For U.S. federal taxes, do not assume prediction-market winnings are tax-free just because you did not receive a tax form. The IRS says taxable income is reportable even without Form 1099-K. But the IRS materials available as of October 7, 2026 do not specifically determine how gains or losses from prediction-market event contracts are classified or which forms apply. Keep detailed records and ask a qualified tax professional how the rules apply to your contracts and tax year.
What is clear about federal taxes—and what is not
The IRS’s general rule is that taxable income must be reported even if no information return arrives. Its Form 1099-K FAQs state: “All income, no matter the amount, is taxable unless the tax law says it isn’t – even if you don’t get a Form 1099-K.” The IRS also says to use Form 1099-K alongside other tax records to determine and report taxable income.
That principle does not settle the tax treatment of prediction-market event contracts. IRS Topic No. 419 says casual gambling winnings are fully taxable and reportable, including winnings not shown on Form W-2G. However, that general gambling guidance is not a specific IRS determination that event contracts on platforms such as Kalshi or Polymarket are gambling. The IRS materials reviewed do not establish a definitive federal classification or prescribe the forms and schedules for these contracts.
Accordingly, avoid treating any one classification as settled for every prediction-market contract. The answer may depend on the contracts and transactions involved, the relevant tax year, and the authority a tax professional considers applicable. State and non-U.S. rules may also differ from U.S. federal treatment.
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Why a missing tax form does not answer the question
A tax form is an information-reporting document, not a general certificate that an activity is taxable or tax-free. The IRS’s 2026-19 Internal Revenue Bulletin describes a $2,000 information-return threshold for specified payments made after December 31, 2025; the threshold is indexed for inflation after calendar year 2026. That reporting threshold does not by itself exempt income from tax, and the bulletin does not resolve how event-contract gains are classified.
The IRS’s January 2026 Form W-2G instructions discuss categories that include sports wagering and other wagering transactions. Their existence does not prove that prediction-market event contracts fit those categories. Likewise, the IRS’s 2026 Publication 505 describes a 24% withholding rate for specified categories of gambling winnings, including certain other wagers over $5,000 when proceeds are at least 300 times the amount bet. That rate should not be assumed to apply automatically to prediction-market payouts.
As context only, the IRS and Treasury report that payors filed 17.3 million Forms W-2G for tax year 2024 gambling winnings in the range between the old and new reporting thresholds; almost 80% related to slot-machine play. This is a general gambling statistic, not a count of prediction-market users or a rule for their tax returns.
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What a platform tax form or P&L statement may cover
Kalshi’s listed documents
In a Help Center article dated June 22, 2026, Kalshi says users who meet IRS reporting thresholds may receive different forms for different types of activity:
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- Form 1099-MISC: credits or rewards.
- Form 1099-B: broker transaction proceeds from crypto transfers.
- Form 1099-DA: digital-asset reporting from Zero Hash.
These are Kalshi’s descriptions of its own reporting and may change. A form for interest, rewards, crypto-transfer proceeds, or digital assets does not by itself determine the tax character of event-contract trading.
Use the P&L as a record, not as a tax conclusion
Kalshi says its profit-and-loss statement summarizes trading activity, including profits, losses, fees, and rebates. The platform says the data is updated monthly, so a mid-month review may not include the latest activity. Keep dated copies and compare the statement with your transaction history rather than assuming the displayed total is the amount to report.
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Kalshi explicitly cautions: “This information and the information included in the Profit and Loss statement are not tax advice, and Kalshi cannot give members advice on their taxes.” Its statement can help organize activity, but it does not resolve which tax rules apply to a particular account or contract.
Digital-asset transactions are a separate issue to check
The IRS says Form 1099-DA reports proceeds from broker transactions and that broker reporting applies to digital-asset sales after 2025. If you separately sold or transferred digital assets in connection with a prediction-market account, ask whether those transactions create their own reporting obligations. Form 1099-DA guidance does not, by itself, classify an event contract.
Records to keep for prediction-market taxes
Save records by tax year, preferably in a format you can export and reconcile. The IRS’s gambling guidance calls for an accurate diary or similar record and supporting documents when claiming gambling losses. The following checklist adapts that general recordkeeping principle to platform activity; it is not an IRS-prescribed event-contract form.
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- Transaction or order history: retain the event or contract name, position, quantity, timestamps, entry and exit prices, settlement outcome, and amounts paid or received. Keep records of partial exits as well as positions held through settlement.
- Platform statements: download annual P&L statements and any notes explaining their methodology. Keep dated copies when figures may be revised or updated during the year.
- Fees and non-trading account activity: record fees, rebates, promotional credits, rewards, deposits, withdrawals, and account balances separately where possible.
- Tax forms and explanations: retain every Form W-2G, 1099-MISC, 1099-INT, 1099-B, 1099-DA, or 1099-K you receive, along with any platform explanation of what the form covers.
- Digital-asset records: keep relevant wallet and exchange statements for crypto transfers or digital-asset sales connected to the account.
- A reconciliation: note how your transaction records compare with platform statements and tax forms, and document adjustments, missing records, or discrepancies.
- Supporting proof: preserve receipts, statements, confirmations, and other evidence that helps substantiate amounts shown in your records.
If a tax professional concludes that gambling-loss rules apply to your facts, IRS Topic No. 419 says losses are deductible only if you itemize on Schedule A, only up to reported gambling winnings, and with records supporting the claim. That conditional rule should not be treated as a determination that prediction-market losses qualify as gambling losses.
Questions to take to a tax professional
Bring your transaction exports, platform statements, tax forms, and any crypto records. Ask questions tied to your actual activity and the tax year rather than relying on a generic answer about all prediction markets.
- For the contracts I traded in this tax year, what tax characterization is supportable, and what authority supports it?
- Which forms and schedules should I use for realized gains or losses, fees, rewards, interest, or contract sales under that characterization?
- How should I reconcile partial exits, contracts held to settlement, reversals, open positions at year-end, and activity across multiple platforms?
- What loss rules apply to my facts, and can any losses offset gains from other activity?
- Do my deposits, withdrawals, or transfers involving crypto create separate digital-asset reporting obligations?
- Does my state treat these contracts differently from federal rules, and could residence, travel, or non-U.S. accounts affect the result?
- What records should I retain to substantiate both the amounts and the method used to report them?
Seek advice from a qualified tax professional who can consider your transactions, tax year, and jurisdiction. This is especially important if your gains or losses are material, you used multiple platforms, or digital-asset transfers or state and cross-border issues are involved.
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