Listing litigation outcomes as predictive contracts is not a single-step launch — the product needs to evolve from simple binary outcomes to multi-dimensional structures as market depth supports each successive layer.

Phase 1 — Binary outcomes

The simplest contract: YES if the named plaintiff (or defendant) prevails, NO otherwise. Resolution criterion is the final non-appealable judgment, with explicit tie-breakers for partial wins, settlements, dismissals, and reversals on appeal. Phase 1 is the natural starting point because it's structurally identical to the sports event contracts and political event contracts that have cleared regulatory review. The Kalshi sports-contract framework — court verdicts as binary "events" — ports directly.

Best fits for Phase 1: cases with a single clear outcome variable, near-term resolution, and broad public attention. The IEEPA tariffs case at SCOTUS is the archetypal Phase 1 contract: binary, dated, materially-exposed across many sectors, and already trading on Polymarket with measurable open interest.

Phase 2 — Multi-state outcomes

Real litigation rarely resolves as a clean binary. The Google search remedy appeal could leave the data-sharing requirements intact, strike them down, impose structural divestiture instead, or be remanded for further proceedings — four economically distinct outcomes with materially different market-cap implications. A multi-state contract decomposes this into a vector of mutually-exclusive YES contracts that sum to 1.0 at resolution.

Phase 2 contracts are how you express "rare-event hedge" structures cleanly. A sector ETF that wants to hedge the Big Tech antitrust tail buys YES on the "structural divestiture" branch of three or four cases — small probability, large payoff if any single one resolves adversely. The contract design follows the standard exhaustive-and-mutually-exclusive pattern that the Kalshi rules-based event framework already supports.

Phase 3 — Timing + outcome composites

For many litigation events, the timing matters as much as the outcome. A generic entry for Eliquis in Q1 2027 is economically very different from one in Q4 2027 — the BMY/PFE franchise revenue at risk scales with the calendar. Phase 3 contracts pair the outcome dimension with the timing dimension: a 4×3 grid of (outcome) × (resolution window), each cell a separately-traded YES contract.

The mass-tort sector is the natural Phase 3 home. J&J's Texas Two-Step talc bankruptcy: outcome states (bankruptcy approved / rejected / aggregate settlement / inventory continues) cross timing windows (2026 / Q1 2027 / 2027H2 / beyond). Twelve cells, each a contract — and the implied probabilities across them have meaningful constraints (each row must sum to the probability of that outcome state irrespective of timing) that create a clean intra-contract arbitrage check.

Phase 4 — Perpetual on a basket index

The destination state: a perpetual futures contract referencing a weighted basket of individual litigation YES contracts within a sector. The reader who's followed the GSR perpetual or compute futures pieces will recognize the design pattern — a standardized basket, a published index, cash-carry-anchored funding, no expiry. The difference is that the underlying isn't a commodity price; it's a probability that ranges between 0 and 1.

Phase 4 is where the systemic hedger lives. A diversified macro fund that wants ongoing exposure to "Big Tech antitrust tail risk" doesn't want to manage five individual contracts with five different resolution dates. It wants a single perpetual position. The index design (Section 3) and the funding mechanics (also Section 3) make this possible while avoiding the path-dependence problems that have historically made probability-referenced derivatives hard to clear.

Below is a hand-curated list of 16 US litigation cases that meet three criteria: material economic exposure (typically $5B+), identifiable hedger constituency, and resolution-criteria clarity that supports event-contract listing. Filter by sector, phase recommendation, or hedger type. Click any row to see the multi-state outcome decomposition.

The aggregate economic exposure across the 16 cases is roughly $1.0T — and that understates the true addressable market because each case's exposure number is just the most directly-relevant figure (settlement size, revenue at risk, market-cap-implied damage). The cross-sectional patterns matter: Big Tech antitrust has the highest single-case exposure ($150-200B per case) but lower hedge demand per dollar of exposure (the natural hedgers are passive sector funds with limited mandate); pharma and mass tort have lower exposure per case but materially higher hedge demand per dollar (litigation finance funds and D&O insurers are active hedgers with mandate to deploy capital).

Three composite indices are highlighted at the bottom of the explorer — BIGTECH, PHARMA, and MASSTORT. These are the natural Phase 4 perpetual-reference baskets. Each is weighted differently (equal-weight YES probability, revenue-weighted, settlement-valuation-weighted) based on the dominant economic exposure pattern in that sector.

