Are Kalshi Contracts Securities for Tax Purposes? Why the Answer Matters

Probably not. Kalshi's contracts are regulated by the CFTC rather than offered as SEC securities, and they don't fit the tax code's main definitions of a security. But tax law has no single definition. Each rule, such as wash sales, Section 475 or worthless securities, uses its own test, so the answer has to be checked rule by rule. No IRS guidance says event contracts are or aren't securities, so this is a reading of the text.

OddsFile is software, not tax advice. The IRS has not issued guidance on how prediction-market contracts are taxed. This article explains the options and the sources behind them; a tax professional can tell you which position fits your situation.

The regulatory answer

Kalshi describes itself as a CFTC-regulated Designated Contract Market. In October 2026, the CFTC proposed to define event contracts as swaps, and it said plainly that tax treatment is decided under the Internal Revenue Code. Regulatory labels don't control tax classification. A security for SEC purposes isn't necessarily a security for a given tax rule, and the other way round.

Rule by rule

The last row is the key one. You don't need a contract to be a security for capital gain treatment. A capital asset is property, broadly speaking, so a non-security can be one. Calling Kalshi "taxed like stocks" is loose. Capital treatment uses the same forms, but it doesn't mean Kalshi contracts are stocks.

What would change if they were securities

So being a non-security has good and bad sides. You probably escape wash sales, but you may also have no clear path to the Section 475 election.

Why contracts on stocks are different

Some event contracts reference equity indexes or share prices. A contract that pays $1 if the S&P closes above a level sits closer to an option. It still isn't a contract to buy or sell stock, and it's settled in cash. But the "contracts or options to acquire or sell" language of §1091 and the derivative language of §475 create more of an argument. Treat these with more caution than sports contracts.

Polymarket and on-chain tokens

Polymarket's on-chain outcome tokens are digital assets. The IRS says digital assets are property, not currency. Whether a token is a security under securities law is separate. For tax, the same rule-by-rule logic applies. A transferable token doesn't become stock just because you can sell it. See Polymarket taxes: the complete guide.

Selling vs settling

Capital treatment needs a sale or exchange. If a position expires, the result depends on rules such as Section 1234A, which covers termination of certain rights. That's a separate open question. Worthless security treatment isn't the fallback, because a contract isn't a security under §165(g). See unredeemed losing positions for how this plays out with losers.

Pending legislation

H.R. 10357, as introduced, would extend wash sales to traded digital assets. It doesn't mention event contracts. If it passes, Polymarket tokens could be pulled in, but only for that rule, and not because they're securities. It shows how Congress adds assets rule by rule rather than through one definition.

Example: why it's a real-money question

You sold a Kalshi contract at a $2,000 loss on December 20 and rebought the same contract on December 29.

That's $480 of 2026 tax at a 24% rate, moved to a later year. A one-word classification can decide when you get a deduction.

What to do

1. Don't describe contracts as securities on your return unless you mean to.
2. If you use capital treatment, rely on the property argument.
3. Treat stock-linked contracts more carefully.
4. Check whether your software is applying wash sale logic.
5. Write down your reasoning.

Run the free OddsFile check: paste a Polymarket or Hyperliquid address and see your 2026 P&L under each treatment, no signup. For the overall framework, read are prediction market winnings taxable?

FAQ

Are Kalshi contracts stocks?

No. They're event contracts on a CFTC-regulated exchange.

Are prediction markets taxed like stocks?

Under capital treatment they use the same forms. That's a position people take, not an IRS rule.

Do I get a 1099-B for Kalshi contracts?

Kalshi describes its 1099-B as covering crypto transfers, not event contracts.

If they aren't securities, can they still be capital assets?

Yes. A capital asset doesn't need to be a security.