New Jersey gambling winnings tax and Kalshi legal status

New Jersey's 2025 rates run from 1.4% on the first $20,000 to 10.75% on income over $1,000,000 (single).

New Jersey taxes short-term trading gains like other income, with no separate short-term or long-term rate. Net gains from sale of property are one income category, and a net loss there can't offset other categories.

New Jersey lets you subtract gambling losses from gambling winnings in the same year and report only the net on line 24 of the NJ-1040. If the net is zero or less, you make no entry. You can't use gambling losses against wages or any other income category, and you attach a statement showing winnings and losses.

• Net gambling winnings are taxable, including casino and track betting and multistate lotteries. New Jersey Lottery prizes of $10,000 or less are not taxable. Out-of-state lottery winnings are taxable at any size.
• You don't need to itemize. New Jersey doesn't use federal itemized deductions, so the netting works even if you took the federal standard deduction.
• New Jersey withholds 3% of the payout on gambling winnings for residents and nonresidents. Lottery payouts are withheld at 5% from $10,001 to $500,000 and 8% above $500,000.
• New Jersey nets losses against winnings on its own return and has not said whether the federal 90% limit applies from 2026.

As of October 27, 2026, a federal court order in force bars New Jersey from enforcing its gambling laws against Kalshi's sports contracts while the case continues, so Kalshi remains available in the state. The Third Circuit appeals court upheld that order 2-1 on April 6, 2026, and New Jersey has asked the U.S. Supreme Court to take the case. Robinhood has its own pending suit against the state, and we found no ruling in it.

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 IRS hasn’t said how prediction market trades are taxed, so you pick one of four federal methods: capital gains, ordinary income, gambling or Section 1256. New Jersey uses its own definitions, so check how it treats the method you choose federally. If you report as gambling, the loss rules above apply. The four methods, compared.

The court cases are about whether New Jersey can license or stop the platforms. None of them decides how your trades are taxed. Trades you already made, including positions an order made you close, still count in your tax year.