A calculator and a pen resting on printed figures

Analysis · Tax

Kalshi taxes and Polymarket taxes, and what the IRS rules say about prediction market winnings

Published 2026-10-13By the CryptoGuardz Register Desk7 min read16 sources

Photo: Aaron Lefler / Unsplash

In short, from the documents

Kalshi taxes and Polymarket taxes, per the IRS

Kalshi's help centre lists four forms it may issue, 1099-INT, 1099-MISC, 1099-B and 1099-DA, and none of them is described as reporting event contract profits. As of 13 October 2026 the IRS has published no guidance on how event contracts are taxed, and the Treasury's 2026-2027 guidance plan does not list the topic.

Piece published 2026-10-13Reviewed by CryptoGuardz Register Desk, editorial desk

Kalshi taxes start with four forms. Kalshi's help centre, read on 13 October 2026, says members who cross IRS thresholds get a 1099-INT, a 1099-MISC, a 1099-B or a 1099-DA. None of the four is described as reporting profit on event contracts. The IRS has published no guidance on how event contracts are taxed, and the Treasury's 2026-2027 guidance plan of 29 September 2026 does not list the topic.

So the treatment of prediction market winnings is open. Three readings of the Code are possible, and each lands differently on a player's return. This page sets out what the primary texts say and where they stop. It is not tax advice: check with a tax professional before you file.

What forms cover Kalshi taxes?

Four, each tied to a specific kind of payment. The help article, updated 22 June 2026, lists them:

Platform	Form issued	What the platform says it covers	Source
Kalshi	1099-INT	Interest payments from Kalshi	Kalshi Help Center
Kalshi	1099-MISC	Credit/rewards from Kalshi	Kalshi Help Center
Kalshi	1099-B	Proceeds from broker transactions (crypto transfers)	Kalshi Help Center
Kalshi	1099-DA	Digital asset transaction reporting from ZeroHash	Kalshi Help Center
Polymarket (international)	None listed	Terms bar US persons from trading	Polymarket Terms of Use
Polymarket US	Not disclosed	No tax page in its documentation	docs.polymarket.us

A tall stack of paper documents marked with coloured sticky tabs — Illustration: a stack of tabbed paperwork. Which IRS form arrives depends on how the exchange classifies the contract, as the section explains. Photo: Tanja Tepavac / Unsplash

For trading results Kalshi points members to a Profit and Loss statement, computed on a first-in-first-out basis and updated on the first morning of each month. The page is plain about its limits:

This information and the information included in the Profit and Loss statement are not tax advice, and Kalshi cannot give members advice on their taxes.

Kalshi Help Center, What Tax Documentation Does Kalshi Provide?, retrieved 2026-10-13

It also says that if no 1099 appears, "it is likely because you did not meet the IRS thresholds required for issuance." A missing form does not remove the income. The page does not state the dollar thresholds: not disclosed.

Does the IRS have guidance on event contracts?

No. On 13 October 2026 no IRS notice, ruling, regulation or publication addressing event contracts or prediction markets was found. The Treasury and IRS 2026-2027 Priority Guidance Plan, dated 29 September 2026, was searched for "event contract", "prediction", "wager", "gambling", "swap" and "binary". None appears. Its digital assets section lists four projects, all on crypto transactions and broker reporting.

That leaves the general Code. The three candidate treatments below are what the statutes say about each category. Which category an event contract falls into is the part nobody official has written down.

Are prediction market winnings taxable?

Yes, under every reading. The question is only which rules apply to the gain and, more expensively, to the losses.

If event contracts are gambling income

If an event contract is a wager, IRS Topic 419 applies: "Gambling winnings are fully taxable and you must report the income on your tax return." The topic lists "sports betting" among its examples. Losses are deductible only by itemizing on Schedule A.

