Edge Case

#Definition

An Edge Case is an unusual, rare, or unexpected scenario that doesn't fit neatly into a market's standard resolution framework but could potentially occur. Well-designed prediction markets anticipate and address edge cases in their rules to prevent disputes and ensure fair resolution.

Edge cases test the robustness of market rules and often reveal ambiguities that weren't apparent when the market was created.

#Common Edge Cases

#Event Cancellation/Postponement

Scenario: Event scheduled but doesn't occur as planned

Examples:

• Sports game postponed due to weather
• Election delayed due to emergency
• Product launch pushed to next year
• Concert canceled

Resolution approaches:

Option 1: Wait for rescheduled date
"Resolves based on rescheduled game within same season"

Option 2: Resolve as NO
"If game not played by Dec 31, resolves NO"

Option 3: Void market (return funds)
"If postponed >30 days, market voids and all funds returned"

#Multiple Valid Outcomes

Scenario: More than one outcome could be considered correct

Examples:

• Tied election (exact tie in electoral votes)
• Photo finish in race (too close to call)
• Simultaneous announcements from different sources
• Co-winners of an award

Resolution approaches:

Option 1: Specific tiebreaker
"If tied, resolves based on popular vote"

Option 2: Split resolution
"If tie, both outcomes pay 50¢ per share"

Option 3: Pre-defined priority
"In case of tie, first by alphabetical order"

#Resolution Source Unavailable

Scenario: The designated source for determining the outcome becomes inaccessible

Examples:

• Website goes offline
• Organization disbands
• API shuts down
• Source contradicts itself

Resolution approaches:

Option 1: Backup sources
"Primary: Coinbase price feed
 Backup: Average of Binance, Kraken, Bitstamp"

Option 2: Trusted arbiter
"If source unavailable, platform makes good-faith determination"

Option 3: Market voids
"If source unavailable >7 days, market voids"

#Ambiguous Wording

Scenario: Market question can be interpreted multiple ways

Example:

Market: "Will Elon Musk step down as CEO?"

Ambiguity:
- CEO of which company? (Tesla? SpaceX? X/Twitter?)
- Temporarily or permanently?
- Announced or actually stepped down?
- What if he's fired vs. resigns?

Resolution: Good rules specify all ambiguous terms upfront

#Partial Fulfillment

Scenario: Event partially occurs but not completely

Example:

Market: "Will all 50 states certify election results by Dec 20?"

Edge case: 49 states certify, 1 is delayed
- Does "all" mean every single one?
- Or is 98% close enough?

Resolution approaches:

Option 1: Strict interpretation
"ALL means every single one. 49/50 = NO"

Option 2: Threshold
"Resolves YES if ≥48 states certify"

Option 3: Proportional
"Pays proportion: 49/50 = 98¢ per YES share"

#Timing Ambiguities

Scenario: Event timing unclear or disputed

Examples:

• "By end of 2025" - which timezone?
• "Before announcement" - which announcement?
• "During Trump's term" - does transition count?
• "Within 24 hours" - from when?

Resolution approaches:

Always specify:
- Exact timezone (UTC)
- Specific timestamp (23:59:59)
- Calendar dates (Dec 31, 2025)
- Reference events with precise timing

#Changed Definitions

Scenario: The meaning of a term changes after market creation

Example:

Market: "Will recession occur in 2024?"

Edge case: NBER retroactively changes recession definition
- Market based on old definition
- But new definition says no recession

Resolution approaches:

Option 1: Lock definition
"Recession defined as two consecutive quarters negative GDP"
(Specific, not reliant on external changing definition)

Option 2: Specify authority
"Based on NBER official recession dating"
(Accept whatever they say, even if retroactive)

#Fraudulent Outcomes

Scenario: The reported outcome is later proven false

Example:

Market: "Who wins Best Picture Oscar 2025?"

Edge case: Winner announced, market resolves, then Academy says there was a mistake
- What if envelope error like 2017?
- Does market re-resolve?

