Kalshi 1099: Tax Reporting for Event Contracts
Kalshi 1099-B tax reporting explained with 60/40 Section 1256 treatment, 2 worked examples, and mark-to-market rules for event contract traders.
If you traded on Kalshi last year, a 1099-B is heading your way. Kalshi is a CFTC-regulated Designated Contract Market, which puts its event contracts in a specific tax category with rules that differ from ordinary stock trading. Understanding your Kalshi 1099 saves you money at filing time and keeps you out of trouble with the IRS.
This article covers what is on the form, when it arrives, how the 60/40 tax split works, and what happens with open positions on December 31. For the broader picture of how all prediction market platforms handle taxes, see our complete guide to prediction market taxation.
What Form Kalshi Sends and When
Kalshi issues a 1099-B to every user who had realized gains, losses, or proceeds during the tax year. This is the same form your stock brokerage sends, but the underlying assets are event contracts rather than equities.
Expect to receive your 1099-B by mid-February. Kalshi typically makes it available in your account dashboard and mails a copy. If you traded through Robinhood or Coinbase, your event contract trades still route through Kalshi's exchange. That means your Kalshi 1099-B covers those trades too, though Robinhood may also issue a consolidated 1099 that includes them.
The form reports three key numbers for each closed position:
| Field | What It Means |
|---|---|
| Proceeds | What you received when the contract settled or you sold |
| Cost basis | What you paid to enter the position (including fees) |
| Gain or loss | Proceeds minus cost basis |
Fees are baked into the cost basis and proceeds figures. They are not listed separately. This matters because you cannot deduct Kalshi fees as a separate line item. They already reduce your reported gain. Use our fee calculator to see exactly how much fees eat into a specific trade before you place it.
The Section 1256 Tax Advantage
Here is where Kalshi traders get a meaningful edge over traders on unregulated platforms like Polymarket.
Kalshi operates as a CFTC-regulated DCM. Most tax professionals interpret contracts traded on a DCM as regulated futures contracts under IRC Section 1256. Under this interpretation, gains are split 60% long-term and 40% short-term capital gains, regardless of how long you held the position.
For most traders, long-term capital gains are taxed at 15% versus ordinary short-term rates that can reach 37%. The blended rate on Section 1256 contracts is always lower than the pure short-term rate. Even if you held a contract for 10 minutes, 60% of the gain gets the long-term rate.
One important caveat: the Section 1256 classification for prediction market event contracts is the prevailing interpretation among tax professionals, but the IRS has not issued guidance explicitly confirming this treatment for event contracts specifically. The legal reasoning is sound. Kalshi is a registered DCM, and DCM contracts fall under Section 1256 by statute. But until the IRS rules directly, some ambiguity exists. Work with a tax professional who understands derivatives if your gains are substantial.
For more on how event contracts compare to traditional options, including tax classification differences, see our full breakdown.
Worked Example: Closed Position with 60/40 Split
You buy 200 Yes contracts on a Kalshi event at $0.35 each. Total cost: $70.00. The event trends your way and you sell at $0.80 each. Total proceeds: $160.00.
Your 1099-B shows:
| Amount | |
|---|---|
| Proceeds | $160.00 |
| Cost basis | $70.00 |
| Gain | $90.00 |
Now apply the Section 1256 split. Assume you are in the 32% federal income tax bracket (taxable income between $191,950 and $243,725 for single filers in 2025).
60/40 calculation:
| Portion | Amount | Tax Rate | Tax Owed |
|---|---|---|---|
| 60% long-term | $54.00 | 15% | $8.10 |
| 40% short-term | $36.00 | 32% | $11.52 |
| Total | $90.00 | 21.8% blended | $19.62 |
If this same $90 gain were taxed entirely at short-term rates (as it would be on an unregulated platform), you would owe $28.80. The Section 1256 treatment saves you $9.18 on this single trade. That is a 31.9% reduction in tax liability.
Scale that across a full year of active trading and the difference compounds. Use the EV calculator to factor tax treatment into your expected value before entering positions.
Worked Example: Mark-to-Market on December 31
Section 1256 has a second rule that surprises many traders: mark-to-market. On December 31, every open position is treated as if you sold it at fair market value. You report the unrealized gain or loss on that year's return, even though you still hold the contract.
Here is how it works. On November 15, you buy 100 Yes contracts at $0.40 each. Cost: $40.00. On December 31, the contract is trading at $0.65. You have not sold.
Mark-to-market calculation:
| Amount | |
|---|---|
| Dec 31 fair market value (100 x $0.65) | $65.00 |
| Cost basis | $40.00 |
| Unrealized gain reported in Year 1 | $25.00 |
You owe tax on that $25.00 gain for Year 1, split 60/40 as described above.
