Are prediction market winnings taxable in the US?

Yes. All prediction market profits are taxable income at both the federal level and state level. There is no federal de minimis exception. Even small profits are reportable, regardless of whether the platform issues a 1099.

Does Kalshi send a 1099?

Kalshi historically issues 1099-B forms to users who hit reporting thresholds. The form arrives in January or February for the prior tax year and is also available in your account's tax documents section.

Does Polymarket send a 1099?

Polymarket does not currently issue 1099 forms to US users. You are responsible for self-reporting all profits. Use the platform's CSV export to track activity.

What is Section 1256 treatment?

Section 1256 of the Internal Revenue Code provides 60/40 tax treatment for qualifying regulated futures contracts: 60% long-term capital gains, 40% short-term, regardless of holding period. Some prediction market contracts may qualify; consult a CPA.

Are USDC conversions on Polymarket taxable?

Technically, yes. Each USDC-to-USD conversion is a separate taxable event under crypto tax rules. The amounts are usually negligible since USDC is pegged to USD, but they should be tracked.

Can I deduct prediction market losses?

Yes, with limits. Capital losses can offset capital gains plus up to $3,000 of ordinary income per year. Excess losses carry forward. 1256 contract losses have additional carryback options.

No. This article is general information only. Consult a licensed CPA, ideally one familiar with derivatives or 1256 contracts, before filing.

Are prediction markets legal in the US?

Yes. federally-regulated event-contract platforms operate under federal commodities law, which preempts state gambling statutes. That makes Kalshi, Polymarket, Sleeper, Chalkboard, Novig, Rebet, and Crypto.com legal for US traders to use today — even in states where traditional online sportsbooks remain unavailable.

Who regulates the platforms I am trading on?

The Commodity Futures Trading Commission (CFTC) — the same federal agency that regulates futures, options, and swaps. Platforms operate as Designated Contract Markets (DCMs) and must follow rules on disclosures, market integrity, customer protection, and segregation of customer funds.

Do I need to pay tax on my winnings?

Yes. Profits are taxable as either short-term capital gains or ordinary income at both federal and state levels. There is no de minimis exemption. Some Kalshi contracts may qualify for Section 1256 60/40 treatment. Consult a CPA — this is not tax advice.

Is my money protected if a platform fails?

federally-regulated event-contract platforms are required to keep customer funds segregated from operational capital. That gives meaningful protection in the event of operator bankruptcy, but it is not the same as FDIC insurance. Only fund accounts with money you are prepared to lose.

What disclosures should I read before trading?

Read each platform's contract resolution rules carefully — they vary across venues for the same event. Also review our editorial Disclosure for how we earn revenue from affiliate partnerships and how that affects (and does not affect) our coverage.

What are the age and residency requirements?

You must be 21 or older and a US resident with a valid government ID. KYC verification is mandatory and typically completes in 5–60 minutes.

Guide · 8 min read

Prediction Market Taxes in the US: What Traders Owe

By Catie Di StefanoPublished April 21, 2026Updated August 7, 2026

How federal tax treatment, 1099 forms, and state income tax stack on Kalshi and Polymarket gains. A practical primer for US traders.

Some links on this page are affiliate links — we may earn a commission if you sign up, at no cost to you. How we make money.

Independent educational guide. Not affiliated with, endorsed by, or connected to FIFA or any official World Cup body.

Prediction Market Taxes in the US: What Traders Owe

Sources

Every figure on this page is checked against primary sources — regulator filings, exchange documentation and official results. Prices and rules change; verify with the operator before trading.

1.Publication 550, Investment Income and Expenses — Internal Revenue Service
2.Topic no. 419, Gambling income and losses — Internal Revenue Service
3.California income tax guidance — California Franchise Tax Board
4.Kalshi Help Center — fees, funding and account rules — Kalshi
5.Kalshi market listings and contract rulebooks — Kalshi
6.Polymarket documentation — markets, fees and resolution — Polymarket

Affiliate partner

Trade soccer event contracts on Kalshi — trade $25 and get $25 with code WCPREDICTS.

