Learn / How event contracts work

Can a small business hedge real risks with prediction markets?

The Crux Team · Published October 7, 2026 · Updated October 7, 2026

Yes, for some risks. A prediction market is an exchange that lists event contracts, which pay if an agreed event happens. A business can use one to offset a cost tied to a measurable event, such as a price, the weather, a policy decision or a sports result. The payout follows the event, not your actual loss. Some markets are thin, and payout rules can be disputed. You can buy contracts yourself, or Crux can set up protection for you.

What is a prediction market?

In a March 2026 notice, the CFTC uses “prediction market” to mean a CFTC-registered exchange that offers event contracts. An event contract pays under its terms if an agreed event happens. The same notice says these contracts are swaps or futures contracts subject to the CFTC’s jurisdiction.

Kalshi is one such exchange. The CFTC designated KalshiEX LLC as a contract market in November 2020. In its March 2026 notice, the CFTC asked for public comment on the rules that apply to prediction markets, including how event contracts are used to hedge.

For how a single contract works, see What is an event contract, and how can a business use one?

What risks can be covered?

Reuters reported in August 2026 that a handful of US small businesses use event contracts to hedge risks such as these:

• A change in the law. Susquehanna International Group worked with Kalshi and Castle Technologies to create a one-of-a-kind contract for Western Grazers, a California goat-herding firm. It will pay the firm $500,000 if California legislators don’t fix a gap in labor laws that could send its labor costs up.
• Freight costs. Facing a surge in freight costs, the founder of Zest Tea turned to Kalshi for a contract tied to the average value of an index that tracks container shipping costs.

PYMNTS, citing the Reuters report, wrote that companies this size can’t get Wall Street banks to help them hedge risks that could, in some cases, threaten the business. It also reported that Castle Technologies’ founders wrote in an August 10 blog post that clients had sought help with risks including potential tariff swings, tax credit removals and court rulings.

The events that exchanges list are broad. Exchanges certified about 1,600 event contracts in 2025, on subjects including financial indices, economic data, weather, political events and sports, the CFTC notice says.

Crux protects against rising input costs, bad weather and promotion refunds. Tell us what could hurt the business and we’ll confirm what we can protect.

What are the limits and disputes?

Critics question the label. Ben Schiffrin, director of securities policy at Better Markets, told Reuters that describing what is really a sports bet as a hedge is “trying to pull the wool over people’s eyes.” A Kalshi spokeswoman told Reuters that Kalshi works very differently from a sportsbook. State governments say event contracts are another venue for sports betting, while the CFTC and prediction market platforms say they are swaps regulated by the CFTC, Reuters reported.

Some markets are thin. An event with few buyers and sellers can be hard to cover in size. CryptoSlate reported that shallow order books can make large orders hard to fill without moving the price. For an unusual risk, a contract may have to be created from scratch, as in the Western Grazers case.

Payouts can be disputed. The contract’s rules decide the payout, not the business’s view of what happened. CryptoSlate described a market on whether a public company sold bitcoin by May 31. The company’s filing reported a sale between May 26 and May 31, but the market resolved “No” because of how its rules treated the timing of public confirmation. The terms name the event, the deciding source and the dates.

The event may not match your loss. A freight index can rise less than your own shipping bills. A contract on one outcome doesn’t cover a loss with another cause.

The rules are still changing. The CFTC’s March 2026 notice sought public comment on the rules for prediction markets and said the comments may inform future rulemaking.

Do I need my own account?

With Crux, yes. 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. Tools now help with that. In August 2026, Fortune reported the public launch of Blanket, an AI tool built and owned by independent economist Lauris Zminsky and “powered by Kalshi.” A business owner describes a risk, and Blanket suggests yes-or-no Kalshi markets that could offset it. Blanket says it doesn’t hold money or place orders. Any order happens on Kalshi.

When you buy contracts yourself, you choose the contract, the amount and the timing, and you manage the contract until it settles. Specialty finance firms also help create one-off contracts, as in the Western Grazers case.

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.
• Not every risk has an event contract that fits it. Tell us what could hurt the business and we’ll confirm what we can protect.
• The contract’s rules decide whether it pays, including how the deciding source reports the event and when.
• Federal and state rules for prediction markets are still changing.

When is Crux not a fit?

• The risk has no clear, measurable event, such as a general slowdown in sales.
• You need a payout that matches the loss you can document. Indemnity insurance pays based on the covered loss.
• You can pass the cost to customers, for example with a price-adjustment clause or a fuel surcharge.
• The cost is small enough to absorb. Doing nothing may cost less than protection.

Related guides

• What is an event contract, and how can a business use one?
• Is an event contract the same as insurance?
• How can my business protect its margins from tariff increases?
• See how Crux protects against rising costs
• See how Crux protects against bad weather
• See how Crux covers promotion refunds

Sources

1. Prediction markets take a swing at hedging for US small businesses, Reuters, via KFGO, August 28, 2026.
2. Small Businesses Tap Prediction Markets to Shield Profits From Surprise Costs, PYMNTS, August 28, 2026.
3. Prediction markets are drawing corporate hedgers, but payout disputes threaten trust, CryptoSlate, June 17, 2026.
4. Exclusive: Kalshi partners with Blanket to help small businesses hedge against risk, with help from the guru of ‘hypergamblification’, Fortune, August 7, 2026.
5. Blanket, Blanket, October 2026.
6. Prediction Markets (advance notice of proposed rulemaking), Commodity Futures Trading Commission, Federal Register, March 16, 2026.
7. CFTC Designates KalshiEX LLC as a Contract Market, Commodity Futures Trading Commission, November 4, 2020.

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.