Polymarket NegRisk markets explained: multi-outcome events and NO conversions
Questions with many possible answers — who wins an election, which team wins a league — are built on Polymarket as a set of linked yes/no markets. The link, called NegRisk, lets a trader convert NO shares into YES shares on every other answer, and it is where most trackers get profit wrong.
One event, many yes/no markets
A multi-outcome event on Polymarket is a set of binary markets, one per answer: 'Will A win?', 'Will B win?', and so on. Exactly one of them resolves YES. Polymarket's market data flags these events as negRisk, and their markets trade on a separate NegRisk exchange contract, with a NegRisk adapter contract handling the operations that tie the answers together.
What a NO conversion does
Because only one answer can win, holding NO on several answers is partly the same bet as holding YES on all the others. The adapter makes that exact. Converting burns an amount a of NO on each answer in a chosen set S, and returns an amount a of YES on every answer outside S, plus (|S| − 1) × a in collateral. Converting NO on three answers, for example, returns YES on all the others and two units of collateral per unit converted.
Why it matters to traders
Conversion lets a trader take the cheapest route into a position: buying NO on several answers and converting can cost less than buying the YES shares directly, and the reverse holds when NO is expensive. Traders who specialise in multi-outcome events use it routinely.
Why it breaks naive PnL
A conversion is neither a trade nor a transfer between people: tokens leave a wallet for a system address, other tokens arrive, and collateral appears. A tracker that only reads fills sees YES shares appear from nowhere and NO shares vanish, and reports profit or loss that never happened. On chain, most conversions are also called through a Polymarket router contract, so the wallet that benefits is not the one named in the adapter's event.
How PMWallets handles it
PMWallets matches each adapter event to the token flows it must cause, using the market's structure at the moment of the conversion, and attributes it to the one wallet whose flows match every leg. The minted YES shares are valued at market prices and the collateral is shared across the burned NO legs, so every market in the event gets a fair share and the wallet's total equals the collateral actually received on chain. A flow that cannot be explained is excluded and counted, not guessed.
Questions
What does negRisk mean on Polymarket?
It marks a multi-outcome event built as linked yes/no markets where exactly one resolves YES. The NegRisk adapter lets NO shares on some answers be converted into YES shares on all the other answers plus collateral.
What is the formula for a NegRisk conversion?
Burn amount a of NO on each answer in a set S; receive amount a of YES on every answer not in S, plus (|S| − 1) × a in collateral.
Why do trackers get NegRisk profit wrong?
Because a conversion looks like tokens disappearing and appearing without a trade, and the adapter's event usually names a Polymarket router rather than the trader. Without matching each conversion to its flows, the profit on these markets is misstated.