Understanding Prediction Event Contract Payout Structure on Crypto.com

This document is for informational purposes only and does not constitute investment advice or a solicitation to trade. All trading involves risk and you could lose your entire investment.  Please see below for further disclosures. 

What are prediction event contracts on Crypto.com?

Prediction event contracts are financial instruments that enable you to speculate or hedge on the occurrence, non-occurrence, or extent of the occurrence of a specified event, by purchasing contracts that represent each probability. 

Unlike traditional derivatives that derive their value from underlying assets like stocks or commodities, prediction contracts derive their value solely from the probability of specific events occurring.

These contracts differ fundamentally from traditional betting products in several ways. For example, while betting involves fixed probabilities set by bookmakers, prediction markets operate as continuous double auctions, where prices fluctuate based on supply and demand from participants. 

This creates a more efficient price discovery mechanism because it reflects the information discovery of market participants. Betting probabilities are set from above by the bookmaker, whereas prediction market probabilities are set from below by all participants. 

If a large share of traders predicts that the market probability is wrong, they will buy or sell contracts until the price shifts, meaning the market actively absorbs and incorporates their information.

Of course, the system is not perfect. In practice, some participants (for example in popular sports markets) may purchase contracts to back their favorite team, introducing bias rather than purely objective positioning.

We offer various prediction event contracts covering categories including cryptocurrency price movements, sports events, political events and economic indicators like interest rate decisions. You can start once you have completed regulatory required onboarding.

Our Predict platform works on blockchain technology to ensure transparency, immutability of contract terms and automated settlement based on predetermined criteria. The underlying blockchain infrastructure allows for trustless execution through smart contracts, eliminating the need for traditional intermediaries. 

This further creates a more efficient market where prices tend toward the true probability of events occurring, as participants have a financial incentive to correct mispricing.

Popular prediction event categories on Crypto.com include Bitcoin price predictions, major sporting events and FOMC decisions among many others. Explore prediction markets with us. 

Please note that this guide is for educational purposes only and doesn’t constitute a recommendation for you or investment advice.

The mechanics of prediction contract payout structures

Most prediction contracts on Crypto.com are listed as event-referenced swaps and operate on a structure with yes/no event occurrences. Each contract typically trades between $0.01 and $0.99, with the price representing the market's overall assessment of the implied probability that the event will occur. 

As a general rule, and with some caveats, a contract trading at $0.70 implies a 70% probability of the event happening.

In complete markets, the probabilities of all possible occurrences will add up to 100%. For contracts, if a ‘Yes’ contract trades at $0.65, the corresponding ‘No’ contract should trade at or very close to $0.35. This relationship ensures market consistency and prevents arbitrage opportunities, though often contracts will be off by a cent or two as they rebalance.

Contract prices reflect real time probability estimates based on all publicly available information and participant opinions. As new information becomes available or an event date approaches, prices will adjust accordingly. Additionally, the higher liquidity seen in more popular markets generally leads to more accurate pricing and smoother price movements.

Crypto.com implements a fee structure that typically includes trading fees and sometimes withdrawal fees. The platform's fee schedule is transparent and competitive with other prediction market platforms.

For markets that use a $1 contract size, there is a $0.02 trade fee, and no other fees.

The mathematical formula for calculating potential returns is straightforward:

Potential return = (1 - purchase price) ÷ purchase price.

This means that if you buy a ‘Yes’ contract for $0.40 and the event occurs, your return is ($1.00 - $0.40) ÷ $0.40 = 150%, or $0.60, + your initial $0.40 stake for the total $1 contract.

Types of prediction contracts available on Crypto.com

We offer several types of prediction contracts:

• Basic – represents the simplest form of event contracts, offering two possible event occurrences. Examples include ‘Will Bitcoin exceed $150,000 by 31^st December?’ or ‘Will the Federal Reserve cut the federal funds rate again this year?’ These contracts settle at either $1.00 (if you’re correct) or $0.00 (if you’re incorrect).
• Scalar – involve ranges of possible values rather than simple yes/no event occurrences. For instance, ‘What will Bitcoin's price be at the end of Q4?’ might have multiple price ranges, each representing a separate contract. These contracts allow for more nuanced predictions about specific values within a range.
• Categorical – offer multiple distinct possibilities for events with several potential occurrences. A contract asking, ‘Which cryptocurrency will have the highest percentage gain in 2025?’ might include Bitcoin, Ethereum, Solana and other options as separate contracts.

We also offer conditional markets that create ‘if…then’ scenarios where the resolution of one event depends on another. These can be harder to grasp, so it can make sense to start out with basic contracts first. On the other hand, they offer the chance to engage in different trading strategies.

