Prediction Market Taxes (2026): What You Owe and How to Report

Prediction market winnings are taxable income in the US. Here's what to know for Polymarket and Kalshi.

Are winnings taxable?

Yes. Both Polymarket and Kalshi gains are taxable. Even without a 1099, you're required to self-report. The IRS treats prediction market gains as ordinary income or capital gains.

Kalshi and the IRS

Kalshi issues 1099 forms for US customers with $600+ in annual winnings. Kalshi contracts may qualify as Section 1256 contracts with favorable 60/40 long/short-term capital gains treatment.

Polymarket taxes

Polymarket does not issue 1099 forms but gains are still taxable. Export your trade history and use a crypto tax tool (Koinly, CoinTracker, TaxBit) to calculate net gains and losses on resolved markets.

Deducting losses

Prediction market losses generally offset gains. Net losses up to $3,000 can be deducted against ordinary income annually, with excess carried forward.

Frequently asked questions

Does Kalshi send a 1099? Yes, for US customers with $600+ in winnings.

Do I pay taxes on Polymarket? Yes. Self-reporting required even without a 1099.

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