Legally, that is unresolved. Kalshi says its contracts are traded peer-to-peer on a federally regulated exchange, not bets against a house. Many states, the American Gaming Association and two federal appeals courts treat its sports contracts as sports betting. The Supreme Court has been asked to decide.

What is the difference between a prediction market and a sportsbook?

On a sportsbook you bet against the book, which keeps your losses. On a prediction market you trade with other users and the exchange takes a fee. Sportsbooks are licensed and taxed by states; prediction markets are regulated by the CFTC and pay no state gaming tax.

Are prediction market winnings taxed like gambling winnings?

The IRS has not said. Gambling winnings are fully taxable, but there is no IRS guidance on event contracts, and practitioners have reported them in several different ways. Ask a tax professional.

How old do you have to be?

Kalshi and Robinhood require users to be 18. Most states set the gambling age higher; Massachusetts, for example, requires online sports bettors to be 21.

Guide

Are prediction markets gambling?

It depends who you ask, and the courts are answering differently. Here is each side’s case, the practical differences from a sportsbook, and the scoreboard so far.

Reviewed Oct. 22, 2026 · Live figures update with our records · Sources are footnoted

The short answer

Legally, no one has settled it. The platforms call sports event contracts swaps on federally regulated exchanges; states, the gaming industry and two federal appeals courts treat them as sports betting by another name.^1,2,3 3 petitions ask the Supreme Court to decide.

Side by side

	Prediction market	Licensed sportsbook
Who you trade against	Other users; the exchange matches orders and takes a fee.^1,4	The sportsbook, which keeps your losses.⁴
Regulator	The CFTC, as a designated contract market.⁵	A state gaming regulator, under a state licence.⁴
Where offered	Kalshi offered sports contracts in all 50 states by the 2025 Super Bowl; court orders now block them in Michigan, Nevada and Washington.⁶	Only where a state has legalised it; online sportsbooks were banned in about 20 states in late 2025.⁴
Minimum age	18 at Kalshi and Robinhood.^7,8	Set by each state, usually 21; Massachusetts requires 21 for online betting.^9,10
State tax	No state gaming tax.⁴	Yes; New York takes 51% of gross sports-wagering revenue.⁴
Winning customers	Kalshi says it does not profit when customers lose and does not limit winners.¹	The house profits from customer losses.⁴

The case that it’s gambling

States argue substance over form. Massachusetts says Kalshi’s sports contracts closely resemble licensed sportsbook wagers; Arizona’s regulator saw no meaningful difference.^10,11 Nevada’s Sen. Catherine Cortez Masto has called sports event contracts sports betting by another name.⁴

The gaming industry agrees. The American Gaming Association says Americans see these contracts as gambling, not financial instruments, and in May 2026 it and the Indian Gaming Association asked Congress to make clear sports betting can’t be offered nationwide through federally registered platforms.^2,12 The NCAA asked the CFTC to block college-sports markets, and its president has noted that prediction markets accept 18-year-olds while most states set the gambling age at 20 or 21.^9,13 In October 2026 the NFL backed New Jersey’s Supreme Court petition.¹⁴

The Ninth Circuit called the substance of Kalshi’s sports contracts sports gambling, and noted Kalshi had marketed them as “legal sports betting.”³

The case that it isn’t

The platforms point to structure. Kalshi says its customers trade with each other at prices set by supply and demand, not against a house, and that it does not limit winning customers.¹ Its chief executive has argued that calling event contracts gambling would be like calling the whole financial market gambling.¹⁵ Robinhood describes its contracts, offered through its CFTC-registered broker, as speculation in prediction markets rather than bets.⁸

The legal hook is the definition of a swap. The Third Circuit majority concluded that event contracts are swaps, which put Kalshi’s sports contracts inside the CFTC’s exclusive jurisdiction.¹⁶ Some leagues have also signed up: MLB named Polymarket its official prediction market exchange in March 2026 under an integrity agreement with the CFTC.¹⁷

What courts have said

1appeals court has ruled for the platforms (Third Circuit)

2have ruled for the states (Sixth Circuit and Ninth Circuit)

6more have appeals pending

3petitions ask the Supreme Court to decide

The disagreement turns on whether these are swaps. The Third Circuit said yes; the Ninth said Kalshi’s sports contracts are likely not swaps; the Sixth held Kalshi had not shown they were.^3,16,18 For the full legal framework, read how prediction markets are legal, and follow each appeal on the circuit split tracker.

Taxes and age

The IRS taxes gambling winnings in full, payers issue Form W-2G for some of them, and losses are deductible only by itemizers and only up to winnings.¹⁹ From 2026, only 90% of wagering losses can be deducted against wagering gains.²⁰ But the IRS has issued no guidance on event contracts, and practitioners have reported them as section 1256 contracts, capital gains, wagering and ordinary income.^21,22 Kalshi lists Forms 1099-INT, 1099-MISC, 1099-B and 1099-DA as the forms it may send; Robinhood has said it will not issue 1099s for event-contract trades.^21,23 This is not tax advice; ask a tax professional.

Kalshi and Robinhood require users to be 18.^7,8 Connecticut’s governor proposed raising the minimum age for event-contract trading to 21 in February 2026.²⁴ Kalshi offers self-exclusion, deposit caps and trading breaks.^25,26

Questions

Is Kalshi gambling?: Legally, that is unresolved. Kalshi says its contracts are traded peer-to-peer on a federally regulated exchange, not bets against a house. Many states, the American Gaming Association and two federal appeals courts treat its sports contracts as sports betting. The Supreme Court has been asked to decide.
What is the difference between a prediction market and a sportsbook?: On a sportsbook you bet against the book, which keeps your losses. On a prediction market you trade with other users and the exchange takes a fee. Sportsbooks are licensed and taxed by states; prediction markets are regulated by the CFTC and pay no state gaming tax.
Are prediction market winnings taxed like gambling winnings?: The IRS has not said. Gambling winnings are fully taxable, but there is no IRS guidance on event contracts, and practitioners have reported them in several different ways. Ask a tax professional.
How old do you have to be?: Kalshi and Robinhood require users to be 18. Most states set the gambling age higher; Massachusetts, for example, requires online sports bettors to be 21.

If gambling is causing you harm, call or text 1-800-GAMBLER. This guide is not legal or tax advice.