Kalshi taxes: how prediction market winnings are taxed, and which forms you get (2026)
Prediction market profits are taxable, but the IRS has not said exactly how. The forms Kalshi and Polymarket send, the possible tax treatments, and what records to keep.
In this article
If you made money on Kalshi or Polymarket, it is taxable income in the US. What is not settled is how it is taxed: the IRS had not issued specific guidance on prediction market contracts as of October 2026, and tax professionals disagree about the right treatment. This guide explains the forms you may receive, the main options and the records that will make filing easier.
This is general information, not tax advice. Talk to a tax professional about your situation, especially if your trading is large or frequent.
The short version
- Profits are taxable whether or not you receive a form.
- There is no official IRS rule for event contracts yet. Treatments people use range from capital gains to gambling income.
- You may not get a form for your trading profit. Kalshi reliably reports interest and rewards; trading results are often left to you to calculate.
- Keep your own records of every buy, sell, fee and payout.
Which tax forms does Kalshi send?
Based on Kalshi's tax help pages, as summarised by several CPA guides in 2026:
| Form | What it reports |
|---|---|
| 1099-INT | Interest Kalshi paid on your cash balance and positions, if $10 or more |
| 1099-MISC | Rewards, promotions and referral credits above the reporting threshold |
| 1099-B / 1099-DA | Crypto-related transfers, where applicable |
What is usually missing is a form for the profit or loss on the contracts themselves. Don't assume a missing form means nothing to report: your account's statements and trade history are what you will use.
Polymarket US is a US exchange and provides tax documents in your account where they apply. The global Polymarket site does not send US tax forms; if you used it from abroad, your local rules apply, and converting crypto to USDC to fund it can be a taxable event in its own right.
How might prediction market profits be taxed?
| Treatment | How it works | Why people use it | Watch out for |
|---|---|---|---|
| Capital gains | Profit = sale or payout minus cost and fees; mostly short-term | Contracts are bought and sold like other financial assets | Short-term gains are taxed at ordinary income rates |
| Section 1256 contracts | Futures-style "60/40": 60% long-term, 40% short-term | Kalshi is a regulated futures exchange | Whether event contracts qualify is untested |
| Gambling income | Winnings are income; losses deductible only if you itemise, up to winnings | Sports contracts look like bets | From 2026, only 90% of gambling losses are deductible |
| Ordinary income | All net profit taxed as income | Simple and conservative | No special treatment of losses |
The 90% rule comes from the 2025 tax law that limits gambling loss deductions starting in tax year 2026. Whether sports event contracts count as wagering for that rule is one of the open questions; see is Kalshi gambling for why the legal label is contested.
A simple example
You buy 100 "Yes" contracts at 40¢ ($40 plus about $1.68 in fees). The market resolves Yes and pays $100. Your gain is about $58.32. If instead you sold at 70¢ before the result, you would receive $70 minus the selling fee; your gain is the difference between what you received and what you paid, including both fees.
If the market had resolved No, you would have lost the $41.68. Whether that loss offsets other gains fully, partly or only against winnings depends on the treatment you use.
What records to keep
- Every trade: date, market, side, number of contracts, price and fee. Download statements from your account at least once a year.
- Payouts and settlements.
- Interest and rewards, which are reported separately.
- Deposits and withdrawals, to reconcile your balance.
- For global Polymarket users: the crypto transactions used to fund the account.
State income tax usually applies too, following your federal treatment.
Kalshi taxes: frequently asked questions
Do you pay taxes on Kalshi winnings?
Yes. Net profits are taxable income, even if you do not receive a form for them.
Does Kalshi send a 1099?
Kalshi issues a 1099-INT for interest of $10 or more and a 1099-MISC for rewards above the threshold. Trading profit is often not reported on a form, so keep your own records.
Are prediction market winnings capital gains or gambling income?
The IRS has not decided. Both treatments are used in practice; a tax professional can help you choose a defensible one and apply it consistently.
Can I deduct prediction market losses?
It depends on the treatment. As capital losses they offset gains (and up to $3,000 of other income a year); as gambling losses they only offset winnings, and from 2026 only 90% of them count.
How are Polymarket winnings taxed?
The same open questions apply to Polymarket US. On the global site you get no US forms, and crypto conversions can create separate taxable events.
