A binary contract that pays a fixed amount (typically $1) if a specific event happens and nothing if it does not. Kalshi markets are event contracts, priced from 1 to 99 cents to reflect the market's implied probability of the outcome. What is Kalshi? →
A federally regulated exchange authorized by the CFTC to list contracts for trading. Kalshi operates as a DCM, which is the basis for the argument that its event contracts could qualify for Section 1256 tax treatment. Is Kalshi legit? →
A category of contracts (regulated futures, certain options, and others on qualified exchanges) that receive special tax treatment under the Internal Revenue Code, including the 60/40 split. Whether prediction-market event contracts qualify is unsettled. Section 1256 explained →
The tax treatment for Section 1256 contracts: 60 percent of the net gain is taxed at long-term capital-gains rates and 40 percent at short-term rates, regardless of how long the position was held. It usually produces a lower effective rate for active traders. Section 1256 explained →
A rule that disallows a loss deduction when you sell a security at a loss and buy a substantially identical one within 30 days. Section 1256 contracts are generally exempt because they are marked to market. Wash sales and Kalshi →
Treating open positions as if sold at fair value on the last day of the tax year. Section 1256 contracts are marked to market, which is why they are generally not subject to wash sale rules. Form 6781 →
The IRS form used to report gains and losses from Section 1256 contracts and straddles. It applies the 60/40 split and flows the result to Schedule D. Form 6781 and Kalshi →
An IRS form payers issue to report certain gambling winnings. Receiving one does not determine whether income is taxable; all gambling winnings are taxable whether or not a W-2G is issued. Gambling winnings tax →
What you paid to enter a position, including fees. Your taxable gain is your proceeds minus your cost basis. Kalshi does not provide a broker-style basis report, so traders reconstruct it from their fills. Calculating cost basis →
A matching method that treats the earliest contracts you bought as the first ones you sold. It is the common default for reconstructing cost basis when you trade the same market repeatedly. FIFO cost basis →
The most conservative way to report trading gains: the full net is taxed at your regular marginal rate, with no preferential split. For event contracts it typically lands on Schedule 1. How Kalshi taxes work →
A designation for traders who qualify as conducting a trading business, which can allow a mark-to-market election under Section 475 and ordinary loss treatment. It has strict qualification requirements. How to report Kalshi taxes →
The probability of an outcome implied by a contract's price. On Kalshi, a price of 65 cents implies roughly a 65 percent chance the event resolves yes, before fees and edge. Prices as probability →
The built-in margin a sportsbook or market charges, reflected in prices that sum to more than 100 percent across outcomes. Stripping the vig reveals the fair, no-vig probability. No-vig calculator →
A formula for the bet size that maximizes long-run growth given your edge and the odds. Most traders use a fraction of full Kelly to reduce volatility and risk of ruin. Position size calculator →
The probability that your bankroll hits zero before reaching your horizon, given your edge, bet size, and variance. Conservative position sizing keeps it near zero. Risk of ruin calculator →
A maker posts a resting order that adds liquidity; a taker crosses the spread to fill immediately, removing liquidity. The two are often charged different fees. Maker vs taker →
Taxable income with no matching cash gain, which can arise under the post-2025 rule limiting gambling-loss deductions to 90 percent of winnings. A roughly breakeven bettor can still owe tax. Gambling winnings tax →
The gap between the highest price buyers will pay and the lowest price sellers will accept. A wide spread makes it costlier to enter and exit a position. Thin books and slippage →
The difference between the price you expected and the price you actually got, usually because your order moved through a thin order book. Thin books and slippage →
How easily you can buy or sell a contract without moving its price. High liquidity means tight spreads and deep order books; low liquidity means the opposite. The order book explained →
The resolution of a contract when its event is decided. A correct Kalshi contract settles at $1 and an incorrect one at $0, in cash. How markets settle →
A drop in your bankroll from a previous peak, measured as the decline before you recover. The maximum drawdown is the worst such drop over a period. Risk of ruin calculator →
The average outcome of a trade if you made it many times, weighing each result by its probability. A positive-EV trade makes money on average; a negative-EV trade loses. EV calculator →
The live list of buy and sell orders for a market at each price. It shows how much size is available where, and the gap between the best buy and sell is the spread. The order book explained →
An order to buy or sell immediately at the best available price. It fills fast but you accept whatever price the book offers, including slippage. Limit vs market orders →
Your advantage over the market's price, the gap between your estimate of an outcome's true probability and the price you can trade it at, net of fees. Expected value and edge →
The natural swing in results around your expected outcome. Even a profitable strategy produces losing streaks because of variance. Risk of ruin calculator →
The total pool of money you've set aside for trading. Position sizing is expressed as a percent of bankroll, which is what keeps any single loss survivable. Position size calculator →
