Tax Center
Are Kalshi Winnings Taxable?
By Owen Monagan ·
Yes — money you make on Kalshi is taxable income in the United States. You must report your gains on your federal tax return whether or not you receive a tax form from Kalshi, and whether or not you have withdrawn the cash. What is not yet settled is exactly how those gains and losses should be characterized — and that distinction can meaningfully change what you owe.
This guide explains the general rules, where the open questions are, and what to track. It is information, not tax advice — the tax treatment of prediction-market event contracts is an evolving area, so confirm your own situation with a qualified professional before filing.
Do I have to report Kalshi winnings to the IRS?
Yes. The U.S. taxes income "from whatever source derived," and gains from trading event contracts are income. This is true even if:
- You never received a 1099 or other tax form,
- You left your winnings in your Kalshi balance instead of withdrawing them, or
- Your net result for the year was small.
The obligation to report does not depend on receiving a form. If you have a net gain for the year, it generally belongs on your return. For background on how the IRS treats winnings and wagering income generally, see the IRS topic on gambling income and losses.
How are Kalshi gains and losses characterized?
This is the part that is genuinely unsettled, and it is where most of the dollars are. There are a few possible frameworks, and which one applies affects both your tax rate and how losses can be used:
| Possible treatment | How gains are taxed | How losses can be used |
|---|---|---|
| Section 1256 contracts (regulated derivatives) | Generally a blended 60% long-term / 40% short-term capital rate, regardless of holding period | Net losses offset capital gains; a residual loss can offset up to $3,000 of ordinary income per year, with the rest carried forward (and a limited carryback election may apply) |
| Ordinary capital gain/loss | Short- or long-term capital rates based on holding period | Offsets capital gains, then up to $3,000 of ordinary income per year, remainder carried forward |
| Gambling winnings | Ordinary income at your marginal rate | Losses deductible only up to winnings, and only if you itemize |
Kalshi operates as an exchange designated by the Commodity Futures Trading Commission (CFTC), which is why some traders and commentators argue its contracts should follow the rules for regulated derivatives — potentially Section 1256 treatment — rather than the rules for gambling. That argument is plausible but not definitively settled by the IRS or the courts for retail event-contract traders. We do not state that Section 1256 applies to your trades; we flag it as the most-discussed possibility and a question for your tax professional.
Why it matters: under a derivatives/capital framework, a losing year can actually reduce your taxes by offsetting other gains and some ordinary income. Under the gambling framework, losses are far more limited. Same trades, very different outcome.
Does Kalshi send a 1099?
Kalshi may provide a tax form (such as a 1099) depending on your activity and the tax year, but you should never rely solely on whether a form shows up. Two rules of thumb:
- Report your gains even with no form. The absence of a 1099 is not permission to skip reporting.
- Reconcile any form against your own records. Forms can be incomplete or use a characterization you may disagree with. Your full trade history is the source of truth.
What records should I keep?
Keep enough to reconstruct every position: trade dates, contracts, entry and exit prices, fees, and your net proceeds. At minimum, retain:
- A full export of your Kalshi trade and settlement history for each year,
- Year-end balances and any tax forms Kalshi issues, and
- Records of deposits and withdrawals.
Good records are what let you (or your accountant) apply whichever treatment is correct, claim losses you are entitled to, and substantiate the numbers if asked. The relevant IRS form for Section 1256 contracts and straddles, if that treatment applies, is Form 6781.
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How Realize helps
Realize connects to your Kalshi account (read-only), pulls your full trade history, and organizes your gains and losses into a clear year-by-year ledger — so you have clean, reconciled numbers ready for your return or your CPA, instead of a spreadsheet you build by hand. Realize is a data tool that does the bookkeeping; the tax characterization is still a decision you make with a professional.
The bottom line
Kalshi winnings are taxable, and you must report them. The harder question — capital/Section 1256 versus gambling treatment — is unsettled and can change what you owe, especially in a losing year. Keep complete records, and talk to a tax professional about which treatment fits your situation.