The mechanism a prediction market uses to resolve smart contracts determines its technical efficiency and its regulatory classification.
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Mechanism
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Connects to UMA's Optimistic Oracle. The system assumes a submitted outcome is correct unless someone challenges it within a specific time window.
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Dispute Resolution
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Challenged outcomes escalate to token-holder voting. The winning majority receives rewards funded by the losing side's slashed bond.
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Regulatory Impact
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Relying on an external decentralized oracle removes the platform operator from outcome determination. This limits control over user funds and simplifies compliance in strict jurisdictions.
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Mechanism
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Community members report outcomes and stake the native REP token.
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Dispute Resolution
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Disagreements trigger staking wars. Extreme disputes cause the network to "fork," forcing users to abandon the alternate reality.
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Regulatory Impact
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Eliminating centralized control makes it difficult for regulators to assign operator liability. The associated 60-day resolution delay creates significant friction for users.
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Mechanism
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The individual who creates the market acts as the sole arbiter and resolves it manually.
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Dispute Resolution
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Fraud is prevented by social consequences. Dishonest creators lose their reputation, and the community boycotts their future markets.
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Regulatory Impact
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Using manual resolution with real capital fundamentally mirrors a traditional sportsbook. Operating this model legally requires full gaming authorizations, such as a Malta gambling license.
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Mechanism
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Smart contracts call upon external juror networks when disputes arise.
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Dispute Resolution
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Jurors stake tokens to review evidence and vote. Game theory aligns incentives by rewarding those who match the majority consensus.
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