An example of a conditional market might be ‘If a specific Bitcoin ETF approval occurs, will the BTC price exceed $120,000 within 30 days?’

We use time-based resolution mechanisms to ensure that all contracts settle fairly and promptly. This involves predetermined criteria, and often relies on multiple data sources, reducing disputes and ensuring accuracy. 

While we aim to settle all successful contracts as soon as possible, there can be delays when the occurrence is in question (for example, a contested election result, or substantial accusations of cheating in a match).

Step-by-step guide to participating in Crypto.com prediction markets

Trading event contracts on our Predict platform is fairly simple, easily letting you predict the occurrence of events:

1. Account setup and verification

The first step is to download the Crypto.com App from the Apple Store or Google Play Store and create your free account using your email and a strong password. 

You’ll then need to complete the Know Your Customer (KYC) verification process, which requires a government-issued ID (usually as a passport or driver’s license), proof of address (for example, a utility bill or bank statement) and a selfie to confirm your identity. This is a legal requirement. 

For added protection, your account will be protected by multi-factor authentication.

2. Funding your account

Transfer funds to your Crypto.com account using any of our supported methods including bank transfers, cryptocurrency deposits, or credit and debit cards.

Some deposit methods are fee-free while others face deposit fees, and deposit processing times also vary. It can make sense to fund your prediction market account well in advance of when you want to place a trade.

3. Navigating to the Predict platform

Once your account is active, click on the main menu and locate ‘Predict’ in the drop down list. The feature may appear under trading tools, or as a separate section depending on the latest app update. 

Existing users can usually access Predict immediately, though there may be additional terms and conditions to accept in some jurisdictions.

4. Placing your first contract

You will be able to trade contracts on a wide range of live and upcoming events across sports, politics and economics. 

Sports markets often include major leagues like the NFL, NBA, or the Premier League, with contracts covering match winners, point spreads and even individual player stats. Political markets will feature election results, policy decisions and approval ratings, while economic events can include Federal Reserve announcements, inflation reports or employment data. There are hundreds of markets to trade.

You can filter events by category and review key details such as timing, current probabilities and trading volume. Once you select an event, available contracts will represent the possible occurrences. Each contract has clearly defined terms and resolution criteria.

Contracts will display a market price that changes with trading activity, reflecting the market’s perceived probability of each occurrence. When you’ve found a contract that matches your personal knowledge and risk tolerance, enter the number of contracts you’d like to purchase, review the total cost (including fees), and confirm your order. 

Remember, there’s no need to trade too frequently. Many users only place trades in specific markets where they feel they have a genuine insight.

5. Position sizing and risk management

Position sizing is generally based around never risking more than you can afford to lose, though it does depend on your personal risk appetite. A common rule of thumb is to limit any single position to at most 5% of your total account value. Spreading your exposure across multiple, uncorrelated events can also help reduce overall portfolio risk.

When placing a trade, the platform will automatically show your potential profit based on current market prices. For example, buying a ‘Yes’ contract at $0.65 would return $1 if correct, netting a $0.35 profit (minus fees).

Before confirming any trade, it’s important to carefully review your choice, stake size, potential return and total costs. If probabilities look unusually attractive, it may be due to new information affecting the event that you’ve missed. You can also use our educational resources for prediction market participants.

You can fund your trades with either crypto or fiat currency, giving you flexibility in how you participate.

6. Monitoring open positions

After placing a trade, keep a close eye on your positions, as market conditions and new information can change contract values. You can track your contracts’ current value on the Crypto.com App.

To manage risk, you may choose to exit a position before the event is resolved by selling contracts at the current market price, though this option depends on market liquidity. Setting alerts for major price movements or key news updates can also help you respond.

7. Settlement process

When an event concludes, contracts automatically settle based on the predefined criteria. Correct contracts settle $1.00 per share, while losing contracts expire worthless. Settlement usually takes place within a few hours of the official result, with funds credited directly to your Crypto.com account balance.

Your potential profit equals $1 per correct contract minus the purchase price and applicable fees. Once credited, these funds can be withdrawn, reinvested in new trades, or converted into cryptocurrency.

Understanding probabilities and potential returns

Crypto.com typically displays probabilities as decimal prices representing the cost per share, which directly corresponds to implied probabilities. A contract priced at $0.25 implies a 25% chance of event occurrence, while $0.80 implies an 80% chance.

However, be aware that the implied chance and the real world chance are not the same thing, as event contracts are priced not only by fundamentals, but by sentiment and crowd psychology. 

