Last April I stared at a 1099-B from Kalshi with 247 separate transactions on it. Fed decisions, CPI prints, election contracts, even a few weather markets I barely remembered entering. My accountant called me three times that week. If you traded on Kalshi in 2024 and you're wondering how to report those winnings and losses on your tax return, welcome to the club. I'll walk you through what I've learned, but fair warning: I'm a former futures quant, not a CPA. Get a tax professional if your situation is complicated.
Kalshi is regulated by the CFTC as a designated contract market. That matters for taxes because it means your trades are happening on a legitimate U.S. exchange, not some offshore book. You'll get actual tax documents. You can't hide this stuff, and you shouldn't try to.
Because Kalshi is a regulated exchange, your contracts are treated as derivatives for tax purposes. This puts them in a different bucket than, say, sports betting winnings or crypto gambling on unregulated platforms. The IRS has clearer (though still imperfect) guidance on how to handle these.
If you had realized gains or losses on Kalshi, you'll receive a 1099-B form. This is the same form you get from a stock brokerage. It lists:
Kalshi sends these out by mid-February for the prior tax year. If you made more than a handful of trades, expect a long document. I recommend downloading the CSV version from your Kalshi account and reconciling it against your own records before filing.
Here's where it gets interesting. Kalshi contracts may qualify as Section 1256 contracts under IRS rules. Section 1256 applies to regulated futures contracts and certain options. The tax treatment is favorable:
This applies regardless of how long you held the position. So even if you bought a KXFEDDECISION contract at 9:00 AM and it settled at 2:00 PM, you still get the 60/40 split.
The catch: not everyone agrees that all Kalshi contracts clearly qualify. The IRS hasn't issued specific guidance on event contracts from prediction markets. Most tax professionals I've spoken with treat Kalshi contracts as Section 1256 based on the CFTC regulation, but this is an evolving area. Document your reasoning and keep records in case of audit.
If you're treating your Kalshi trades as Section 1256 contracts, you'll use Form 6781 (Gains and Losses from Section 1256 Contracts and Straddles). You report your net gain or loss, and the form automatically splits it 60/40. That number then flows to Schedule D.
If you or your accountant decide not to treat these as Section 1256 contracts, you'd report each transaction as a standard capital gain or loss on Schedule D and Form 8949. Short-term positions (held under a year) get taxed at ordinary income rates. Long-term positions get the lower capital gains rate.
For most prediction market traders, this is worse. Our holding periods are usually hours or days, not years. The 60/40 treatment is almost always more favorable.
The IRS expects you to substantiate your reported gains and losses. I keep a spreadsheet with every trade I make on Kalshi, including:
This saved me when I had questions about a CPI contract I'd forgotten I even traded. The Kalshi platform keeps transaction history, but I don't trust any platform to maintain records forever. Export your data regularly.
If you want to compare notes with other traders on how they handle tax reporting, I post occasional threads in the Telegram channel I run. It's not tax advice, just traders sharing what works.
One upside of proper tax reporting: your Kalshi losses reduce your taxable gains. If you lost money on an election contract but made money on Fed decisions, they net out. You're only taxed on the difference.
If your total losses exceed your gains, you can deduct up to $3,000 against ordinary income per year. Excess losses carry forward to future years. This is standard capital loss treatment and applies whether you use Section 1256 or not.
Yes. There's no minimum threshold for reporting. Even if Kalshi doesn't send a 1099-B (which they do for most active traders), you're legally required to report all taxable income. The IRS doesn't care if you made $50 or $5,000. Report it accurately and you won't have problems later.
In theory, yes. If you have losing positions, you can close them to realize losses that offset gains elsewhere. However, wash sale rules may apply if you re-enter a substantially identical position within 30 days. This gets complicated with event contracts since many are unique. Ask a tax professional if you're planning a specific strategy.
Kalshi gives you a 1099-B because it's a regulated U.S. exchange. Offshore platforms like Polymarket don't. You're still legally required to report Polymarket gains, but you'll need to calculate and document them yourself. Keep your own records and report honestly. The IRS treats unreported foreign income seriously.
If your trading activity is significant, yes. Most general accountants haven't seen Kalshi 1099-Bs before and may not know about Section 1256 treatment. Look for someone experienced with futures, options, or derivatives. The fee is worth it if it saves you from errors or missed deductions. I learned this the hard way my first year.
Not financial advice. I trade my own money and you can lose yours. Do your own research.