Do you pay taxes on prediction-market winnings?
The short answer
Yes. Profits from trading event contracts on Kalshi, Polymarket US, or Robinhood are taxable income under federal law, regardless of whether any venue sends you a tax form. The IRS taxes worldwide income from whatever source derived, and "nobody sent me a form" has never been a defense.
What is genuinely unsettled is not whether the profits are taxed but how they are characterized — as capital gains, as Section 1256 contract gains with a blended rate, or (the venue's least favorite theory) as gambling winnings. The characterization changes the rate you pay, the forms you file, and whether you can deduct losses.
Why there is no definitive answer yet
The IRS has issued no guidance that specifically addresses CFTC-regulated event contracts sold to retail traders. Existing guidance covers futures, options, securities, and gambling — event contracts resemble all four and fit none cleanly. Tax professionals currently reason by analogy, and reasonable professionals disagree.
This ambiguity is unlikely to resolve quickly. Until it does, the practical approach is to pick the most defensible characterization, apply it consistently, keep complete records, and revisit the position if the IRS or Congress acts.
What you should do this year
Track every trade. Neither Kalshi nor Polymarket US currently issues a 1099-B summarizing your trading gains, so the burden of reconstructing your profit and loss falls entirely on you. Export your trade history regularly — venues are not obligated to keep it available forever.
Set aside a percentage of net winnings for taxes as you go, and talk to a tax professional if your volume is material. The guides in this cluster walk through the forms, the characterization debate, and the record-keeping that makes either characterization easy to defend.
What this site is not
Nothing here is tax, legal, or investment advice, and nothing here is personalized to your situation. These guides describe the public state of the rules so you can have a better-informed conversation with a professional.
FAQ
Are prediction-market winnings taxable if the venue sends no tax form?
Yes. Income is taxable whether or not it is reported to the IRS on a form. The absence of a 1099-B for event-contract trades means you must reconstruct gains from your own records, not that the gains are exempt.
Are prediction-market losses deductible?
It depends on the characterization, which is unsettled. Capital-loss treatment, Section 1256 treatment, and gambling-loss treatment each have different rules and limitations. This is the core open question — see the Section 1256 vs Schedule D guide.
Do small winnings need to be reported?
Yes. There is no de minimis exception for unreported trading income. Form thresholds only govern what the venue must report to the IRS, not what you owe.