From tax year 2026 the loss side shrank. Section 70114 of Public Law 119-21, enacted 4 July 2025, rewrote 26 U.S.C. 165(d):

(A) shall be equal to 90 percent of the amount of such losses during such taxable year, and (B) shall be allowed only to the extent of the gains from such transactions during such taxable year.

26 U.S.C. 165(d)(1), as amended by Pub. L. 119-21, section 70114(a), retrieved 2026-10-13

Section 70114(b) applies it "to taxable years beginning after December 31, 2025." Under this reading a trader who wins and loses the same amount in 2026 deducts only 90% of the losses, and pays tax on money never kept. The full mechanics are in how gambling winnings are taxed in the US and can you deduct gambling losses.

If they are section 1256 contracts, taxed 60/40

Section 1256(a)(3) treats gain or loss on a section 1256 contract as 40% short-term and 60% long-term capital gain or loss, and (a)(1) marks open positions to market at year end. The list in 1256(b)(1) starts with "any regulated futures contract". Subsection (g)(1) defines that as a contract where deposits and withdrawals depend "on a system of marking to market" and which "is traded on or subject to the rules of a qualified board or exchange."

Then 1256(b)(2)(B) excludes "any interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement." That exclusion collides with the litigation. The Third Circuit held on 6 April 2026 that "Kalshi's sports-related event contracts are swaps traded on a CFTC-licensed DCM." The Sixth Circuit held on 25 September 2026 "that Kalshi's sports-event contracts do not constitute swaps under § 1a(47)(A)(ii)." Those rulings are about commodities law, not tax. Whether any court or the IRS would carry either label into section 1256 has not been decided. The court fight is in is Kalshi gambling.

If they are ordinary capital assets

If a contract is neither a wager nor a section 1256 contract, a sale or settlement could give ordinary capital gain or loss, short or long term by holding period. No IRS document read for this page applies that treatment to event contracts either: not verified.

How do Polymarket taxes work?

For US residents, the international site is the wrong starting point: its terms say, in capitals, that trading "is not permitted by persons or entities who reside in, are located in" the United States, among other places. The help centre's restriction list of 14 August 2026 names the United States among 39 blocked countries. Using a VPN to get round that is a breach of the terms; this page does not cover how anyone would try.

The international site's money is crypto. Its help centre says "All transactions are denominated in USDC", and from 28 April 2026 balances moved to pUSD, which it describes as "backed 1:1 by USDC". Its terms put tax on the user:

It is your sole responsibility to determine whether there are any tax consequences from any transactions you initiate using the Site, any other Interface, or Features, and you are solely responsible for ensuring compliance with applicable tax laws in your tax resident jurisdiction.

Polymarket.com Terms of Use, effective 11 August 2026, retrieved 2026-10-13

Polymarket's international help centre had no tax article on 13 October 2026, and the documentation for Polymarket US, the CFTC-regulated venue, had none either. Which forms Polymarket US issues: not disclosed. Its legal status is covered in is Polymarket legal in the US.

What does Form 1099-DA mean for USDC?

The crypto leg has its own rules, separate from the contract question. The IRS lists stablecoins as digital assets, and every Form 1040 asks whether you sold, exchanged or otherwise disposed of one. Broker reporting on Form 1099-DA applies "beginning with transactions on or after Jan. 1, 2025." The 2026 instructions add basis reporting for covered securities, meaning digital assets acquired after 2025 in a custodial account at that broker.

Stablecoins get a carve-out. A broker using the optional method need not report designated sales of qualifying stablecoins if a customer's aggregate gross proceeds "do not exceed $10,000 for the year." A qualifying stablecoin must track one government currency one-to-one, use "an effective stabilization mechanism" and be "generally accepted as payment by persons other than the issuer." Kalshi's 1099-DA comes from ZeroHash, per its help page.

What this does not show

State income tax, which applies on top in most states: not measured. Kalshi's dollar thresholds for each form: not disclosed. Whether the IRS or a court will pick one of the three treatments. Fees reduce a trader's net result and are covered in Polymarket and Kalshi fees explained. For state rules on gambling more widely, see the US state guide.

