IRS silence leaves prediction market users guessing on tax obligations
Prediction market platforms are issuing tax forms without IRS guidance on how event-contract profits should be reported. Kalshi and Polymarket provide users some form of Form 1099, while Robinhood offers an Event Contracts Annual statement. The IRS has not specified whether winnings qualify as ordinary income, capital gains, or gambling income. Traders must file without knowing which rules apply. The lack of clarity shifts compliance burdens onto individual filers and their accountants.
Traders on Kalshi, Polymarket, and Robinhood must file 2026 returns without knowing which tax bucket their winnings fall into. Each classification carries different rates, deduction rules, and audit exposure. The platforms are not responsible for IRS inaction, but they absorb the churn risk when users face surprise tax bills or conservative overpayment.
Accountants are billing extra hours for judgment calls that should be routine. If the IRS delays into 2027, retroactive penalties on filers who guessed wrong become a real threat. The first platform to solve this with clear user guidance gains a retention edge over competitors hoping the agency speaks first. Bigger revenue forecasts mean little if tax anxiety drives mainstream users back to simpler instruments.
The IRS silence follows a recent Bernstein forecast that prediction markets will become a material Robinhood revenue line by 2028, yet that growth rests on traders willing to stay despite filing uncertainty. Kalshi and Polymarket now face the same tax-reporting gap that related coverage flagged nine days ago, with no agency timeline for resolution.