Kalshi vs Polymarket: how the taxes differ
Kalshi and Polymarket are both prediction markets, but they're built differently, and that difference shows up at tax time. The short version: Kalshi is a CFTC-regulated US exchange settling in dollars, while Polymarket is crypto-based, which adds a layer.
This guide compares the two. It is educational, not tax advice, and both sides have unsettled elements.
- Kalshi settles in US dollars on a federally regulated exchange.
- Kalshi gains are dollar-denominated event-contract income, with the familiar three-treatment question (ordinary, Section 1256, or gambling) and no clean 1099-B.
- Because Polymarket runs on crypto, there can be additional considerations: moving in and out of a stablecoin and the underlying crypto can itself create reportable events, on top of the prediction-market gains.
- If you trade both, don't assume one set of records or one treatment covers both.
- ContractTax focuses on the Kalshi side, turning your dollar-settled history into a clean net and showing each treatment.
The core structural difference
Kalshi settles in US dollars on a federally regulated exchange. Polymarket operates on crypto rails, with positions funded and settled in a stablecoin. That structural gap is what drives the different tax considerations.
It also affects availability: Polymarket's US access has historically been restricted and is evolving, while Kalshi is broadly available to US traders.
The Kalshi side
Kalshi gains are dollar-denominated event-contract income, with the familiar three-treatment question (ordinary, Section 1256, or gambling) and no clean 1099-B. Your records come from a cents-based CSV.
The regulated-exchange status is what underpins the Section 1256 argument, contested as it is.
The Polymarket side
Because Polymarket runs on crypto, there can be additional considerations: moving in and out of a stablecoin and the underlying crypto can itself create reportable events, on top of the prediction-market gains. That makes the recordkeeping more involved than a dollar-settled account.
The classification of the trading gains is unsettled in the same way Kalshi's is, with the crypto layer added on top.
What it means for you
If you trade both, don't assume one set of records or one treatment covers both. The dollar-settled Kalshi side and the crypto-settled Polymarket side may need to be handled separately.
For either, clean per-trade records are the foundation, and a professional is worth it given the unsettled questions.
Where ContractTax fits
ContractTax focuses on the Kalshi side, turning your dollar-settled history into a clean net and showing each treatment. It removes the cents-CSV and reconciliation work for the Kalshi part of your taxes.
It is educational software, not tax advice.