The execution of your order. A full fill means your entire order traded; a partial fill means only some did, with the rest still resting or canceled. The order book explained →
The contracts you currently hold in a market, and the direction (yes or no). Your open positions carry risk until you close them or they settle. Position size calculator →
A position taken to offset risk in another. On Kalshi, buying the opposing side or a correlated market can lock in or limit your exposure. Hedging with Kalshi →
Profit from selling a capital asset. Whether Kalshi event contracts produce capital gains is unsettled; Section 1256 treatment gives capital-gains-style rates via the 60/40 split. Are Kalshi gains capital gains? →
The rate applied to your next dollar of income, set by your tax bracket. Ordinary and gambling treatment tax Kalshi gains at this rate. What tax rate you pay →
How long you held a position before closing it, which normally determines short- versus long-term capital-gains rates. Section 1256 overrides this with a fixed 60/40 split. The 60/40 split explained →
A Kalshi event whose outcomes are structured together as a single multivariate market group rather than independent yes/no markets. Kalshi's 15-minute crypto markets and many scalar-range markets are multivariate events. 15-minute crypto markets →
A Kalshi crypto contract that resolves every fifteen minutes based on whether a coin closes the window above or below its opening price. It pays yes for up and no for down. How 15-minute markets work →
The amount by which the prices of all outcomes in a market sum above 100 percent. In a one-winner event, if buying yes on every outcome costs more than 100 cents, the excess is the overround, the market's built-in margin. Value scanner →
The fee Kalshi charges when you cross the spread to trade immediately against a resting order. It scales with the number of contracts and is largest for prices near 50 cents. Fee calculator →
A resting limit order that adds liquidity to the book and waits to be filled, rather than crossing the spread to trade immediately. Maker fills typically avoid the taker fee on Kalshi. Fee calculator →
The measured probability that a series of outcomes continues in the same direction after a streak, for example how often a coin closes up again after several up windows. Crypto history →
An event where exactly one outcome can win, such as a single election or a championship. The outcomes' fair probabilities sum to 100 percent, unlike multi-select events where several outcomes can occur. Odds boards →
Selling a position before settlement to lock in its current value rather than holding to resolution. On Kalshi any position can be sold at the market price, which functions as cashing out. Parlay builder →
An order to buy or sell at a specific price or better, which rests on the book until it is filled or cancelled rather than executing immediately at the current price. Kalshi limit orders →
The gap between the highest price buyers are bidding and the lowest price sellers are asking. A tight spread means a liquid market; a wide spread means it costs more to trade in and out. Value scanner →
The probability an event will happen, as inferred from its market price. On Kalshi the price in cents is the implied probability in percent: a 63-cent contract implies about a 63 percent chance. How to read Kalshi odds →
The determination of a market's outcome at settlement, based on the market's stated rules. When a market resolves yes, yes contracts pay $1 and no contracts pay nothing, and vice versa. Settlement calendar →
The difference between the price you expected and the price you actually got, usually because your order was large enough to move through several price levels on the book. Limit orders →
The degree to which stated probabilities match real outcomes: a well-calibrated forecaster's 70% predictions happen about 70% of the time. It is the core skill of prediction-market trading. Prediction journal →
A measure of forecast accuracy: the average squared difference between your predicted probability and the actual outcome (1 or 0). Lower is better, 0 is perfect, and 0.25 is what you'd get always guessing 50%. Prediction journal →
A judgment that a result is unlikely to have happened by chance. In trading, a win rate is significant when it clears a threshold (often a z-score near 2) that a no-edge trader would rarely reach by luck. Edge significance calculator →
The natural swing in results around their true expectation. Even a real edge produces losing streaks, and even a losing strategy produces winning runs, purely from variance. Risk of ruin calculator →
The tendency to state probabilities that are too extreme, saying 90% when the honest estimate is 75%. It is the most common and most costly forecasting bias. Get better calibrated →
The number of trades or predictions in your record. Larger samples make a real edge (or leak) statistically detectable; small samples are dominated by variance and prove almost nothing. Trades-to-prove-edge calculator →
How many standard deviations a result sits from what chance alone would produce. In trading, a win rate with a z-score around 2 or higher is unlikely to be luck. Edge significance calculator →
A one-winner event whose outcomes collectively cost less than 100 cents to buy. Since exactly one outcome must pay 100 cents, an underround field is priced below fair value, the prediction-market version of an arbitrage. The Value Scanner →
Trader slang for a position with a guaranteed profit regardless of the outcome, on prediction markets, typically buying every outcome of a one-winner event whose field costs under 100 cents (an underround). The Value Scanner →
Put the terms to work
ContractTax turns your Kalshi history into a P&L breakdown, a Sharp Score, and ready-to-file tax numbers, no jargon required.