Kalshi is a federally-regulated exchange for event contracts on soccer, politics and culture. Open an account in minutes, trade $25 and your $25 follows.

Certain limitations apply. The offer is available to new users only, subject to the terms and conditions at kalshi.com/tc/500. 18+ only. Restrictions and eligibility requirements apply. Event contract trading involves significant risk and is not appropriate for everyone. Please carefully consider if it is appropriate for you in light of your personal financial circumstances. Kalshi products are not available in all jurisdictions. See kalshi.com/regulatory for more information.

Some links on this page are affiliate links — we may earn a commission if you sign up, at no cost to you. How we make money.

Independent educational guide. Not affiliated with, endorsed by, or connected to FIFA or any official World Cup body.

Kalshi — Trade $25 and get $25 with code WCPREDICTS.

Editorial coverage

Polymarket is the world's largest prediction market, with a US iPhone app for event contracts.

We don't operate Polymarket and don't accept signups on this site. For state-specific availability and guidance, jump to the sibling editorial site for your jurisdiction.

Learn more about prediction markets in soccer

Guide

Frequently asked questions

Are prediction market winnings taxable in the US?: Yes. All prediction market profits are taxable income at both the federal level and state level. There is no federal de minimis exception. Even small profits are reportable, regardless of whether the platform issues a 1099.
Does Kalshi send a 1099?: Kalshi historically issues 1099-B forms to users who hit reporting thresholds. The form arrives in January or February for the prior tax year and is also available in your account's tax documents section.
Does Polymarket send a 1099?: Polymarket does not currently issue 1099 forms to US users. You are responsible for self-reporting all profits. Use the platform's CSV export to track activity.
What is Section 1256 treatment?: Section 1256 of the Internal Revenue Code provides 60/40 tax treatment for qualifying regulated futures contracts: 60% long-term capital gains, 40% short-term, regardless of holding period. Some prediction market contracts may qualify; consult a CPA.
Are USDC conversions on Polymarket taxable?: Technically, yes. Each USDC-to-USD conversion is a separate taxable event under crypto tax rules. The amounts are usually negligible since USDC is pegged to USD, but they should be tracked.
Can I deduct prediction market losses?: Yes, with limits. Capital losses can offset capital gains plus up to $3,000 of ordinary income per year. Excess losses carry forward. 1256 contract losses have additional carryback options.
Is this tax advice?: No. This article is general information only. Consult a licensed CPA, ideally one familiar with derivatives or 1256 contracts, before filing.

Legal & Compliance

Legality, regulation, and your protections

For full guardrails, see our Responsible Trading guide and our editorial Disclosure. This page is informational, not legal or tax advice.

Responsible Trading

Trading safely: the questions that matter

Is trading prediction markets the same as gambling?: No. Prediction markets are federally-regulated event contracts — financial derivatives, not casino games. That said, you can still lose every dollar you put in. Treat capital at risk as money you are prepared to lose.
How much should I trade with?: Only with money you can afford to lose without affecting rent, bills, or savings goals. A common rule of thumb: cap total prediction market exposure at 1–5% of your discretionary income.
What are the warning signs of problem trading?: Trading to recover losses, hiding activity from family, borrowing to fund deposits, missing work or sleep, or feeling unable to stop. If any of these apply, step away and call 1-800-GAMBLER.
Where can I get help in the US?: Call the National Problem Gambling Helpline at 1-800-GAMBLER (free, confidential, 24/7) or visit ncpgambling.org. Most platforms also offer self-exclusion and deposit limit tools in account settings.
Can I set deposit or loss limits?: Yes. Kalshi, Polymarket, Sleeper, and Chalkboard all offer self-imposed deposit limits, loss limits, and cooling-off periods. Set them when you open the account, not after a bad week.

If you or someone you know needs help, call 1-800-GAMBLER or visit ncpgambling.org.

Next steps

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Prediction Market Taxes in the US: What Traders Owe

Sources

Trade soccer event contracts on Kalshi — trade $25 and get $25 with code WCPREDICTS.

Polymarket is the world's largest prediction market, with a US iPhone app for event contracts.

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