In January, suppose the contract settles at $1.00. Your Year 2 gain is calculated from the December 31 value, not your original cost:
| Amount | |
|---|---|
| Settlement proceeds (100 x $1.00) | $100.00 |
| Adjusted basis (Dec 31 value) | $65.00 |
| Gain reported in Year 2 | $35.00 |
The total gain across both years is $60.00 ($25.00 + $35.00), which equals the actual profit ($100.00 minus $40.00). Nothing is double-counted. The timing just shifts.
This can work against you too. If a position drops in value by December 31, you report the unrealized loss that year and can use it to offset other gains. Understanding bankroll management helps you plan for these year-end tax effects.
Robinhood and Coinbase Users: Same 1099
If you trade event contracts through Robinhood or Coinbase, your orders execute on Kalshi's exchange. The tax reporting follows the same structure. You receive a 1099-B reflecting your event contract activity, and most tax professionals apply the same Section 1256 interpretation.
Robinhood may consolidate your event contract 1099-B with your stock and options 1099 into a single document. Make sure you can identify which entries are event contracts, because they get the 60/40 treatment while your stock trades do not (unless they are also Section 1256 eligible).
Coinbase similarly acts as a front-end to Kalshi's order book. Your cost basis, proceeds, and gain/loss calculations are identical to trading directly on Kalshi.
ForecastEx, operated by Interactive Brokers, is also CFTC-regulated but operates as an exempt board of trade rather than a DCM. Whether the Section 1256 argument extends to ForecastEx contracts is less clear. The key factor for Section 1256 is DCM registration specifically.
How Fees Show Up on Your 1099-B
Kalshi charges fees on each trade. These fees are not reported as a separate deductible expense. Instead, they are embedded in the cost basis (increasing it) and proceeds (decreasing them) on your 1099-B.
This means your reported gain already accounts for fees. You get the tax benefit automatically. There is no need to itemize trading fees separately, and doing so would be incorrect (it would double-count them).
To understand how fees affect your breakeven point before entering a trade, run the numbers through our fee calculator or the breakeven calculator. Knowing your true breakeven, inclusive of fees and taxes, is what separates profitable traders from those who think they are profitable. Our guide to prediction market fees covers fee structures across all major platforms.
Filing Your Kalshi Taxes
The actual filing process is straightforward:
Form 6781 is where the Section 1256 magic happens. Line 1 collects your net gain or loss from all Section 1256 contracts. The form then splits it 60/40 and sends each portion to the appropriate line on Schedule D.
If you also trade on platforms that are not CFTC-regulated, those gains go directly on Schedule D as short-term capital gains. Do not mix them with your Section 1256 reporting. For a complete walkthrough of how prediction markets are taxed across every platform type, see our pillar guide.
What to Do If Your 1099-B Looks Wrong
Check every entry against your own records. Common issues include:
- Missing trades. If Kalshi's records do not match yours, contact their support before filing.
- Incorrect cost basis. This sometimes happens with contracts acquired through limit orders that partially filled at different prices.
- Wash sale adjustments. Section 1256 contracts are generally exempt from wash sale rules, but verify this has been applied correctly.
Keep your own trading log. Export your Kalshi trade history at the end of each year and reconcile it with the 1099-B when it arrives. This takes 20 minutes and can save you hours of back-and-forth with the IRS.
Frequently asked questions
- Does Kalshi send a 1099 to every trader?
- Kalshi sends a 1099-B to users who had realized proceeds during the tax year. If you only deposited funds but never closed a trade, you will not receive one. Open positions are still subject to mark-to-market reporting under Section 1256, so you may still owe tax.
- Is the Kalshi 1099-B the same as a stock 1099-B?
- Same form, different tax treatment. Stock gains are short-term or long-term based on holding period. Most tax professionals interpret Kalshi event contracts as Section 1256 regulated futures, meaning gains are split 60% long-term and 40% short-term regardless of holding period.
- Do I need to report Kalshi losses?
- Yes. Losses on Kalshi contracts receive the same 60/40 treatment and can offset other capital gains. Under Section 1256, you can also carry back net losses up to 3 years to offset prior Section 1256 gains.
- What if I traded Kalshi contracts through Robinhood?
- Your trades still execute on Kalshi's exchange and receive the same Section 1256 tax treatment. You may receive a consolidated 1099 from Robinhood that includes your event contract activity alongside stocks and options.
- Can I deduct Kalshi trading fees on my taxes?
- Fees are already factored into the cost basis and proceeds on your 1099-B. They reduce your reported gain automatically. Do not deduct them separately, as that would double-count the tax benefit.