The Phase 4 product is a perpetual futures contract referencing a basket index of individual litigation YES contracts. The design borrows directly from the GSR perpetual framework — cash-carry-anchored funding, published index, no expiry — but adapts the underlying-economics piece for probability references rather than price references.

Reference index methodology

• Source. Composite-weighted YES-side mid prices across the constituent event contracts on the published list. Primary venues: Kalshi for US-regulated contracts, Polymarket for the broader liquid universe (with regulatory wrapper as the structure permits).
• Index value. Index = Σ (w_i × P_i_YES_mid), where w_i is the published weight and P_i_YES_mid is the bid-ask midpoint of the YES contract. For Phase 4 the index ranges in [0, 1] — it's a probability.
• Sampling cadence. 5-minute volume-weighted midpoint, refreshed every 60 seconds. Wide enough to absorb single-trade noise; narrow enough that the perp tracks the underlying basket within a tick.
• Roll handling. When a constituent event resolves (YES or NO at final judgment), it leaves the index at its resolution value, and the next-ranked candidate enters at the next weekly rebalance. The perpetual is constructed to survive constituent rotation without discontinuity — analogous to how an equity-sector ETF survives constituent changes.
• Settlement reference. 4:00 PM ET close of the index; mark-to-market at the same cadence as the existing Kalshi event contracts.

Funding rate mechanics

The standard cash-carry construction for a probability-referenced perpetual:

The first term is the carry analog. For a probability-referenced perpetual, the "carry" reflects the expected drift of the basket toward resolution — a basket priced at 0.30 today must resolve to either 0 or 1; over time, the expected value remains 0.30 but the variance compounds. The θ_drift parameter is a small adjustment that keeps the perp mark anchored to the index without overwhelming the underlying economics. The second term is the standard Hyperliquid-style premium term that disciplines the mark to the live basket index.

Funding cadence. Every 8 hours, mirroring Kalshi BTCPERP. Funding is paid in cash at the funding event; the position holder's margin balance adjusts directly. The cap on any single funding event is ±25 bps per period — meaningful but not catastrophic — to prevent liquidation cascades around constituent resolutions.

Settlement and margin

The perpetual itself never settles (it's perpetual), but the constituents do. When a constituent resolves, its position in the index is fixed at the resolution value (0 or 1) until the next weekly rebalance moves it out and the next-ranked candidate in. Margin is modeled at roughly 25% of notional for a Phase 4 perpetual, reflecting both the natural mean-reversion of a probability index (it can't go above 1.0) and the variance contribution of constituent resolutions.

Initial sizing for a launch: a $50M open-interest target on the BIGTECH composite, scaled up to $200M as constituent depth supports it. Comparable to the early Kalshi BTCPERP volume profile post-CFTC approval.

Two years ago, listing event contracts on US litigation outcomes would have been a CFTC enforcement target. The regulatory landscape has shifted materially since.

The favorable precedents

• Kalshi political event contracts (May 2025). The District Court for the DDC ruled that Kalshi's congressional-control contracts were not "gaming" under the CEA. The CFTC voluntarily dismissed its appeal. This established that event contracts on government-process outcomes are within the CFTC's exclusive jurisdiction and not preempted by state gambling law.
• Third Circuit Kalshi sports ruling (April 2026). The Third Circuit affirmed a preliminary injunction against New Jersey's gaming-law enforcement against Kalshi sports contracts, holding that those contracts "satisfy the CEA's definition of 'swaps' because they provide for payments dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence." That language reads more broadly than sports — it covers any event contract with economic stakes.
• Polymarket court-case markets. Polymarket lists 105+ Supreme Court prediction markets, including the IEEPA tariffs case and the birthright citizenship EO. These are operationally similar to what a Phase 1 litigation contract looks like, and they have not been the target of CFTC enforcement.