But as a general rule, the relationship between contract price and potential return is inverse. Lower priced contracts offer higher potential returns but represent lower probability events, while higher-priced contracts offer smaller returns but represent more likely occurrences.

As an extreme example, let’s assume the event in question is: 

‘Will the Federal Reserve increase the federal funds rate to 10% within the next 12 months?’

An event this unlikely may have ‘Yes’ priced close to $0.01, meaning that a $1 stake will return $100 if it somehow occurs. Conversely, ‘No’ would be priced around $0.99, reflecting a near certain probability but offering a much smaller return on the same stake.

This illustrates the risk-reward curve inherent in prediction markets. Betting on low probability, high impact events can yield enormous payoffs, but the chances of being correct are extremely slim, while high probability occurrences provide more likely, but also more modest returns. 

On Crypto.com, contract prices reflect implied probabilities, but real world chances may differ due to market sentiment. A key tool for evaluating trades is Expected Value (EV), which estimates the average profit if a trade could be repeated many times, using the formula:

EV = (Probability of Being Correct x Potential Profit) - (Probability of Losing x Amount Risked)

For example, a contract priced at $0.10 with a $10 stake could pay $100 if it wins. The EV is zero if the implied probability matches the potential profit, but if the contract were undervalued at $0.08, the EV becomes positive, signaling a theoretically profitable trade over time. 

To illustrate, as events approach their resolution date, probabilities typically become more extreme as uncertainty decreases and traders exit positions. This creates both opportunities and risks for traders if you try to identify mispriced contracts.

Key risks of trading prediction event contracts

While prediction markets can offer opportunities to speculate or hedge on future occurrences, they also carry significant risks. Understanding these factors is essential before participating:

1. Market and event risk

Occurrences and non-occurrences are uncertain by definition. Unexpected news, data releases or events can cause large and sudden swings in contract prices, leading to rapid losses. Even if you believe the probability is in your favor, market sentiment may move against you before settlement.

2. Liquidity risk

Some contracts may have low trading volumes. This can make it difficult to exit positions early or may result in wider bid-ask spreads and unfavorable pricing.

3. Information and timing risk

Prediction contracts depend on publicly available information, which can change quickly. Traders who react slowly to new data or rely on incomplete sources may enter or exit positions at disadvantageous times.

4. Counterparty and operational risk

Although event contracts on Crypto.com are settled automatically, operational delays or third-party data disputes can temporarily affect settlement. Users should be aware that contract resolution may take longer when an event occurrence is contested or unclear.

5. Leverage and exposure risk

While prediction contracts themselves are not leveraged products, concentrating too much capital in a single event or occurrence can expose you to outsized losses. Limiting position size and diversifying across unrelated events helps reduce overall exposure.

6. Psychological and behavioral risk

Overconfidence, emotional trading and the urge to ‘chase’ losses are common pitfalls. Maintaining discipline and using only funds you can afford to lose are essential for responsible participation.

Prediction event contracts are speculative instruments. Prices may fluctuate significantly and past market behavior is not indicative of future results. Always evaluate your financial situation, risk tolerance and experience before participating.

Risk management strategies for prediction contracts

Key tools for managing market risk include:

1. Appropriate position sizing – this is likely the most important risk management factor to take into account when participating in the prediction market. Consider limiting individual positions to a small percentage of your total capital, typically between 1-3% for high conviction trades. This helps to preserve capital while retaining exposure to the upside.
2. Diversification across markets – reduces portfolio volatility by spreading risk across uncorrelated events. Avoid concentrating positions in related markets (such as multiple cryptocurrency price predictions) that might move together during times of market stress.
3. Hedging strategies – can help protect existing positions. If you hold a large position in one direction, consider taking smaller opposing positions in correlated markets to reduce overall exposure. This strategy sacrifices some profit potential for reduced risk.
4. Information advantage – represents your edge in prediction markets. Focus on areas where you possess superior technical knowledge, whether through professional expertise, dedicated research or unique insights. Avoid markets where you lack informational advantages over other participants. It’s important to recognize that nobody is an expert in all sectors.
5. Psychological considerations – play a crucial role in prediction market success. Avoid emotional decision making, maintain discipline and resist the temptation to chase losses with larger positions. Set predetermined rules for entries and exits. Importantly, the psychological element will be much easier to manage if you start out with appropriate position sizing in the first place.

Beyond this, the common pitfalls newer traders tend to face include overconfidence bias, following crowd sentiment without your own independent analysis, trading too much or with too much capital when starting out, and failing to consider the time value of holding positions until expiration.

