The IRS hasn't said how event contracts are taxed — so an honest calculator shows a range, not one number. Compare short-term capital, Section 1256 60/40, and gambling treatment with the new 90% loss cap, side by side, federal + state.
For estimates only — every situation varies. Three treatments are plausible because the IRS hasn't issued tax guidance on event contracts; results are a range, not advice.
Because the IRS and Treasury have issued no formal tax guidance on prediction-market event contracts as of July 2026 — no ruling, notice, regulation, or published private letter ruling to our knowledge, and nothing on the 2025–2026 Priority Guidance Plan. That silence is specific to tax: other federal regulators have been active, with the CFTC's June 2026 proposed rulemaking on prediction markets and public-interest determinations out for comment into late July. The nearest date worth watching on the tax side is the 2026–2027 Priority Guidance Plan, typically released around September or October. Practitioners openly disagree, and two identical traders can legally file differently. An honest estimate is therefore a range across the plausible treatments, not a single number.
The practitioner playbook under uncertainty: pick one characterization, apply it consistently year over year, document the reasoning, and keep complete records — trade history, dates, contract IDs, amounts, net P&L. Every situation varies; a CPA helps choose a defensible position.
Illustration: a trader with $30,000 of gross wins and $20,000 of gross losses — $10,000 of real profit — assuming a 24% federal bracket and a 15% long-term rate. The same trades produce federal estimates from $1,860 to $7,200 depending on characterization and an itemizing checkbox. That spread is the whole story of prediction-market taxes in 2026.
| Treatment | Taxable Amount | Federal Est. | Effective Rate on Profit |
|---|---|---|---|
| §1256 60/40 (Form 6781) | $10,000 split 60/40 | $1,860 | 18.6% |
| Short-term capital (Form 8949) | $10,000 | $2,400 | 24% |
| Gambling — itemizer (90% cap) | $12,000 | $2,880 | 28.8% |
| Gambling — standard deduction | $30,000 (gross) | $7,200 | 72% |
Under the gambling-itemizer row, the deduction is limited to the lesser of 90% of losses and total winnings: $30,000 − min(0.9 × $20,000, $30,000) = $12,000 taxable — the 90% haircut alone costs $480 here, and itemizing can mean giving up the standard deduction. A break-even trader ($150K wins / $150K losses) typically nets to $0 under capital or 60/40 treatment, but could face roughly $15,000 of phantom income as a gambling-itemizer — and tax on the full gross as a standard-deduction filer. Illustrative arithmetic at assumed rates, not personalized advice — every situation varies.
Generally none issue a comprehensive trade-level 1099 for event-contract profit and loss, based on current platform documentation. Some issue narrower forms — interest, rewards, or digital-asset proceeds — but those don't cover the contracts themselves, and practices vary, third-party descriptions conflict, and policies can change year to year. Checking your own account's tax section, and keeping your own records regardless, is the pattern most practitioners suggest.
| Platform | Status | Typical Tax Paperwork | Extra Wrinkle |
|---|---|---|---|
| Kalshi | CFTC-designated exchange since 2020 | Help center describes interest (1099-INT, generally at $10+ of interest) and referral/reward (1099-MISC) forms, plus limited digital-asset reporting — a narrow 1099-B for proceeds on certain broker/crypto-transfer transactions and, beginning with tax year 2025, Form 1099-DA issued through Kalshi's crypto partner Zero Hash. None of those covers event-contract trades. Some third-party guides describe a broad 1099-B once gross proceeds top $600; Kalshi's current help documentation doesn't appear to support one — check your account's tax section. | Transaction CSV is widely reported to store values in cents — a common error overstates P&L 100x. Per Kalshi's help documentation, platform P&L is FIFO, updated monthly, already includes fees, and is explicitly not tax advice. This row reflects a direct Kalshi account; contracts routed through a broker follow that broker's reporting choice, not Kalshi's. |
| Polymarket (offshore) | USDC on Polygon; geoblocked for US IPs 2022–2025 | No tax forms at all. | Each trade typically involves a USDC digital-asset disposal on top of the position itself — and the 1040 digital-asset question typically applies. |
| Polymarket US | CFTC-designated exchange, launched Dec 2025 | No confirmed 1099 policy as of July 2026 — genuinely open. | USD-settled with full KYC — no crypto layer, unlike the offshore platform. |
| Robinhood Events | FCM routing to CFTC exchanges | Per Robinhood's own support page: no 1099 for event contracts — an "Event Contracts Annual Statement" that is explicitly not a tax form. | Common myth: assuming the consolidated 1099-B covers event contracts. Robinhood's own page says the trades aren't reported to the IRS. |
For the 2025 tax year, platform practices varied and may change for 2026 — this table reflects platform documentation as of July 2026. A platform's tax form (or lack of one) reflects the platform's reporting choice, not an IRS determination of your treatment. And OBBBA raised the general 1099-MISC/NEC reporting threshold from $600 for payments through 2025 to $2,000 for payments made in 2026 — indexed for inflation from 2027 — so many profitable traders will get no form at all while still owing tax.