The remaining hurdles

• Material non-public information (MNPI). Trial lawyers and corporate insiders frequently know things about pending litigation that the public doesn't — settlement negotiations, witness preparation, jury selection patterns. The clearest analog is securities markets, where Rule 10b-5 polices insider trading. A litigation event-contract exchange needs an analogous information-flow policy. Polymarket's current approach (passive monitoring, no active enforcement) is unlikely to survive scrutiny at scale. CFTC's existing insider-trading prohibitions under CEA Section 4c(a) provide a serviceable framework.
• ABA Model Rule 7 considerations. Lawyers cannot ethically advertise specific case outcomes (Rule 7.1), and there's an open question whether actively trading event contracts on cases counsel is involved in violates that prohibition. The exchange has no direct exposure here — this is a lawyer-side compliance issue — but it affects the natural hedger pool. Likely settled by state bar opinions over the next 12-18 months.
• Witness and juror manipulation. The theoretical risk: a market participant with a position could attempt to influence a witness or juror. This is already a federal crime under 18 USC §1503 (obstruction of justice) and §1512 (witness tampering); existing law covers it. The exchange needs explicit suspension authority around jury-selection windows for high-profile cases as a precaution.
• State preemption (still litigated). The Third Circuit ruling covers the Third Circuit; other circuits are split on whether the CEA preempts state gambling law. Until SCOTUS resolves the split, an exchange needs to geofence by circuit. The Kalshi compliance template is sufficient.
• Section 5C self-certification. Under CEA Section 5C, a designated contract market can self-certify new contracts unless the CFTC objects within ten business days. For Phase 1 binary litigation contracts, this is the path of least resistance. Phase 2-4 contracts likely require a formal product filing given their structural novelty.

None of these is fatal. The Kalshi precedents established that event contracts on consequential public events are within CFTC jurisdiction; the question is no longer whether litigation contracts can be listed, but how the operational details (insider information, geofencing, suspension protocols) are structured.

Three reference numbers anchor the market-size case:

• $79B+ — top 10 US class action settlements, 2025. The largest single settlement was the $38B Visa/Mastercard merchant antitrust case. Eight "mega settlements" of $100M+ totaled $1.6B in securities class actions alone. The right tail of the distribution is fat: a small number of cases drive most of the dollar volume.
• $19.4B — global litigation finance market, 2026. Burford Capital holds roughly 18% market share; the rest fragmented across IMF Bentham, Omni Bridgeway, and a tail of smaller funds. This is the directly-hedger-adjacent capital — it's already investing in case outcomes, just bilaterally and illiquidly. A liquid event-contract market would not displace this capital; it would extend the addressable hedge universe to the corporate defendants and passive funds that currently can't access litigation finance economics.
• $300B+ — pharma patent cliff exposure through 2030. Eight of the 13 largest pharmaceutical firms face 30%+ revenue exposure to expiring patents, with losses ranging $6B to $38B per company. The pharma sector's structural hedge demand here is enormous — every patent-cliff-exposed defendant has a quantifiable tail risk that a multi-state event contract on Eliquis generic entry (or any comparable case) could partially transfer.

Addressable market sizing

Conservative bottom-up: assume Phase 1-4 collectively capture 1-2% of the litigation-finance addressable market as direct event-contract notional — call it ~$200-400M of open interest at maturity, distributed across the 16+ initial candidate cases. That's plausible vs Polymarket's current SCOTUS market open interest, which clusters in the low single-digit millions per market at peak. Scale up to 50-100 cases as the product matures.

More aggressive: if Phase 4 perpetuals on sector composites achieve early-Kalshi-BTCPERP-style liquidity profiles ($50M+ open interest on flagship products), the litigation-perpetual category could reach $500M-$1B of open interest within three years. The natural hedgers are large and underserved.

The structural drivers are favorable. Litigation tail risk is currently absorbed almost entirely by D&O insurers and shareholders — neither of which is the economically natural hedger. D&O insurance is a small, concentrated market with limited capacity; shareholders absorb litigation tail risk passively through equity-price volatility. A liquid event-contract market routes the risk to the economically natural hedgers (litigation finance funds, macro event-driven allocators, sector ETFs running explicit tail-risk overlays) and lets the price discovery function the way it does in other actively-traded derivative markets.

• Skadden — Third Circuit Affirms Kalshi's Preliminary Injunction (April 2026)
• Holland & Knight — Federal Appeals Court on CFTC Jurisdiction over Event Contracts
• Polymarket — Supreme Court prediction markets (105+ active)
• Cornerstone Research — Record High Median Securities Class Action Settlement (2025)
• CFO Dive — Top US Class Action Settlements Hit Record $79B (2025)
• Future Market Insights — Litigation Funding Investment Market 2025-2035
• Congressional Research Service — Federal Court Endorses Behavioral Remedies in Google Search Antitrust
• CNBC — Judge finalizes remedies in Google antitrust case
• Labiotech — The next pharma patent cliff: 2026-2032
• Brownstein — Kalshi v. CFTC Challenges Contracts on Political Events