Resolution approaches:

Option 1: First announcement stands
"Resolves based on initial announcement, errors notwithstanding"

Option 2: Final official result
"Resolves based on corrected official result within 7 days"

Option 3: Time-limited corrections
"Corrections accepted within 24 hours only"

#Technical Failures

Scenario: Platform or smart contract issues affect trading or resolution

Examples:

• Website down during critical period
• Smart contract bug
• Oracle failure
• Data feed corruption

Mitigation:

- Platform insurance/guarantee funds
- Manual override capability
- Rollback provisions
- Force majeure clauses

#Edge Cases by Market Type

#Political Markets

• Candidate death/withdrawal before election
• Electoral college tie (269-269)
• Contested election with no clear winner by inauguration
• Disqualification after winning
• Third-party unexpected victory

#Sports Markets

• Game canceled and not rescheduled
• Forfeited game (does it count as loss?)
• Player trades teams mid-season (affects player prop bets)
• Rule changes mid-season
• Asterisk outcomes (wins vacated due to cheating)

#Economic Markets

• Data revisions (initial jobs report vs. revised)
• Methodology changes (CPI calculation changes)
• Reporting delays (government shutdown affects releases)
• Rounding (is 4.95% unemployment "4.9%" or "5.0%"?)

#Crypto Markets

• Chain splits/forks (which chain's price counts?)
• Exchange hacks (price manipulation during hack)
• Flash crashes (does 1-second spike count?)
• Oracle attacks (manipulated price feeds)

#Entertainment Markets

• Ties in voting/awards
• Disqualifications after announcement
• Category changes (film moved to different category)
• Technical issues during live events

#Preventing Edge Case Disputes

#1. Comprehensive Rule Writing

Anticipate scenarios:

✅ Good: "Resolves YES if Bitcoin trades ≥$100,000 on Coinbase
         BTC/USD pair for any 1-second interval between Jan 1,
         2025 00:00:00 UTC and Dec 31, 2025 23:59:59 UTC"

❌ Bad: "Resolves YES if Bitcoin hits $100k in 2025"

#2. Backup Plans

Always specify backup options:

Primary source → Backup source → Final arbiter → Void market

#3. Void/Refund Provisions

Include escape hatches:

"If event becomes logically impossible or fundamentally changed,
 market voids and all positions refunded at cost"

#4. Dispute Resolution Process

Clear escalation path:

1. Automatic resolution (oracle/source)
2. Platform review (if disputed within 24 hours)
3. Community vote (DAO/governance token holders)
4. Final arbiter (legal/regulatory)

#5. Historical Precedent

Reference how similar past cases were handled:

"Resolved consistent with 2020 market on similar event"

#Handling Edge Cases Post-Creation

When edge case occurs:

#Platform Response

1. Pause trading if appropriate
2. Communicate with users about situation
3. Review rules for guidance
4. Make determination based on rules
5. Allow appeals within reasonable timeframe
6. Document decision for future reference

#Trader Response

1. Read rules carefully before trading
2. Consider edge cases in pricing
3. Reduce exposure if rules ambiguous
4. Monitor for announcements
5. Appeal if unfair resolution

#Edge Cases and Market Quality

Markets with poor edge case handling:

• Lower trust from traders
• Reduced liquidity (uncertainty premium)
• More disputes and appeals
• Platform reputation damage

Markets with good edge case handling:

• Higher liquidity (confidence in fair resolution)
• Tighter spreads (less uncertainty)
• Institutional participation (regulated entities need certainty)
• Platform credibility

#Famous Edge Case Examples

#2000 U.S. Election

• Markets on "Who wins presidency?"
• Florida recount → Supreme Court decision
• Weeks of uncertainty
• Edge case: What if court changes outcome?

#Brexit Extension Markets

• "Will Brexit happen in 2019?"
• Multiple deadline extensions
• Edge case: Does leaving technically but with deal count?

#COVID-19 Pandemic Markets

• "Will there be March Madness 2020?"
• Tournament canceled (not postponed)
• Edge case: Canceled vs. postponed vs. modified format

#Asteroid Prediction Markets

• "Will asteroid impact Earth?"
• Edge case: Impact in ocean vs. land?
• Edge case: Small fragment vs. main body?

#Edge Case Risk Management

For traders:

1. Discount ambiguous markets - demand higher edge
2. Diversify - don't concentrate in one ambiguous market
3. Exit early - sell before edge case periods
4. Insurance - hedge with correlated markets

For market creators:

1. Get legal review for high-value markets
2. Beta test rules with community
3. Learn from history - study past edge cases
4. Over-specify - more detail is better

#The Edge Case Paradox

Trying to cover every edge case can:

• Make rules too complex to understand
• Create new ambiguities through over-specification
• Make markets less accessible

Balance needed between:

• Completeness (covering scenarios)
• Clarity (easy to understand)
• Brevity (not overwhelming)

Good rules cover likely edge cases without becoming unreadable.