Prediction Market Guides

Plain-English guides to event contracts, probability pricing, US tax treatment, and which platform to use for which event.

Prediction-market basics

How do prediction markets work?

You buy a yes-or-no contract that pays $1 if the outcome happens. The price (e.g. 62¢) reflects the market's estimate of the probability. Sell anytime before the event resolves to lock in profit or limit loss.

Are prediction markets legal in the US?

Yes — through federally-regulated venues. They're not classified as sports betting under US law because they're federally-regulated commodities derivatives.

How are winnings taxed in the US?

Profits are taxable, but the IRS has not issued guidance on how event contracts are classified. Tax professionals argue for gambling income, ordinary income or capital gains, or (more aggressively) Section 1256 treatment; from 2026, gambling losses are deductible only up to 90% of losses. Kalshi provides a profit-and-loss statement for your trades and issues 1099s for interest, rewards and crypto transfers. Keep your own records; general information, not tax advice.

Where should I start?

Open a Kalshi account, fund $20–$50, and trade two or three small markets you actually have an opinion on. Read our event-contracts guide before you place your first trade.

Frequently asked questions

How do prediction markets work?

You buy a yes-or-no contract that pays $1 if the outcome happens. The price (e.g. 62¢) reflects the market's estimate of the probability. Sell anytime before the event resolves to lock in profit or limit loss.

Are prediction markets legal in the US?

Yes — through federally-regulated venues. They're not classified as sports betting under US law because they're federally-regulated commodities derivatives.

How are winnings taxed in the US?

Profits are taxable, but the IRS has not issued guidance on how event contracts are classified. Tax professionals argue for gambling income, ordinary income or capital gains, or (more aggressively) Section 1256 treatment; from 2026, gambling losses are deductible only up to 90% of losses. Kalshi provides a profit-and-loss statement for your trades and issues 1099s for interest, rewards and crypto transfers. Keep your own records; general information, not tax advice.

Where should I start?

Open a Kalshi account, fund $20–$50, and trade two or three small markets you actually have an opinion on. Read our event-contracts guide before you place your first trade.