How prediction-market income is taxed
Prediction markets exploded in popularity faster than the tax rules caught up, which leaves traders with a genuinely confusing picture. This guide gives you the lay of the land across the major platforms.
It is educational, not advice. The core classification questions remain unsettled, so treat this as a map, not a verdict.
The income is taxable everywhere
Whatever platform you trade on and whatever forms you do or do not receive, your gains are taxable and reportable. The absence of a 1099 never removes the obligation; it just shifts the work of documenting your income onto you.
Three possible treatments
Across platforms, the same three frameworks come up: ordinary income (conservative), Section 1256's 60/40 split (favorable but contested), and gambling (generally least favorable, with a tightened loss-deduction rule after 2025). Which applies is the unsettled question at the heart of all of this.
Platforms differ in important ways
Kalshi is a CFTC-regulated Designated Contract Market, which is the strongest basis for even considering Section 1256, though that treatment is still contested. Polymarket settles in crypto and is analyzed more like property. Robinhood's event contracts route through Kalshi's exchange but come with their own reporting quirks.
Because of these differences, the right approach can vary by where you traded. Our platform-specific guides go deeper on each.
No uniform form, so self-report
Unlike stock trading, where a mature 1099-B regime exists, prediction-market platforms do not provide uniform, complete tax forms for contract activity. Self-reporting from your own records is the norm, not the exception.
Where ContractTax fits
ContractTax turns trade history from these platforms into clean P&L and tax figures under each treatment, so the confusing part becomes a clear, comparable set of numbers you can take to a professional.