Do you pay taxes on prediction market winnings?
Profits are generally taxable, but how isn't fully settled. What to expect and what records to keep.
Short answer: Yes. In the US, profits from prediction markets are generally taxable income. The IRS hasn't published rules written specifically for event contracts, so tax professionals treat them in different ways. Keep a record of every trade, deposit and withdrawal, and download any tax forms your platform provides. This is general information, not tax advice.
What platforms may send you
US platforms may issue tax forms (for example a Form 1099) when you meet reporting thresholds, especially for bonuses or rewards. Look for a "Tax documents" section in the app's account settings in January and February.
Why it's unclear
Event contracts sit between categories:
- Treated like gambling, winnings are income and losses may only be deductible if you itemize, up to your winnings.
- Treated like investments (they're regulated as derivatives), gains and losses may be capital gains and losses.
- Sign-up bonuses are commonly reported as other income.
Which treatment applies can depend on the platform, the contract and your situation. That's why a professional's advice is worth it once your trading is more than small.
Records to keep
- Every trade: date, market, number of contracts, price, fees.
- Every settlement: what paid out and what expired worthless.
- Deposits, withdrawals and bonuses.
- For crypto-funded accounts (for example USDC): the value in dollars on each date.
Most apps let you export your history as a spreadsheet. Do it at least once a year.
Outside the US
Rules differ by country. In some, winnings from licensed gambling aren't taxed at all; in others, derivatives gains are. Check with a local adviser.
Frequently asked questions
Does Kalshi report to the IRS?
Kalshi may issue tax forms and report to the IRS when you meet reporting thresholds. Check the tax documents section of your account.
Are Polymarket winnings taxable?
Yes, for US taxpayers profits are generally taxable, whether you use the US app or not. Crypto-funded accounts add extra record-keeping.
Can I deduct prediction market losses?
Possibly, depending on how your trades are treated (gambling or capital). Ask a tax professional.
