The US Commodity Futures Trading Commission sued Kentucky, challenging state laws affecting prediction markets and a tax on their transaction fees. The tax, due to take effect on 1 January 2027, requires operators to pay 14.25% of monthly transaction fees; the CFTC is seeking to block enforcement.
The lawsuit challenges Kentucky’s ability to regulate and tax prediction-market operators and could affect contract availability.
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It was reported that the Tax Law Center published an analysis on 1 October arguing that US sports prediction contracts qualify as wagers for federal taxation. Its interpretation would bring these contracts within gambling provisions covering excise taxes, winnings and loss deductions. The analysis calls for IRS clarification to reduce uncertainty.
An analysis from the Tax Law Center, dated Oct. 1, examines whether contracts tied to sporting events on venues like Kalshi belong within the federal rules that govern gambling. The center's position is that such contracts amount to wagers for federal tax purposes.
Pennsylvania lawmakers have proposed prediction-market rules covering taxation, oversight and insider trading. State Representative Danilo Burgos’s bill would give the PGCB oversight and impose a 34% state tax plus a 2% local assessment. State Representative Tarik Khan backs separate bipartisan legislation banning insider trading and market manipulation and restricting bets involving deaths and youth sport.
Illinois Representative Travis Weaver is seeking to repeal the state's recently introduced sports prediction market tax. The proposal would remove a 1.75%-to-3.5% transaction tax that Kalshi and the CFTC have challenged.
The US Internal Revenue Service has not issued guidance on how prediction market winnings and losses should be taxed in 2026. Tax experts say outcomes could fall under gambling income, capital gains or Section 1256 contract treatment, while the CFTC classifies event contracts as swaps rather than gambling.
North Carolina enacted a 6% tax on prediction-market net trading fees as part of its newly approved budget, signed by Governor Josh Stein earlier in July. The measure applies no licensing requirements, while the state also raised the mobile sports betting tax from 18% to 23%; the report estimates the prediction-market levy will raise about $1 million in fiscal 2026–27.