LearnHow event contracts work
Is an event contract the same as insurance?
No. Crux arranges contracts through your own account. A payout follows the agreed event, so there’s no claims process. Crux is a broker, not an insurer. Insurance is a policy with an insurer: indemnity insurance pays for a covered loss after a claim, and parametric insurance pays a set amount when a measured event happens. An event contract is bought on an exchange and pays under its terms if the agreed event happens.
How do they compare?
| Option | What it covers | How it pays | What you pay upfront | Main limit |
|---|---|---|---|---|
| Indemnity insurance, such as business interruption | The loss you can document from a covered cause, such as income lost after a fire. | You file a claim. An adjuster assesses the loss, and the insurer pays under the policy. | A premium. | Pays only for covered causes. Business interruption cover needs a covered physical loss. Claims can take months. |
| Parametric insurance | A defined event, such as an earthquake of an agreed size, with a set payout. | An agreed third party confirms the trigger, and the insurer pays the set amount. No claims adjustment. | A premium. | The set payout can differ from your actual loss. |
| Event contracts set up by Crux | An agreed, measurable event, such as a published price, a weather reading or a sports result. | If the agreed event happens, the contract pays out under those terms. No claims process. | The upfront cost, which you see before you approve anything. | Not every risk has an event that fits. The upfront cost isn’t returned if the event doesn’t happen. |
| Event contracts you buy yourself on an exchange | Events the exchange lists, such as prices, economic data, weather, policy decisions and sports. | The exchange settles the contract under its rules, using the source named in its terms. | The contract price, plus any exchange fees. | You find, size and manage the contracts yourself. Listed events may not match your risk. |
Is there a claims process?
With indemnity insurance, yes. Business interruption insurance, for example, replaces income lost when operations are disrupted by a covered physical loss, such as a fire, the National Association of Insurance Commissioners (NAIC) says. You report the loss, and the insurer sends a claims adjuster to assess the damage.
With parametric insurance, there is no claims adjustment. The NAIC says parametric cover removes that step, so payment can come in weeks rather than the months or years a standard indemnity claim can take. An agreed third party, often a government agency, confirms whether the trigger happened.
With an event contract, there is no claim to file. A payout follows the agreed event, so there’s no claims process. The exchange settles the contract under its rules. Kalshi’s settlement guide, for example, says timing can vary with the data source and any manual review.
How is the payout decided?
Indemnity insurance pays based on the covered loss, up to the policy’s limits. Parametric insurance pays a set amount based on the size of the event, not the size of the loss, as the NAIC describes it. The policy names the payment, the trigger and the third party that confirms it.
An event contract pays under its own terms. The CFTC describes a binary contract’s payoff as “either a fixed amount or zero.” If the agreed event happens, the contract pays out under those terms. If it doesn’t, the contract doesn’t pay out, and the upfront cost isn’t returned.
Parametric insurance and event contracts share one limit. Both pay on the event, not on your loss, so the payout can be more or less than what you lost. The NAIC notes this gap for parametric cover. For a closer look at those two, see What is the difference between parametric weather insurance and weather event contracts?
Who is on the other side, and who regulates it?
An insurance policy is a contract between your business and an insurer. The insurer collects the premium and pays under the policy. In the US, states regulate insurance, and the NAIC supports that state-based system.
An event contract is bought and sold on an exchange. The CFTC says event contracts listed on CFTC-registered exchanges are swaps or futures contracts subject to its jurisdiction. A designated contract market must have rules that protect the financial integrity of its contracts, including clearing and settling them through a clearinghouse, the same notice says. The CFTC calls a clearinghouse a derivatives clearing organization. A clearinghouse substitutes its own credit for the credit of the two parties. For example, the CFTC registered Kalshi Klear LLC as a clearinghouse in August 2024.
The CFTC’s notice also says event contracts are currently fully collateralized. That means the money for a possible payout is posted in full when the contract is bought.
Crux arranges contracts through your own account. Crux is not an insurer or counterparty.
What does the business own?
With insurance, the business holds a policy: the insurer’s promise to pay under the policy terms in return for the premium.
With an event contract, the business holds the contract itself, in an account in its own name. You tell us what could hurt the business. We set up the protection and show you the terms and price. You approve it through an account in your business’s name that we help you open.
A business can also buy event contracts itself on an exchange. It then chooses and manages the contracts on its own. For how businesses use both routes, see Can a small business hedge real risks with prediction markets? For the basics, see What is an event contract, and how can a business use one?
A worked example
A warm winter cuts heating-fuel sales. Your winter budget works up to a 40°F average. Above that, protection pays more as temperatures rise.
| If December to February averages | Contract payout | What it means |
|---|---|---|
| 35°F | $0 | There is no payout. The $25,000 protection cost still applies. |
| 45°F | $100,000 | Helps cover fleet and payroll costs through a season of lower heating-fuel sales. |
| 50°F | $200,000 | Helps cover fleet and payroll costs through a much warmer winter. |
Protection cost: $25,000 upfront
December to February at your agreed local weather station. Illustrative example. Terms and pricing agreed upfront.
What are the limits?
- If the agreed event doesn’t happen, the contract doesn’t pay out, and the upfront cost isn’t returned.
- The agreed event may not match your actual loss. A contract pays on the measured outcome, not on your own costs or sales. This gap is called basis risk.
- The payout follows the contract terms and the agreed measurement source, such as a published price or a named weather station.
- An event contract doesn’t pay for property damage or any other loss. It pays only under its agreed terms.
- Not every risk has an agreed event that fits it. Tell us what could hurt the business and we’ll confirm what we can protect.
When is Crux not a fit?
- You need to cover damage to property or equipment. Property and business interruption insurance pay for covered physical loss.
- A lender, landlord or customer requires an insurance policy. An event contract is not an insurance policy.
- You want a payout that matches the loss you can document. Indemnity insurance pays based on the covered loss.
- You need cover for claims from other people, such as injury claims. Liability insurance covers that.
Related guides
Sources
- What Business Income Loss Coverages Are Out There? Learn the Endorsements That Can Help with Lost Business Income, National Association of Insurance Commissioners, May 29, 2020.
- Navigating the Claims Process: Recover & rebuild, National Association of Insurance Commissioners, September 1, 2017.
- Parametric Disaster Insurance, National Association of Insurance Commissioners, December 21, 2023.
- McCarran-Ferguson Act, National Association of Insurance Commissioners, April 1, 2026.
- Prediction Markets (advance notice of proposed rulemaking), Commodity Futures Trading Commission, Federal Register, March 16, 2026.
- Clearing Organizations, Commodity Futures Trading Commission, October 2026.
- CFTC Grants Kalshi Klear LLC DCO Registration, Commodity Futures Trading Commission, August 29, 2024.
- Market Settlement, Kalshi, October 2026.
This guide is general education. It is not an offer, and it is not financial, legal or tax advice. Terms, prices and availability depend on the contract.