Last updated: 31 October 2026
Kalshi profits are taxable, but Kalshi does not send most traders a 1099-B or a W-2G for their event contract results. It issues Form 1099-INT for interest and Form 1099-MISC for rewards when IRS thresholds are met, plus a 1099-B or 1099-DA only for certain crypto transfers, and the IRS has issued no guidance on whether event contract profits are capital gains, Section 1256 gains or gambling winnings.
That gap is why prediction market tax treatment has become a competitive issue for your business. A sportsbook customer’s winnings land on a W-2G and run into the new 90% loss cap from 2026. A Kalshi customer’s results land on a monthly P&L statement and are usually reported under financial-product rules. This article explains the mechanics for operators, affiliates and SEO teams: what each venue reports, how the income is characterised, how losses work, what changed in 2026, and which marketing claims you should not make.
This is general information, not tax advice. Nothing here is a recommendation on how any individual should file.
Does Kalshi report to the IRS?
Yes, but only for some items. According to Kalshi’s tax documentation page (dated 22 June 2026), users who meet IRS reporting thresholds receive:
- Form 1099-INT for interest Kalshi pays on cash balances. Kalshi’s FAQ says this is filed with the IRS.
- Form 1099-MISC for credits and rewards, also filed with the IRS.
- Form 1099-B for “transaction proceeds from broker transactions”, which Kalshi describes as crypto transfers.
- Form 1099-DA for digital asset transactions reported through ZeroHash, its crypto partner.
Forms list last verified against Kalshi’s help page: 30 October 2026.
None of these forms reports a customer’s event contract gains and losses. For that, Kalshi provides a profit and loss statement under Account > Tax Info, computed on a first-in, first-out (FIFO) basis, including fees and rebates, and refreshed on the first of each month. Forms are delivered electronically by its tax form provider, Zenwork.
So the shorthand “Kalshi issues a 1099-B, not a W-2G” is only half right. Kalshi does not issue a W-2G, because it does not treat its contracts as wagers. But it does not issue a contract-level 1099-B either. Most traders get a P&L statement and, at most, a 1099-INT or 1099-MISC for small side items.
Does Kalshi give you a 1099 if you made less than $600?
The threshold question matters less than it looks, because there is no minimum for taxability. Under Section 61 of the tax code, income is taxable whether or not a form arrives. The form thresholds only decide who gets paperwork:
- 1099-MISC rewards: the One Big Beautiful Bill Act (OBBBA, Pub. L. 119-21) raised the general threshold from $600 to $2,000 for payments made after 2025.
- 1099-INT interest: $10 or more.
- W-2G at a sportsbook: the IRS’s January 2026 instructions set the 2026 threshold for sports and other wagering at $2,000, and the winnings must also be at least 300 times the stake.
The common search “do I get taxed if I made less than $600 on a gambling site” is therefore out of date twice: the threshold has moved to $2,000 for 2026, and it was never a tax-free allowance.
How Kalshi profits are taxed: four positions, no IRS ruling
As of October 2026 the IRS has issued no revenue ruling, notice or other public guidance on event contracts. The National Association of Tax Professionals said so in May 2026 (NATP), and Thomson Reuters’ Checkpoint reported the same “IRS silence” in June 2026 as the World Cup started (Thomson Reuters). Preparers therefore pick one of four positions and document it.
| Position | Where it is reported | How gains are taxed | How losses work | Main weakness |
|---|---|---|---|---|
| Section 1256 contract | Form 6781, then Schedule D | 60% long-term, 40% short-term, marked to market at year end | Net against gains; $3,000 a year against ordinary income; optional three-year carryback | Swaps are excluded from Section 1256, and the CFTC treats event contracts as swaps |
| Capital asset | Form 8949 and Schedule D | Short-term rates for positions held a year or less, which is almost all of them | Net against gains; $3,000 a year against ordinary income; carry forward | Needs a trade-by-trade basis record the platform does not supply as a 1099 |
| Ordinary income | Schedule 1 | Ordinary rates | Unclear; no capital loss rules | Can overstate tax if losses are not allowed |
| Gambling winnings | Schedule 1 (winnings), Schedule A (losses) | Ordinary rates on gross winnings | From 2026, 90% of losses, only up to winnings, only if you itemise | Kalshi and the CFTC say these are swaps, not wagers |
Are Kalshi contracts Section 1256 contracts?
