Is Polymarket gambling?

A designated contract market is an exchange the CFTC oversees. On Polymarket US, a contract pays $1 if its event happens and $0 if not, and traders buy and sell against each other on a central limit order book: the exchange does not take the other side of a trade. The CFTC amended the designation on November 24, 2025, removing the original order’s bar on futures commission merchants.

Polymarket US’s own case: exclusive CFTC jurisdiction

When Polymarket US sued Michigan’s attorney general and Gaming Control Board on March 4, 2026, its complaint described it as operating “a lawful, nationwide designated contract market subject to the exclusive jurisdiction of the Commodity Futures Trading Commission.” Its October 16, 2026 complaint against Ohio asks the court to declare Ohio’s gambling and sports-gaming laws “unconstitutional as applied to Polymarket US and preempted under the CEA.” The argument is that federal commodities law leaves states no room to regulate contracts on a federally designated exchange.

Where that argument has held, and where it has not

In Minnesota it has, for now. On July 27, 2026 a federal judge barred the state from enforcing its new prediction-market ban against CFTC-registered exchanges, in suits by Polymarket US, Kalshi and the CFTC, while noting the case “does not concern any effort by Minnesota to apply its existing sports-betting laws.” In Michigan it has not: Judge Paul Maloney denied Polymarket US an injunction on June 17, 2026, and Polymarket US appealed to the Sixth Circuit that month.

To state regulators, Polymarket US is a gambling business operating without a license. Nevada’s Gaming Control Board sued on January 16, 2026, and on January 29 Judge Jason Woodbury enjoined all three Polymarket companies from “operating or offering a market in Nevada that involves ‘events-based contracts’ without a valid license,” concluding at that early stage that federal commodities law likely does not give the CFTC exclusive jurisdiction over them. A preliminary injunction against Polymarket US followed on May 29, 2026, and the attorney general says it covers sports, election and entertainment contracts. That order is in force.

Most of these are fights over which court hears the case. Polymarket moved each state-court suit to federal court; Nevada’s was sent back, and the others wait on a ruling. Three more actions are reported but not seen by us: a Tennessee cease-and-desist, a Polymarket US suit against Massachusetts officials, and a Connecticut order that the governor announced on September 10, 2026, naming Polymarket among nine prediction markets.

The split turns on one word. Federal law gives the CFTC exclusive jurisdiction over swaps traded on a designated exchange. The courts are split on whether a sports contract is a swap.

• Third Circuit, April 6, 2026. In Kalshi’s New Jersey case, held Kalshi likely to succeed in showing its sports contracts are swaps and that federal law preempts New Jersey’s.
• Ninth Circuit, August 28, 2026. In Kalshi’s Nevada case, held that federal law likely does not preempt Nevada’s gaming law, writing that the contracts’ substance “is sports gambling, regardless of whether Kalshi calls them swaps.”
• Sixth Circuit, September 25, 2026. In Kalshi’s Ohio and Tennessee cases, held Kalshi had not shown its sports contracts are swaps, and that even if they were, federal law does not preempt those states’ gambling laws. Kentucky’s magistrate judge relied on it in recommending that the state’s Polymarket case go back to state court.

Polymarket’s own appeals are in the Ninth Circuit and the Sixth Circuit. The Nevada appeal, No. 26-1343, was stayed on July 14, 2026 pending three other Nevada appeals, which the Ninth Circuit decided on August 28; we have not seen a later order. The Michigan appeal is No. 26-1552, filed in June 2026.

Polymarket is not a party to any of the three petitions asking the Supreme Court to resolve the split; the last response is due Nov 16, 2026. Separately, on October 9, 2026 the CFTC proposed a rule that would define event contracts, sports included, as swaps. It is a proposal, not a final rule. The rulings in full: is Kalshi gambling?

Whether Nevada can require a gaming license is a question about who regulates Polymarket US. How a Polymarket US year is taxed is a question under the Internal Revenue Code, and no court or IRS guidance has answered it for event contracts. Polymarket US does not answer it either: as of October 22, 2026, no page of its documentation mentions a 1099, a W-9 or the IRS, and its participant agreement says it “provides no legal, tax, investment, financial, or other advice.”

Where the swap question meets Section 1256

For people who want to file under Section 1256 because of the 60/40 split, the provision they point to is §1256(g)(7)(B), which counts a board of trade designated a contract market by the CFTC as a qualified board or exchange; QCX LLC was designated on July 9, 2025. What is cited against it: §1256(b)(1) names no event contract, and §1256(b)(2)(B) excludes swaps and similar agreements. “Swap” is the same word the appeals courts are split over. The appeals courts and the CFTC are addressing the swap question for regulation; none of them addresses it for tax. The mechanics are in the Section 1256 60/40 rule.

What gambling treatment would mean for a Polymarket US year

For people who file as gambling, winnings go on Schedule 1 and losses come off only on Schedule A, only when itemizing, and only up to winnings (§165(d)). From tax year 2026, 90% of those losses count (Public Law 119-21, §70114), so a year that wins and loses the same amount is taxed on 10% of it. What that does to a losing year: are prediction markets taxed as gambling? and the OBBBA 90% limit.

Tax forms

None documented: no page of the docs mentions a 1099, a W-9 or the IRS

Source

Tax advice

Agreement, section VIII: “PMUS provides no legal, tax, investment, financial, or other advice”

Source