Trading sports event contracts on prediction markets like Kalshi won’t protect consumers from federal gambling taxes, and market makers or the platforms themselves may be subject to eight times the legal gambling excise tax, researchers say. While prediction markets are not taxed by states — although they will be in North Carolina starting Jan. 1 — a paper from a nonprofit tax group suggests the federal government can make a case for taxing the entities like gambling.
Tax Analysts published the study, “Are Sports Event Contracts on Prediction Markets Gambling for Federal Tax Purposes?” on Oct. 1. Tax Analysts Senior Fellow Seth Hanlon, Senior Attorney and adviser Miles Johnson, Deputy Director Michael A. Kaercher, Senior Attorney and adviser Kyle Sweeney, and attorney-adviser at New York University’s School of Law Tax Law Center Sophia Yan authored the research.