This is the argument behind the “60/40” claims that circulate on social media, and it is weaker than it sounds. Section 1256 covers regulated futures contracts, foreign currency contracts, nonequity options and two dealer categories. A regulated futures contract must be marked to market and traded on a qualified board or exchange. Kalshi is a CFTC designated contract market, which helps with the exchange test.
The problem is Section 1256(b)(2)(B), which excludes “any interest rate swap, currency swap, basis swap… commodity swap… or similar agreement”. The CFTC’s position in court, and the Third Circuit’s April 2026 ruling for Kalshi in New Jersey, both rest on event contracts being swaps. That is good for Kalshi’s federal pre-emption case and awkward for 60/40 treatment. Monaco CPA, quoted by Checkpoint, put it plainly: CFTC registration alone does not confer Section 1256 status.
Is Kalshi taxed as gambling?
Not by Kalshi’s own reporting, and not by any IRS ruling. But the argument is getting louder. On 30 September 2026 the Tax Law Center at NYU Law published an analysis in Tax Notes concluding that sports event contracts appear to be “wagers” and “wagering” under the tax code. If the IRS agreed, sports contracts would carry ordinary income treatment, the gambling loss limits and the federal excise tax on wagers.
Several state cases make the same point from the other side. The Ninth Circuit (August 2026) and the Sixth Circuit (September 2026) ruled that states can treat Kalshi’s sports contracts as gambling. Those rulings are about state gaming law, not federal income tax, but they feed the same question. For the full court map, see our prediction markets guide.
How sportsbook winnings are taxed in 2026
The sportsbook side has no ambiguity, which is exactly why the comparison matters to you.
- Character: gambling winnings are ordinary income, reported in full on Schedule 1.
- Form: W-2G when a payout meets the 2026 threshold of $2,000 and is at least 300 times the stake. Below that, winnings are still taxable.
- Withholding: 24% of the proceeds (the winnings minus the amount wagered) when those proceeds exceed $5,000 and are at least 300 times the stake, per the IRS W-2G instructions (revised January 2026).
- Losses: deductible only as an itemised deduction, and only up to winnings.
- The 2026 change: Section 165(d), as rewritten by section 70114 of the OBBBA, allows a deduction “equal to 90 percent of the amount of such losses”, still capped at gains, for tax years beginning after 31 December 2025.
Two side effects follow. First, gross winnings flow into adjusted gross income even when the customer broke even, which can affect credits and phase-outs. Second, a break-even bettor can now owe tax. A customer who wins $100,000 and loses $100,000 in 2026 has $10,000 of taxable income, an example Baker Tilly’s James Creech gave Checkpoint in June 2026.
Will the 90% cap be repealed?
Possibly, but not yet. Rep. Dina Titus’s FAIR BET Act (H.R. 4304, introduced July 2025) stalled in committee. On 16 September 2026 the House Ways and Means Committee voted 38 to 5 to attach a full repeal to H.R. 10357, the Digital Asset Tax Certainty Act, retroactive to 1 January 2026, according to Covers and Legal Sports Report. The Joint Committee on Taxation scored it at about $2 billion over 2027 to 2036. It still needs a House floor vote, which is not expected before the November midterms, and Senate passage. Until then, the 90% rule applies to 2026 returns.
Polymarket taxes: offshore tokens and a US exchange
Polymarket is really two businesses for tax purposes.
