of the measured value | Probability each option is the winner |
| Pays | $1 if event happens, $0 otherwise | The numeric resolved value per contract (e.g., $40) | $1 to correct option, $0 to others |
| Example price shown | $0.62 | $37.50 (range 0–100) | Team A $0.65, Team B $0.35 |
| How to convert price to payoff | Buy at $0.62, if event occurs you receive $1 (gain = $0.38) | Buy at $37.50, if it resolves at 40 you receive $40 (gain = $2.50) | Buy Team A at $0.65, if Team A wins you receive $1 (gain = $0.35) |
| Where wording matters most | Exact threshold symbols (≥ vs >), tie rules | Measurement time/window, rounding/precision, source | Full option list, tie and “other” definitions, amendment rules |
| Common price quirks | Interpreted as probability even when liquidity or spreads distort it | Rounding can change nearby threshold outcomes | Option prices may not sum to $1 due to fees or market-maker spread |
| Resolution source | Named authority in settlement line | Official reported value as of a specific time (e.g., “Resolves to the official reported value from [SOURCE] as of 11:59 pm UTC on DATE.”) | Named authority or method that picks the winning option |
Step-by-step: how to 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 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.
Cases where the distinction stops mattering
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Threshold wording: “≥ 50%” vs “> 50%” changes whether exactly 50 counts. That single symbol changes settlement for binary questions.
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Measurement windows: “on Nov 30” vs “between Nov 30 and Dec 1” can flip the result if the measurement moves.
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Multiple sources: if the contract says “first reported by X or Y,” differences in reporting methodology can produce different settled values.
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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.
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Ties and “other” options: categorical lists that omit plausible options can lead to an “other” outcome; check whether that pays $1 or $0.
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Amendments after launch: some platforms allow wording changes; check the amendment policy and whether new wording applies retroactively.
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Fees and market mechanics: categorical prices won’t always sum to $1 because of fees or the market maker’s inventory and spread; interpret prices accordingly.
Where each one actually fits
If you want a direct probability estimate for a yes/no event, follow binary contracts: they are simplest to read and map directly from price to implied probability (e.g., $0.62 ≈ 62% implied probability).
If you need a forecast of a measured value — a temperature, a vote share, or a numeric index — follow scalar contracts, which quote the expected numeric outcome (for example, a scalar range 0–100 trading at $37.50 implies an expectation around 37.5).
If the question is “which of these mutually exclusive options will occur,” follow categorical contracts where each option’s price reflects its chance of being the final winner (for example Team A $0.65 vs Team B $0.35).
Use binaries for quick probability intuition, scalars when the magnitude matters or when thresholds depend on a number, and categorical when you care about exactly which option wins rather than a numeric measure.
Further reading on predictive contract outcomes
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.
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