Short answer: Yes, Kalshi winnings are taxable — but only at the federal level for Texans. Texas has no state income tax. Kalshi issues a 1099-MISC or 1099-B to any user with $600+ in net profits in a calendar year. You report it on your federal return.
How Kalshi profits are taxed
Kalshi event contracts are short-dated derivatives — most resolve in days or weeks. The IRS treats short-term derivative gains as ordinary income, taxed at your marginal federal rate (10–37%). They do not qualify for long-term capital gains rates regardless of how long you hold a single contract.
The 1099 you'll get
By January 31 each year Kalshi posts your tax form in the account dashboard. Depending on the contract classification you may see a 1099-MISC (most event contracts) or a 1099-B(commodity-style contracts). Both are also reported to the IRS — you cannot skip reporting them.
Texas vs other states
Texans get an unusual win here. A New Yorker netting $10,000 on Kalshi pays federal tax PLUS roughly 6.85% NY state tax PLUS NYC tax. A Texan with the same profits pays only federal — saving thousands at higher income levels. It's one of several reasons Texas is one of the best US states to trade event contracts from.
Polymarket is different
Polymarket does not issue 1099s to US users. You are responsible for self-reporting USDC-denominated profits at fair market value on the date of each trade. Practically: export your wallet history, convert each USDC P&L to USD, and report on Schedule 1. This is significantly more work than Kalshi. Polymarket legality in Texas →
Pick the easier paperwork
This is general information, not tax advice. Talk to a CPA about your specific situation, especially if you trade large size or have business income.
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