- Polymarket international has blocked US users since its January 2022 CFTC settlement and has never issued US tax forms. Positions are tokens on the Polygon blockchain, settled in USDC and, since a 2026 upgrade, a USDC-backed token called pUSD. US preparers who see this activity usually treat it as digital asset property on Form 8949, with the extra complication that converting into and out of a stablecoin can itself be a disposal. As a foreign, non-custodial venue, it does not issue Form 1099-DA.
- Polymarket US runs through QCX LLC, a CFTC designated contract market bought in 2025, and settles in US dollars. It faces the same characterisation question as Kalshi. Its year-end reporting practice is not documented in a public tax FAQ that could be checked for this article, so treat any claim about its forms as unverified until it publishes one.
On the crypto side, US custodial brokers now file Form 1099-DA. For stablecoins, IRS instructions give brokers an optional method under which designated sales need no form unless a customer’s yearly gross proceeds exceed $10,000. That rule does not reach offshore wallets, which is why Polymarket international stays a self-reporting problem.
Our Kalshi vs Polymarket comparison covers fees, custody and state access between the two in more detail.
Kalshi vs sportsbook vs Polymarket: tax treatment compared
Table last verified: 30 October 2026 (Kalshi help page, IRS W-2G instructions).
| Item | Kalshi (CFTC DCM) | US sportsbook | Polymarket international |
|---|---|---|---|
| Form for trading or betting results | None; monthly P&L statement | W-2G above threshold | None |
| Other forms | 1099-INT, 1099-MISC; 1099-B or 1099-DA for crypto transfers | Varies by operator | None |
| Usual income character | Unsettled: capital, Section 1256, ordinary or gambling | Ordinary income (gambling) | Usually digital asset property; gambling arguable |
| Loss treatment | Under capital positions, net against gains plus $3,000 a year | 90% of losses from 2026, itemisers only, capped at winnings | Capital losses if treated as property |
| Netting before AGI | Yes under capital positions | No; gross winnings enter AGI | Yes if treated as property |
| 2026 reporting threshold | 1099-MISC $2,000; 1099-INT $10 | W-2G $2,000 and 300 times the stake | Not applicable |
| Federal withholding | None on contract payouts | 24% of proceeds above $5,000 net and 300 times the stake | None |
| Federal wagering excise tax on the venue | Not treated as wagers; Tax Law Center argues it should apply to sports contracts | 0.25% of handle on state-authorised wagers (Section 4401) | Not applicable to US activity |
| State gaming tax on the venue | None in most states; Illinois charges a per-wager tax from 1.75% | Tax on gross gaming revenue, up to 51% in New York | Not applicable |
Worked example: the same results under each regime
The gap is easiest to see with one set of numbers. Assumptions, stated so you can check them:
- A customer’s winning positions or bets total $10,000 of profit and the losing ones total $4,000 of losses in tax year 2026, so the net result is $6,000.
- Federal marginal rate of 24% on ordinary income and 15% on long-term capital gains.
- No net investment income tax, no state tax, no other gains or losses, and no trader status election.
- Sportsbook case shown for an itemiser and for someone taking the standard deduction (the losses do not help them at all).
| Regime | Taxable amount | Federal tax | Added to AGI |
|---|---|---|---|
| Sportsbook, non-itemiser | $10,000 | $2,400 | $10,000 |
| Sportsbook, itemiser (90% of $4,000 deducted) | $6,400 | $1,536 | $10,000 |
| Kalshi as short-term capital gain | $6,000 | $1,440 | $6,000 |
| Kalshi as Section 1256 (60/40) | $6,000 ($3,600 long, $2,400 short) | $1,116 | $6,000 |
The spread runs from $1,116 to $2,400 on an identical $6,000 result. At break-even the gap is starker: $10,000 won and $10,000 lost leaves $1,000 taxable for an itemising sportsbook customer and $10,000 for a non-itemiser, against zero under any capital position. These figures illustrate the rules. They are not a prediction of how the IRS will rule on event contracts.
What it means for operators
The tax wedge works at two levels, and you are on the wrong side of both.