Quick answers

Do you pay taxes on Kalshi winnings?

Yes, the income is taxable whichever treatment applies. Kalshi lists 4 forms it may issue and says its PnL information is "not tax advice". Check with a tax professional.

Does Kalshi send a 1099?

Kalshi says it issues a 1099-INT, 1099-MISC, 1099-B or 1099-DA to members who meet IRS thresholds. None is described as reporting event contract profit; that sits in the PnL statement.

Are prediction market winnings gambling income for tax?

Not decided. The IRS has no guidance on event contracts, and its 2026-2027 plan does not list the topic. If treated as gambling, only 90% of 2026 losses are deductible, per the US gambling tax guide.

Does Polymarket report to the IRS?

Its international terms bar US persons and leave tax to the user. Polymarket US published no tax forms page on 13 October 2026: not disclosed.

Where can I get help with gambling in the US?

The National Problem Gambling Helpline is 1-800-MY-RESET (1-800-697-3738), with call, text and chat. More options are on the responsible gambling page.

More analysis

2026-10-14What does it mean to stake crypto? Proof of stake, lockups, slashing, exchange terms and taxStaking crypto means locking coins in a proof-of-stake network so they back a validator, in return for rewards and at the risk of slashing. Solo Ethereum staking needs 32 ETH. Coinbase takes a 35% commission and Kraken 30% on flexible staking. The IRS taxes rewards as income when you gain control of them.2026-10-09Can you deduct gambling losses on your taxes? Itemizing, the 90% rule from 2026 and the records crypto casinos keepUS players can deduct gambling losses only by itemizing on Schedule A, and only up to the winnings they report. From tax year 2026 the deduction is 90% of losses. The IRS requires a diary plus statements; of three crypto casino terms read, none promises a statement, and two make their own logs final.2026-10-09How are gambling winnings taxed in the US? The IRS text, the 2026 thresholds and the 90% loss ruleThe IRS treats gambling winnings as fully taxable income at ordinary rates, 10% to 37% for 2026. Form W-2G reporting for slots, bingo and keno now starts at $2,000. From tax year 2026, section 165(d) as amended in 2025 lets players deduct only 90% of losses, and only against winnings.2026-10-14How do you sell bitcoin? Exchanges, broker apps, P2P and ATMs, with each provider's own feesBitcoin is sold through an exchange, a broker app, a peer-to-peer market or a bitcoin ATM. Stated fees on 14 October 2026 run from 0% plus a spread of up to 0.75% on a Cash App sale of $2,000 or more to 4.99% at a CoinFlip kiosk. Every sale is a capital gain or loss event for US tax.2026-10-14Do you pay taxes on crypto before withdrawal? What the IRS says is taxable, and what Form 1099-DA reportsNo tax is due because crypto is withdrawn. The IRS taxes a sale, an exchange or another disposal; moving crypto between wallets you own is a non-taxable event, though a network fee paid in crypto counts as a disposal. Brokers report gross proceeds on Form 1099-DA for sales from 1 January 2025 and basis for certain sales from 1 January 2026.2026-10-13AB 831, California's sweepstakes casino ban, and what it does to operators, payment processors and affiliatesAB 831, Chapter 623 of 2025, added Penal Code section 337o. Since 1 January 2026 it is a misdemeanor to offer an online dual-currency sweepstakes game in California, and to knowingly support one as a payment processor, geolocation provider, content supplier, platform or media affiliate. Stake.us and Pulsz exclude California in their terms; Chumba and McLuck keep it for free-play only.

Sources

About this piece

Compiled by the CryptoGuardz register team from the sources listed above. Research and drafting are AI-assisted and reviewed by a named editor before publication. Nothing here is a recommendation to gamble. If a figure or a reading is wrong, tell us and the correction is logged in public.