Advanced strategies for experienced prediction market participants

Once you’ve been trading event contracts for some time, you might want to consider some more advanced strategies:

• Arbitrage opportunities – occasionally arise when the same event is priced differently across multiple contracts. Identifying and executing these opportunities can provide risk-free profits, though they typically require significant capital to make a reasonable profit and experience to spot.
• Timing strategies – involve entering and exiting positions based on information flow and market dynamics. Early positions often offer better probabilities but carry longer duration risk, while late entries may offer reduced upside but greater certainty about the occurrence.
• Market making – involves providing liquidity by placing both buy and sell orders, profiting from bid-ask spreads. This strategy requires deep market knowledge and constant monitoring but can generate consistent returns in liquid markets. 
• Statistical approaches – helps to identify mispriced contracts through systematic analysis. This might involve comparing platform probabilities to statistical models, analyzing historical accuracy of similar predictions or identifying patterns in market behavior.
• Information analysis frameworks – varies by market type. Sports markets might emphasize team statistics and injury reports, while cryptocurrency markets focus on technical analysis, regulatory developments and adoption metrics. 
• Portfolio approaches – treat prediction market participation as a broader investment strategy, balancing positions across different time horizons, risk levels and event types to achieve targeted risk-return profiles.

Tax and regulatory considerations for prediction market earnings

Prediction market earnings generally fall under capital gains tax treatment in most jurisdictions, though specific tax rules vary by location. For example, short-term gains (positions held for less than one year) can face higher tax rates than long term positions.

As ever, the regulatory landscape for prediction markets continues to evolve. It’s important to keep informed about changes in your jurisdiction that might affect the legal status or tax treatment of the market.

To protect yourself, the best practice is to keep detailed records of all trades, including maintaining detailed transaction logs, documenting entry and exit prices, tracking fees and costs, and preserving contract resolution notes. We can generally provide your transaction history, but you should still maintain independent records, track your prediction market earnings and remain responsible for accurate reporting and compliance with local regulations.

If you’re unsure of your tax liability, it can make sense to consult with a tax professional in your jurisdiction who is familiar with cryptocurrency and prediction market regulations and can provide you with personalized guidance. Additionally, you can always contact the local tax office with any query. 

The future of prediction markets on Crypto.com

We continually invest into new features, which in future may include an improved App experience, additional contract types, improved analytics tools and integration with other Crypto.com products. The key improvements will continue to focus on our user experience and market offerings.

On a broader scale, continued mainstream crypto adoption will likely drive increased participation in cryptocurrency-related prediction markets. As mainstream adoption grows, these markets may become important tools for price discovery and risk management in the broader financial ecosystem.

New market categories might even expand beyond traditional areas into emerging technologies, environmental predictions, demographic trends and other areas where collective intelligence can provide valuable insights.

Integration opportunities with other Crypto.com services could also create synergies between prediction markets, traditional trading and other platform features, potentially offering users more portfolio management tools. For example, AI and data analytics could provide you with better market analysis tools, automated alerts for opportunities and improved risk management tools. 

Prediction markets represent an evolution toward more efficient information aggregation. As these markets mature, they may play increasingly important roles in the broader financial ecosystem, offering unique opportunities to make use of collective intelligence for better decision making and profit taking.

FAQs about event contract payout structures

What are prediction event contracts on Crypto.com?

Prediction event contracts let users speculate or hedge on the occurrence of future events, with prices reflecting the market’s assessed probability of each event occurrence.

How do prediction contracts differ from traditional betting?
Unlike fixed-probabilities betting, prediction contracts use market driven pricing that adjusts continuously based on participant supply and demand.

What types of prediction contracts are available?
Crypto.com offers scalar, categorical, and conditional contracts, covering the occurrence, non-occurrence, or degree to which a specified event occurs – including yes/no events, ranges, multiple scenarios and if-then setups.

How are potential returns calculated?
Potential returns are calculated as (1 – purchase price) ÷ purchase price, reflecting the payoff if the contract event occurs.

What are key strategies for managing risk in prediction markets?
Effective risk management involves limiting position sizes, diversifying across events, hedging and using personal technical knowledge in areas where you predict you have an information advantage.

Important information: This content is for informational purposes only and does not constitute financial advice. Event Contract markets are volatile and carry risk. Please consult a financial adviser before making investment decisions.

Prediction is an event contract that is a derivatives product offered by Crypto.com | Derivatives North America (CDNA), a CFTC-regulated exchange. Trading on CDNA involves risk and may not be appropriate for all. By trading you risk losing your cost to enter any transaction, including fees. You should carefully consider whether trading on CDNA is appropriate for you in light of your investment experience and financial resources. Any trading decisions you make are solely your responsibility and at your own risk.