An event contract settles at a fixed value if a defined condition occurs. Its trading price between 0 and 1 corresponds to the market's probability estimate for that condition.
Prices come from resting orders of other participants. Thin books produce wide spreads, which limits how precisely a quote can be read as a probability.
A well-designed contract names an explicit public settlement source. Ambiguous settlement language is a structural risk that sits alongside price risk.