Customer level. For the high-volume sports customers who generate most of your handle, the 90% cap and the AGI effect make a sportsbook account more expensive to use than a prediction market account, as long as event contracts keep their financial-product treatment. That is a retention risk for your best players, and it is the same customer the prediction markets are chasing with sports contracts.
Venue level. A licensed book pays state gaming tax on gross gaming revenue plus the 0.25% federal excise tax on handle. Kalshi pays corporate income tax on its fees. Nathan Goldman’s July 2026 Forbes analysis worked the New York case: on a matched $110 to $100 pair of bets, a sportsbook keeps less than half of about $10 of revenue after the 51% state tax, while Kalshi keeps over 90% of about $10 of fees after 7.25% corporate tax. That wedge is part of why New York sued Kalshi in July 2026, and why Illinois chose to tax prediction markets instead.
Three developments would narrow it: repeal of the 90% cap (closes the customer gap from the sportsbook side), IRS guidance treating sports contracts as wagers (closes it from the other side), or a Supreme Court ruling that lets states license and tax event contracts. The first is the only one with a bill moving. If you supply operators, the ownership and business model background in who owns Kalshi explains why Kalshi has every reason to keep the swap classification.
What it means for affiliates and SEO teams
“Kalshi taxes” and “polymarket taxes” are growing queries, and the pages that rank for them today are mostly CPA firms and crypto tax tools selling a service. Several present contested points as settled law. If you publish on this topic, the safest editorial line is the accurate one.
Claims to avoid in reviews, comparison tables and paid placements:
- “Prediction market winnings are tax-free” or “no 1099 means no tax.” Both are false; all income is taxable.
- “Kalshi issues a 1099-B for your trades.” Its own help centre says otherwise.
- “Guaranteed 60/40 treatment.” There is no IRS ruling, and the swap exclusion cuts against it.
- “Not subject to the 90% gambling cap” stated as fact. It is true only while event contracts are not treated as wagers, and the Tax Law Center argues they are.
- Tax savings as a sign-up hook. Turning an unsettled tax position into an acquisition message invites regulator attention in states already suing these platforms, and it is advice your site is not licensed to give.
Content that will hold up better: explain the forms each venue actually issues, show the open question with dated sources, and add a not-tax-advice line. Update the page when the IRS, Congress or the Supreme Court moves, because any one of them can change the answer in a single day.
Records the venues give, and what they leave out
For anyone advising customers or building tools around this, the record-keeping gap is where the practical problems sit.
- Kalshi: monthly P&L statement on FIFO, fees included, plus any 1099-INT or 1099-MISC. No cost-basis form for contracts.
- Robinhood and other brokers routing to Kalshi: Robinhood says it issues no 1099s for event contracts and provides an Event Contracts Annual Statement it labels “not a substitute tax reporting form”, per NATP (May 2026). The profits are taxable all the same, under the same unsettled rules as trading on Kalshi directly.
- Polymarket international: on-chain history only. Every trade and every stablecoin conversion has to be rebuilt from the wallet.
- Sportsbooks: W-2G above threshold and an account history. The IRS expects gamblers to keep a diary of wins and losses to support any deduction.
If IRS guidance arrives with retroactive effect, positions taken on 2025 and 2026 returns may need amending, which is one more reason the paper trail matters.
Next step
The dates to watch are the House floor vote on H.R. 10357 after the midterms, any IRS notice on event contracts, and the Supreme Court’s decision on New Jersey’s petition in the Kalshi case (No. 26-299). Kalshi’s response to that petition was due on 9 November 2026, but Kalshi asked the Court for an extension on 29 October 2026, so that date may move. Our monthly iGaming regulation roundup tracks all three, and is sports betting profitable shows why a small shift in handle hurts a sportsbook more than it looks.
This article is general information, not tax or legal advice. Tax rules and reporting practices were checked as of the date above; confirm your own position with a qualified tax professional.
