# Collateral Return

**Reclaim collateral early when you hold No across outcomes in a mutually exclusive event.**

When you trade No on multiple contracts in the same mutually exclusive event, at least one of those positions must lose at settlement. Gemini Predictions can return the collateral that backs that guaranteed loss, so you can redeploy capital instead of keeping it locked until the event resolves.

This page explains how collateral return works today, who it helps most, and what is coming next.

## How It Works

### Mutually exclusive events

Collateral return applies to **mutually exclusive event groups**: events where **exactly one** contract resolves Yes. Examples include:

- Sports winner markets (for example, which team wins a game)
- Weather temperature brackets for the same observation time
- Crypto price-range brackets for the same asset and observation time

Each outcome in the group is a separate contract, but only one can pay out at settlement.

### The core idea

Buy **No** on two or more outcomes in the same mutually exclusive group. You still hold risk on the remaining outcomes, but the smallest No leg is fully hedged by your other No positions. The exchange can return the collateral tied to that hedged portion.

The group-level formula is:

```
returned_collateral = sum(|No_i|) - max(|No_i|)
```

Where:

- `sum(|No_i|)` is the total size of all No legs in the group
- `max(|No_i|)` is the size of the largest No leg

Only **No** legs count. Yes legs do not create returned collateral on their own.

### Worked example: three-team event

Consider a mutually exclusive event with three outcomes: **Team A**, **Team B**, and **Team C**. Each contract pays $1.00 per contract at settlement.

| Step | Action | No positions | Returned collateral | Adjustment |
| :---- | :---- | :---- | :---- | :---- |
| 1 | Buy 100 No on Team A | A: 100 | $0.00 | — |
| 2 | Buy 100 No on Team B | A: 100, B: 100 | $100.00 | +$100.00 |
| 3 | Buy 110 No on Team C | A: 100, B: 100, C: 110 | $200.00 | +$100.00 |
| 4 | Buy 50 Yes on Team A (reduces A No to 50) | A: 50, B: 100, C: 110 | $150.00 | −$50.00 |
| 5 | Buy 150 Yes on Team A (flips A to +50 Yes) | A: +50 Yes, B: 100, C: 110 | $100.00 | −$100.00 |

After step 2, the first 100 No on Team A is fully covered by the 100 No on Team B. The exchange returns **$100.00** of collateral. After step 3, an additional **$100.00** returns because the new 110 No on Team C extends the hedged stack.

When you reduce or flip a No leg (steps 4–5), returned collateral decreases by the same amount. The adjustment on each fill is:

```
returned_adjustment = returned_collateral_after - returned_collateral_before
```

### Smaller two-outcome example

| Step | Action | No positions | Returned collateral |
| :---- | :---- | :---- | :---- |
| 1 | Buy 100 No on Outcome 1 | O1: 100 | $0.00 |
| 2 | Buy 80 No on Outcome 2 | O1: 100, O2: 80 | $80.00 |

The 80 No on Outcome 2 is fully hedged by the 100 No on Outcome 1. You receive **$80.00** back. The remaining 20 No on Outcome 1 stays fully collateralized until you add another No leg or reduce the position.

### Onboarding and existing positions

Collateral return is enabled per account when you are onboarded to the program. If you **already hold positions** on instruments in a mutually exclusive event group **before** onboarding, collateral return does **not** apply retroactively to those existing positions.

Returned collateral is calculated on a **fill** that changes your group-level No stack. After onboarding, you receive collateral return on that event group only when you **place your next trade** on any instrument in the group. That trade triggers the returned-collateral calculation against your current positions.

Example: you hold 100 No on Team A and 100 No on Team B before onboarding. You are onboarded on Monday. No collateral returns on Monday. On Tuesday you buy 10 No on Team C (or any other trade in that group). The engine recalculates returned collateral for the whole group on that fill and credits the eligible amount.

## Why market makers benefit

Market makers often provide Yes liquidity on one outcome while building No exposure across siblings in the same event. Collateral return improves capital efficiency in three ways:

1. **Faster capital rotation** — When you add a second No leg in a mutually exclusive group, collateral on the hedged portion returns on the fill instead of staying locked until settlement.
2. **More quotes with the same balance** — Returned funds credit your spendable balance on the fill. You can refresh quotes on related outcomes without waiting for the event to resolve.
3. **Lower effective cost of multi-outcome strategies** — Stacking No across outcomes is a common way to express a view on "not X" while staying hedged within the group. Returned collateral reduces the cash you must keep idle to maintain those positions.

### Market maker scenario

You quote Yes on **Team A** at $0.27 (resting maker) while a taker buys No on **Team B** at $0.73 in the same mutually exclusive game:

- The taker pays $73.00 for 100 No on Team B and holds 100 No on Team B.
- If the taker already holds 100 No on Team A, collateral return releases **$100.00** on the Team B fill.
- The taker's net cash outlay for the Team B leg is effectively **−$27.00** versus pre-return ($73.00 paid, $100.00 returned), leaving more balance to trade other outcomes in the same event.

Market makers benefit indirectly because counterparties with returned collateral can keep trading, which supports tighter spreads and deeper books across the event group.

## Scope and limitations

### Mutually exclusive only (released September 11, 2026, US time)

Collateral return is **live for mutually exclusive event groups only**, released **September 11, 2026 (US time)**. The exchange provisions an event group when an event has two or more active outcome contracts that resolve under a single-winner rule.

**Not included today:**

- **Directional / price-ladder events** — Ordered strike groups (for example, "above $X" rungs on the same underlying) use a different return policy. Support for **Above Directional** and **Below Directional** collateral return is planned; it is not enabled yet.
- **Independent outcomes within the same display event** — Some events list multiple contracts that are **not** mutually exclusive (for example, independent Mecone ladder legs). Collateral return does not apply to those groups.

### Order and position rules

- Collateral return applies to **No** positions across outcomes in the same mutually exclusive group.
- To reduce No exposure, use **Buy Yes** on the same contract. Direct **Sell No** is not supported for accounts using collateral return in mutually exclusive groups.
- Returned collateral adjusts on each fill that changes your group-level No stack. Resting orders continue to hold collateral under the standard event-contract hold rules.

## Availability

Collateral return rolls out by account and event group. Contact [institutional@gemini.com](mailto:institutional@gemini.com) if you are a market maker and want to confirm onboarding eligibility for your accounts.

## What's next

Gemini is extending collateral return to **directional (price-ladder) event groups**. That work will use separate **Above Directional** and **Below Directional** policies for ordered strikes. Mutually exclusive collateral return remains the supported path for single-winner events; directional ladder support will follow in a later release.