WagerMintsPrediction market taxes and legal status by state
Last reviewed October 27, 2026
Where states are acting against prediction markets
Arizona, Arkansas, California, Connecticut, Illinois, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, Ohio, Rhode Island, Tennessee, Utah, Washington, Wisconsin. Each state page has the cases, what each platform can still offer there, and a dated timeline with the filings.
States with a case or letter, by platform
Some contracts stopped (3)
Court has blocked the state (3)
Being fought in court (16)
California, Connecticut, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, New Mexico, New York, Ohio, Rhode Island, Tennessee, Utah, Wisconsin
States say prediction market sports contracts are bets that their gambling laws cover, while Kalshi and the CFTC say they are swaps, a kind of derivative that only the federal Commodity Exchange Act and the CFTC regulate. The Third Circuit appeals court sided with Kalshi against New Jersey in April 2026, while the Ninth Circuit (Nevada, August 2026) and the Sixth Circuit (Ohio and Tennessee, September 2026) ruled for the states, all at the preliminary stage. The Fourth Circuit (Maryland) heard argument in May 2026 and had not ruled as of November 3. New Jersey's petition to the Supreme Court, Flaherty v. KalshiEX (No. 26-299), is waiting on Kalshi's response due December 7, 2026, and the Court has not yet said whether it will hear the case. On October 9, 2026 the CFTC proposed a rule defining event contracts as swaps.
The latest steps
The newest court, regulator and attorney general actions across every state, newest first.
Oct 30, 2026
The court entered a preliminary injunction. It bars Illinois officials from enforcing the sports wagering act and related criminal provisions against swaps, including sports event contracts, on CFTC-regulated exchanges and brokers. That includes licensing, fees, taxes, enforcement actions and subpoenas.
Oct 28, 2026
Prosecutors charged Kalshi and its co-founders Tarek Mansour and Luana Lopes Lara with a second-degree felony count of pattern of unlawful activity, 12 third-degree felony counts of online gambling promotion and one misdemeanor count. Charges are allegations, not a finding of guilt.
Oct 27, 2026
Kalshi sued the Missouri attorney general and gaming commission in federal court, saying federal law keeps the state from regulating its contracts.
Oct 27, 2026
The CFTC sued Utah in federal court to block the state's efforts to shut down CFTC-registered exchanges using state law.
Oct 23, 2026
Kalshi filed a federal lawsuit asking for a permanent injunction and a declaration that Louisiana cannot enforce its gambling laws against its event contracts. The defendants include the attorney general, the governor, the Gaming Control Board and state police. Nothing has been decided.
Oct 16, 2026
Crypto.com's exchange, doing business as OG.Com Prediction Markets, sued for declaratory and injunctive relief against the attorney general and Missouri gaming officials. As of October 21 the docket shows only appearances, summonses and a standing order.
Oct 16, 2026
Ludlow Exchange and Novig sued the attorney general and two other Missouri officials in St. Louis federal court. No ruling has been made.
Oct 16, 2026
QCX LLC, which runs Polymarket US, sued Ohio officials in federal court in Columbus. On the same day Underdog filed a motion for a preliminary injunction in its Cleveland case.
States with no personal income tax
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. Your winnings and short-term trading gains aren’t taxed by the state. Federal tax still applies.
States that don’t allow gambling losses
Connecticut, Illinois, Indiana, Kansas, Louisiana, Ohio, Rhode Island, Vermont, Wisconsin. In these states, gambling winnings are taxed in full on the state return, whatever you lost. If you report prediction market trades as gambling, this applies to them too.
Every state
| State | Income tax | Gambling losses deductible? | Prediction markets |
|---|---|---|---|
| Alabama | 2% to 5% | Only if you itemize | No state action found |
| Alaska | None | No state income tax | No state action found |
| Arizona | 2.5% flat | Only if you itemize | Court has blocked the state |
| Arkansas | 2% to 3.9% | Only if you itemize | Warnings, no lawsuit |
| California | 1% to 13.3% | Only if you itemize | Being fought in court |
| Colorado | 4.4% flat | Only if you itemize | No state action found |
| Connecticut | 2% to 6.99% | No | Being fought in court |
| Delaware | 2.2% to 6.6% | Only if you itemize | No state action found |
| DC | 4% to 10.75% | Only if you itemize | No state action found |
| Florida | None | No state income tax | No state action found |
| Georgia | 4.99% flat | Only if you itemize | No state action found |
| Hawaii | 1.4% to 11% | Only if you itemize | No state action found |
| Idaho | 5.3% flat | Only if you itemize | No state action found |
| Illinois | 4.95% flat | No | Court has blocked the state |
| Indiana | 2.95% flat | No | No state action found |
| Iowa | 3.8% flat | Only if you itemize | Being fought in court |
| Kansas | 5.2% to 5.58% | No | No state action found |
| Kentucky | 3.5% flat | Only if you itemize | Being fought in court |
| Louisiana | 3% flat | No | Being fought in court |
| Maine | 5.8% to 7.15% | Only if you itemize | No state action found |
| Maryland | 2% to 6.5% | Only if you itemize | Being fought in court |
| Massachusetts | 5% (8.5% on short-term gains) | Limited | Being fought in court |
| Michigan | 4.25% flat | Only if you itemize | Some contracts stopped |
| Minnesota | 5.35% to 9.85% | Only if you itemize | Being fought in court |
| Mississippi | 4.4% flat | Limited | No state action found |
| Missouri | 0% to 4.7% | Only if you itemize | Being fought in court |
| Montana | 4.7% to 5.9% | Only if you itemize | Warnings, no lawsuit |
| Nebraska | Up to 5.20% | Only if you itemize | No state action found |
| Nevada | None | No state income tax | Some contracts stopped |
| New Hampshire | None | No state income tax | No state action found |
| New Jersey | 1.4% to 10.75% | Yes, without itemizing | Court has blocked the state |
| New Mexico | 1.5% to 5.9% | Only if you itemize | Being fought in court |
| New York | 4% to 10.9% | Only if you itemize | Being fought in court |
| North Carolina | 3.99% flat | Only if you itemize | No state action found |
| North Dakota | 0% to 2.50% | Only if you itemize | No state action found |
| Ohio | 2.75% flat above $26,050 | No | Being fought in court |
| Oklahoma | Up to 4.75% (2025) | Limited | No state action found |
| Oregon | 4.75% to 9.9% (2025) | Only if you itemize | No state action found |
| Pennsylvania | 3.07% flat | Limited | No state action found |
| Rhode Island | 3.75% to 5.99% | No | Being fought in court |
| South Carolina | 1.99% to 5.21% (2026) | Only if you itemize | No state action found |
| South Dakota | None | No state income tax | No state action found |
| Tennessee | None | No state income tax | Being fought in court |
| Texas | None | No state income tax | No state action found |
| Utah | 4.45% flat | Limited | Being fought in court |
| Vermont | 3.35% to 8.75% | No | No state action found |
| Virginia | 2% to 5.75% | Only if you itemize | No state action found |
| Washington | None | No state income tax | Some contracts stopped |
| West Virginia | 2.11% to 4.58% | Limited | No state action found |
| Wisconsin | 3.5% to 7.65% | No | Being fought in court |
| Wyoming | None | No state income tax | No state action found |
Federal tax comes first
The method you use on your federal return usually carries onto your state return. How prediction market trades are taxed, sports betting taxes, and the 2026 gambling loss calculator.
See your own year four ways
WagerMints prices your Kalshi or Polymarket year under all four federal treatments, side by side, with the work shown and the forms filled. Free to run.
Run your report