How prediction market winnings are taxed in the US (2026)

You closed a prediction market position at a profit, the platform paid out, and now a tax form is either missing or says something you did not expect. The short answer: the IRS has not published guidance on how event contract winnings are taxed, the profits are generally treated as taxable whatever the platform sends you, and tax professionals disagree about which set of rules applies. It is not tax advice, and nothing here replaces a conversation with a licensed preparer who has seen your records.

Has the IRS said anything about prediction market taxes?

Not directly. Patrick Camuso, a CPA who serves on the AICPA Digital Asset Tax Task Force, writes on his firm's site that "at present, there is no IRS guidance directly addressing the treatment of prediction market contracts under section 1256." He adds that Congress has not amended the statute to name event contracts.

The same gap was reported in the summer. A Moneywise article published on July 27, 2026 relays CNBC's report of July 18 that the agency had published nothing on the subject, with no timeline and no sign guidance would arrive before the 2026 filing season. An April 2026 ForkLog piece quotes Camuso describing a "guidance vacuum" that "puts taxpayers at a disadvantage."

Ryan Schutz, a former IRS special agent who runs First There Tax, told CNBC that the situation is "extremely confusing for the users of prediction markets," according to the Moneywise summary. He suspects the IRS is holding back because a tax ruling could conflict with the CFTC's legal position. That is his read, not an IRS statement.

What are the competing ways to tax event contracts?

Practitioners describe three main arguments under existing law, and the Moneywise article lists them as gambling income, capital gains on each contract, or section 1256 treatment for regulated futures. ForkLog adds that some people simply report net profit as ordinary income. Each produces a different bill, and nobody can say with authority which one the IRS would accept.

Gambling income. Under this view the winnings are treated like other gambling winnings, which the IRS requires you to report as income. ForkLog notes that this is the most burdensome option, because it can require tracking each bet rather than reporting a net gain.

Capital gains. Under this view each contract is a capital asset, gains and losses are netted, and the result is reported like other investment trades.

Ordinary income. Net profit is reported as other income.

Why does section 1256 keep coming up?

Section 1256 is attractive because of what it does. Under the statute, 40% of a gain or loss is treated as short-term and 60% as long-term capital gain or loss regardless of how long you held the contract, and contracts still open at year-end are treated as sold at fair market value on the last business day of the year. ForkLog describes the 60/40 split as the reason some traders reach for it.

The catch is the definition. Section 1256(b) covers regulated futures contracts, foreign currency contracts, nonequity options, dealer equity options and dealer securities futures contracts, and it excludes swaps and similar agreements. Event contracts are not named. Camuso's page says that being listed on a CFTC-regulated exchange, as Kalshi is as a designated contract market, may satisfy the "qualified board or exchange" element but does not by itself establish eligibility. His page takes no position on whether any particular contract qualifies.

So the 1256 argument is a legitimate one to raise with a professional, and it is also an unresolved one. Anyone who tells you flatly that Kalshi contracts qualify, or flatly that they do not, is going beyond what has been published. For why CFTC status matters, see what CFTC regulation does and does not cover.

What tax forms do Kalshi and Polymarket send?

Kalshi's help center article, dated June 22, 2026, says users who meet IRS reporting thresholds receive a 1099-INT for interest, a 1099-MISC for credits or rewards, a 1099-B for transaction proceeds from broker transactions such as crypto transfers, and a 1099-DA from ZeroHash for digital asset transactions. If no 1099 shows up, Kalshi says you probably did not meet the thresholds. Its profit and loss statement uses first-in, first-out accounting and is updated monthly. Kalshi states that this information is not tax advice and that members are responsible for the accuracy of their returns.

Third-party writers describe the forms differently. Moneywise, citing Camuso's firm, says Kalshi issues a partial 1099-B that reports gross proceeds without cost basis, and it calls the broader claim that Kalshi and Polymarket issue a Form 1099 contested. Treat the help center as the authority on what Kalshi sends, and check the Tax Info page in your own account.

For Polymarket, the Moneywise article says tax practitioners report that the offshore platform issues no US tax form, and that its newer US entity, launched in beta late in 2025, had not confirmed whether it would issue one. ForkLog says the same of offshore platforms generally: users must report income themselves. Robinhood, per Moneywise, issues no 1099s for these trades and calls its annual statement "not a substitute tax-reporting form."

Do you owe tax if you never get a form?

The sources agree on this point more than any other. Moneywise states that taxes on winnings are owed regardless of forms, and Kalshi's own wording puts accuracy on the member. A missing 1099 usually means the platform did not report, not that the income does not exist.

What do tax professionals actually advise?

The advice is consistent even where the legal answer is not. Keep records of entry prices, settlement amounts, dates and losses for every contract, as the Moneywise article advises. Export your platform's trade history, since a profit and loss statement is a summary and not a return. Camuso told ForkLog he assesses clients case by case and usually takes a conservative approach.

Choose a treatment with a preparer, apply it consistently, and be ready to explain it. The Tax Foundation's Alan Cole said, per Moneywise, that he cannot be sure whether his own Kalshi winnings count as futures or gambling income, and that he wants clearer guidance.

What this does not cover

This post covers US federal income tax as described in public sources through early September 2026. It leaves out state tax and any guidance the IRS issues later. For how markets settle in the first place, see how market odds and resolution work. This is general information, not tax advice.

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