Won on prediction markets? How you file decides how much you keep.
Realize prices your year under standard capital, Section 1256 and gambling treatment, and builds the forms for each.
A $328,092 net gain, and the estimated federal tax on it under each treatment: Standard capital $78,742, Section 1256 $61,025, Gambling $89,205.
Single filer, $150,000 taxable income, short-term, at that bracket’s marginal rates. Gambling assumes $764,046 won and $435,954 lost, itemized. Federal income tax only, before the net investment income tax. Illustrative. No IRS guidance or court ruling addresses whether event contracts are Section 1256 contracts. Separately, federal appeals courts disagree on whether states can regulate them as gambling.
How much tax do you pay on Kalshi winnings?
Prediction market winnings are taxable, and you pay taxes on them whether or not the venue sends a form: a reporting threshold decides only whether a form is issued. With no IRS guidance, we see traders report them three common ways: as short-term capital gains at ordinary rates, under Section 1256 at a blended 60/40 rate, or as gambling income with losses deductible only if you itemize.
Section 1256 taxes 60% of a gain at the long-term rate, so its saving over standard capital is 60% of the gap between the two tax rates. At the top bracket, 37% against 20%, that is about 10.2% of the gain. If you file under Section 1256, the IRS could disagree later, including for years you have already filed.
Realize is US federal tax software for traders on Kalshi and Polymarket US. It rebuilds a year from every trade, prices it under standard capital, Section 1256 and gambling treatment side by side, and builds the forms for each, from $59 a year. Estimates are free.
How is your win taxed under each treatment?
Enter roughly how much you’re up, all-time, to understand how different filing methods impact how much money you keep.
Where does each way to file come from?
Each treatment has a reason to be on the table. Realize builds the forms for all three, and the choice stays yours or your preparer’s.
Section 1256 covers regulated futures and nonequity options listed on a qualified board or exchange (§1256(b), (g)(7)(B)). Kalshi and Polymarket US are CFTC-designated contract markets. Whether a yes/no event contract is a contract of that kind is untested.
Section 1256 excludes swaps (§1256(b)(2)(B)), and event contracts may be swaps. If that exclusion applies, the contract is still property you bought and sold, and the default rule for property is capital gains.
Several states argue these contracts are bets, and that the CFTC should not have allowed sports contracts at all. If that view applies to you, the gambling rules do.
No IRS guidance or court ruling addresses whether event contracts are Section 1256 contracts. Separately, federal appeals courts disagree on whether states can regulate them as gambling. The two decisions: KalshiEX, LLC v. Flaherty (3d Cir., April 6, 2026) and KalshiEX, LLC v. Assad (9th Cir., August 28, 2026).
GuideHow the three treatments differWhat stands between your win and a clean return?
None of them is your fault, and none of them is solved by a venue export.
Your venue gives you a number, not a filing.
Kalshi issues Form 1099-INT, Form 1099-MISC, a 1099-B for crypto transfers only, a 1099-DA through ZeroHash, and a profit and loss statement. No tax form reports your contract profit and loss, and none is Form 6781. The statement does not split basis by lot or mark open positions at December 31, which Section 1256 needs.
GuideDoes Kalshi send a 1099?Getting to the forms is an engineering job.
Section 1256 values every position still open on December 31 at that day’s close. Rebuilding that means every trade, matched into lots with fees in basis, and the year-end price of every open market from the venue’s history. Our guide walks through each step, from trade history to Form 6781.
GuideHow to file Kalshi taxes- 01Every tradefrom the venue API
- 02FIFO lotsmatched, fees in basis
- 03Dec 31 closefor every open market, from price history
- 04Mark to marketopen positions valued at the close
- 05Form 6781with its statement
Few preparers have filed a prediction market return yet.
Your CPA is a tax expert, but not necessarily in the weeds on the regulatory changes in gambling and prediction markets. We refer you to approved CPAs who already file returns for prediction market traders. If you want a second opinion, we can refer you to one.
Work with a CPA who already knows this market.
- Approved CPAs who already file returns for prediction market traders.
- Book a call with our team and we refer you. The CPA advises you directly.
- They start from the forms Realize builds, so nothing is rebuilt by hand.
Have a CPA already? Hand them the forms, from $59 a year. See all options.
Using your own CPA? We've got the forms your preparer needs.
Forms your preparer can read, line by line. Kalshi’s profit and loss statement shows no lots and no December 31 value. Realize gives them what a return is built from, for whichever treatment you choose together. Every number traces back to a trade they can open.
See our other options.
One price for the whole year, billed once. Pick the amount of help you want.
Forms
Your documents for every route, for you or your accountant to file. We don't file or review them.
Get your tax formsForms + Filing
Your documents, e-filed through our filing partner, who is the preparer. Nothing is filed until you approve it.
Start filingForms + Filing + Insights
Everything in Forms + Filing, plus a 30-minute call with our team.
Start filingForms + CPA
Your documents, bundled with a referral to an approved CPA. The CPA advises you, not Realize.
That's what they're built for. Form 6781 is built on the IRS template with the transaction statement behind it, Form 8949 has one row per closed lot, and the summary and CSV let a preparer check any figure against a trade. What goes on your return is your preparer's call, and yours.
A short conversation with the Realize team about your venues, the size of the year, open positions at December 31, prior years, and whether you have a preparer. If a CPA fits, we route you to one we approve of. The CPA advises you directly; Realize supplies the forms.
Withdrawing is not what creates the tax. A gain is generally reportable when the position closes or settles, whether or not the money left the platform, and under Section 1256 open positions are also marked at year end. Leaving a balance on the exchange does not defer anything.
Under Section 1256 they are treated as if you sold them at the December 31 closing price, and the new year starts from that price. Once January arrives that price is hard to recover from a venue export, so Realize reads it from the venue’s published price history. Under standard capital or gambling treatment, an open position is reported in the year it closes.
Your return is one return, so the two have to be combined, and neither venue can do that for you because neither knows about the other. Realize reads both through read-only API access and combines them into one year, with every figure traceable to the trade it came from.
Realize can calculate your year under Section 1256, one of three common treatments in use, and shows the other two beside it. Whether it fits your return is one to decide with your tax professional.
No. No IRS guidance or court ruling addresses whether event contracts are Section 1256 contracts. Separately, federal appeals courts disagree on whether states can regulate them as gambling. The IRS could disagree later, including for years you have already filed. Realize shows all three treatments side by side so the choice is made with the numbers in front of you and your CPA.
That's your decision, or your preparer's. Realize isn't a tax advisor; we show what each treatment would mean for your year so you can decide with the numbers in front of you.
Realize builds your forms. If you want e-filing, it goes through our filing partner, who is the preparer, and nothing is filed until you approve it.
We compute the federal numbers. Not every state conforms to §1256's 60/40 split (PA and NJ, for example, treat the income differently). Our federal figures are the input your preparer or tax software uses for the state return.
Get your winning year ready to file.
Book a call for a CPA referral, or get a free estimate in about a minute.