Often, and sometimes more than the federal number does. Most states start from federal adjusted gross income, so the federal characterization mechanically drives the state result. Under capital or 60/40 treatment the netting happens inside AGI. Under a gambling characterization, gross winnings land in AGI and the loss deduction sits below the line — where roughly ten states don't allow it at all.
Those two state taxes are excises on the platforms, not income taxes a trader files — they don't change what any individual owes, though operator costs can reach traders indirectly through fees. The state figures in the calculator are simplified modeling approximations for the states listed, not statements of any state's law; other states vary widely. Every situation varies.
Trade on these platforms? Visit kalshi.com or polymarket.com for account statements and data exports — the raw material for accurate reporting.
It typically depends on which treatment applies — a question the IRS hasn't settled. Assuming a 24% bracket: roughly $930 under a Section 1256 60/40 approach, about $1,200 as short-term capital gain, and potentially more under gambling treatment depending on gross wins, gross losses, and whether the trader itemizes. Every situation varies.
Typically yes. Prediction-market profits are taxable income under IRC §61 regardless of whether any tax form arrives. The taxable event is generally settlement or sale of a contract — not withdrawal — so winnings left sitting in an account are still typically reportable for that year.
Generally not at the trade level, based on current platform documentation. Robinhood's own support page says event-contract trades aren't reported to the IRS; offshore Polymarket issues no forms; Kalshi's help center describes interest, referral, and limited digital-asset forms — including a narrow 1099-B and, from tax year 2025, Form 1099-DA through its crypto partner — rather than a comprehensive trade-level 1099 for event contracts. Third-party descriptions conflict, so checking your own account's tax section is worth it. The income is taxable regardless.
Unsettled. Some practitioners take that position because Kalshi is a CFTC-designated exchange, but the CFTC classifies event contracts as swaps — and the tax code excludes swaps from Section 1256. Practitioners who file 60/40 often recommend disclosure on Form 8275. Kalshi itself takes no position on tax characterization. More background: our full Kalshi taxes guide.
The OBBBA capped the wagering-loss deduction at 90% of losses (and at gains) starting tax year 2026 — itemizers only, no carryforward. Whether it reaches prediction markets depends on whether event contracts count as "wagering," which is exactly the question the IRS hasn't answered. Sports-style contracts typically carry the highest recharacterization risk. The implementing regulations remain proposed (REG-113229-25) — a public hearing was held July 17, 2026, where the cap's phantom-income effect drew criticism from a member of Congress, industry groups, CPAs, and professional gamblers — and repeal attempts haven't advanced, so the cap stands for 2026.
Under a gambling characterization, typically yes. A trader with $100,000 of wins and $100,000 of losses could deduct only $90,000 if itemizing — leaving $10,000 of "phantom income" — and a standard-deduction filer would typically get no loss offset at all. Capital or 60/40 treatment nets the same year to zero.
It depends on the characterization. Under capital treatment, losses typically net against other capital gains, with up to $3,000 per year against ordinary income and indefinite carryforward. Under gambling treatment, losses are deductible only when itemizing, only up to winnings, only at 90% for 2026 — and unused amounts never carry forward.
Often, for profitable traders. No prediction-market platform withholds tax, so traders expecting to owe $1,000 or more typically make quarterly estimated payments, often using the 100%/110% prior-year safe harbor. Many set aside a percentage of each winning settlement as it happens. A CPA can size the payments for a specific situation.
Each treatment this calculator models lands on a real IRS form with real instructions. Worth stating plainly: none of the IRS pages below mentions prediction markets or event contracts. They're the underlying forms and topics practitioners map event-contract activity onto — which is exactly why the characterization question matters so much.
Statutory backbone, for anyone reading further: IRC §61 (gross income), §1221 and §1234A (capital assets and terminations of rights), §1256 including the §1256(b)(2)(B) swap exclusion, and §165(d) as amended by OBBBA §70114 (P.L. 119-21). The implementing regulations for the 90% cap and the new §6041(h) reporting threshold are proposed at REG-113229-25. Informational only, not personalized tax advice.
For most prediction-market traders, the calculator's range — not any single row — is the honest answer, because the characterization question is genuinely unsettled. A CPA who works with traders can help pick one defensible position, apply it consistently, and document it. The tools below give a ballpark; a CPA confirms what actually applies.
Prefer to read first? The prediction market taxes hub walks the full characterization debate. Curious how we handle your data before you upload anything? See our security page.
Trade on more than one platform? Each one structures settlement and tax paperwork differently, so the practical mechanics vary even when the underlying characterization question is identical. Every platform named on this page has its own guide: