WagerMintsTennessee gambling winnings tax and Kalshi legal status
Tennessee has no personal income tax, so the state doesn't tax your gambling winnings or short-term prediction market gains. You still owe federal tax.
As of October 27, 2026, Kalshi has no court protection in Tennessee after the Sixth Circuit vacated the injunction that had shielded it. Where it stands
Checked October 27, 2026 against Tennessee’s tax department, court dockets and regulator records.
Tennessee at a glance
- Income tax
- None
- Gambling losses
- No state income tax
- 2026 federal 90% rule
- No state income tax
- Prediction markets
- Injunction overturned on appeal
Income tax
How does Tennessee tax gambling and prediction market winnings?
Tennessee has no personal income tax on wages, gambling winnings or short-term trading gains.
Tennessee does not tax capital gains, because it has no state income tax on them.
Legal status
Is prediction market trading legal in Tennessee?
As of October 27, 2026, Kalshi has no court protection in Tennessee after the Sixth Circuit vacated the injunction that had shielded it. The appeals court ruled on September 25, 2026 that Tennessee's gambling laws are not overridden by federal law, based on the early record. Kalshi has asked the full court to rehear the case, and Underdog filed a new suit on October 13, 2026.
Where each platform stands
A federal judge protected Kalshi in February 2026; the Sixth Circuit vacated that injunction on Sept. 25, 2026 and sent the case back, and Kalshi seeks a rehearing.
Underdog Exchange DCM sued Tennessee officials in federal court in Nashville on Oct. 13, 2026; no ruling yet.
What happens next: The Sixth Circuit has not ruled on Kalshi's Oct. 9, 2026 request for a rehearing by the full court.
Timeline · 5 steps
Every step in Tennessee, in order
Jan 9, 2026
Court · U.S. District Court, M.D. Tennessee · KalshiEX LLC v. Orgel (No. 3:26-cv-00034)
After the Tennessee Sports Wagering Council sent a cease-and-desist letter, Kalshi sued Tennessee officials in Nashville federal court and got a temporary restraining order.
CourtListener docket, KalshiEX v. OrgelFeb 19, 2026
Court · U.S. District Court, M.D. Tennessee · KalshiEX LLC v. Orgel (No. 3:26-cv-00034)
A federal judge in Nashville granted Kalshi a preliminary injunction against the state officials, finding its contracts are swaps under federal law. Tennessee appealed on Mar. 20.
CourtListener docket, KalshiEX v. Orgel, entries of Feb. 19 and Mar. 20, 2026Sep 25, 2026
Court · U.S. Court of Appeals for the Sixth Circuit · KalshiEX LLC v. Orgel (decided with KalshiEX LLC v. Schuler) (No. 26-5235)
The Sixth Circuit vacated Kalshi's injunction and sent the case back to the Nashville judge. It held Kalshi had not shown its sports contracts are swaps and that federal law would not override Tennessee's gambling laws even if they were. This was a preliminary-stage ruling, not a final judgment.
Sixth Circuit opinion, Sept. 25, 2026Oct 9, 2026
Court · U.S. Court of Appeals for the Sixth Circuit · KalshiEX LLC v. Orgel (No. 26-5235)
Kalshi petitioned for the full Sixth Circuit to rehear the Tennessee and Ohio appeals.
CourtListener docket, Sixth Circuit No. 26-5235Oct 13, 2026
Court · U.S. District Court, M.D. Tennessee · Underdog Exchange DCM, Inc. v. Skrmetti (No. 3:26-cv-01461)
Underdog's exchange sued Tennessee officials, including the attorney general, in federal court in Nashville.
CourtListener docket, Underdog v. Skrmetti
Federal courts
What the federal courts and the CFTC have said
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.
Apr 6, 2026
Court · U.S. Court of Appeals for the Third Circuit · KalshiEX LLC v. Flaherty (No. 25-1922)
By a 2-1 vote, the appeals court for New Jersey, Pennsylvania and Delaware upheld an order that stops New Jersey from enforcing its gambling laws against Kalshi's sports contracts for now. It found Kalshi likely to win its argument that federal law overrides the state. This is a preliminary ruling, not a final judgment.
Third Circuit opinion, Apr. 6, 2026Aug 28, 2026
Court · U.S. Court of Appeals for the Ninth Circuit · KalshiEX LLC v. Assad (No. 25-7516)
A unanimous three-judge panel upheld the order that lifted Kalshi's protection against Nevada, so Nevada may enforce its gambling laws against Kalshi's sports contracts. The court held that sports contracts are not swaps under federal law. It sent Kalshi's election contracts back to the district court. This is a preliminary ruling.
Ninth Circuit opinion, Aug. 28, 2026Sep 2, 2026
Court · Supreme Court of the United States · Flaherty v. KalshiEX, LLC (No. 26-299)
New Jersey asked the Supreme Court to review the Third Circuit ruling. Kalshi's response is due December 7, 2026 after two extensions. Many states, tribes, the NFL and others have filed friend-of-the-court briefs. The Court has not decided whether to take the case.
Supreme Court docket No. 26-299Sep 16, 2026
Court · U.S. Court of Appeals for the Ninth Circuit · Blue Lake Rancheria v. Kalshi, Inc. (No. 25-7504)
In a case brought by two California tribes, the court held the tribes are likely to win their claim that Kalshi's sports contracts offered on tribal lands break the federal Indian Gaming Regulatory Act, and sent the case back to the lower court. A Lanham Act (false advertising) claim was rejected.
Ninth Circuit opinion, Sept. 16, 2026Sep 25, 2026
Court · U.S. Court of Appeals for the Sixth Circuit · KalshiEX LLC v. Schuler (Ohio) and KalshiEX LLC v. Orgel (Tennessee) (Nos. 26-3196 and 26-5235)
A unanimous panel upheld a federal judge's refusal to block Ohio's gambling laws and threw out the order that had protected Kalshi in Tennessee. It held Kalshi's sports contracts are not swaps and, even if they were, federal law does not override the states' gambling laws. The cases go back to the lower courts.
Sixth Circuit opinion, Sept. 25, 2026Oct 9, 2026
Regulator · Commodity Futures Trading Commission
The CFTC proposed a rule that would expressly define event contracts, including those on sports, politics, culture and weather, as swaps, which would place them under federal rather than state oversight. The public may comment for 30 days after Federal Register publication (91 FR 66022). It is a proposal, not a final rule. The same day the CFTC issued an interim rule excluding casino-style gambling products, such as sportsbook wagers and casino games, from the swap definition (91 FR 65969).
CFTC press release 9310-26, Oct. 9, 2026Oct 26, 2026
Court · U.S. Court of Appeals for the Fourth Circuit · KalshiEX LLC v. Martin (Maryland) (No. 25-1892)
No ruling yet. The appeal was argued May 7, 2026 and the parties were still filing supplemental authorities on Oct. 26, 2026.
CourtListener docket, Fourth Circuit No. 25-1892
Your trades
Kalshi and Polymarket profits in Tennessee
Tennessee doesn’t tax them, but the federal rules do, and the method you choose can change your federal bill by thousands. The four methods, compared.
The court cases are about whether Tennessee 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.
Ask your AI
Ask your AI about your taxes in Tennessee
Answer a few questions and we write the prompt for ChatGPT, Claude, Perplexity or any AI. It carries the four tax methods, your state’s rule and links to the pages behind them, checked November 3, 2026. Or run your actual trades for exact figures, free.
Add rough numbers (optional)
The AI can then work the methods out for your year. Round figures are enough.
Your prompt
2,433 characters
I trade prediction markets on Kalshi. I'm working on my US federal taxes for 2026. I live in Tennessee. From WagerMints, checked November 3, 2026: - Kalshi's Documents page says it does not report profits and losses to the IRS. - Forms it may send: 1099-INT for interest, 1099-MISC for credits and rewards, 1099-B or 1099-DA for crypto transfers. - Its Profit and Loss statement uses first in, first out, is split by year and updates on the first morning of each month. - Reward credits only appear in the activity export, not the trades export. - The IRS has published no guidance on how event contracts are taxed. Four ways traders report this: 1. Capital gains: Form 8949 and Schedule D, short- or long-term by holding period. Net losses offset up to $3,000 of other income a year, and the rest carries forward. 2. Section 1256: Form 6781, 60% long-term and 40% short-term however long I held. Positions open on December 31 count as sold at that day's value. Disputed: Camuso and Mukherjee (Tax Notes Federal, June 2026) conclude it isn't available, White & Case argues for it, and the CFTC's October 2026 proposal to call event contracts swaps cuts against it, because Section 1256 excludes swaps. 3. Ordinary income: net result on Schedule 1, line 8z. 4. Gambling: winnings on Schedule 1, line 8b. Losses only on Schedule A if I itemize, only up to winnings, and only 90% of them from 2026. Tennessee: Tennessee has no personal income tax, so the state doesn't tax your gambling winnings or short-term prediction market gains. You still owe federal tax. Legal status there: As of October 27, 2026, Kalshi has no court protection in Tennessee after the Sixth Circuit vacated the injunction that had shielded it. Read these pages: - https://wagermints.com/kalshi-taxes - https://wagermints.com/blog/how-kalshi-calculates-profit-and-loss - https://wagermints.com/blog/how-to-report-kalshi-polymarket-taxes - https://wagermints.com/state-taxes/tennessee My question: How would my year come out under each of the four methods? How to answer: - Say which links you opened, and never describe one you didn't open. If one fails, use the facts above and say so. - Mark each point [linked source], [general tax rule] or [unsettled]. - Put the methods side by side in one table for my year, and state any number you assume. - Don't pick a method for me. End with questions for a CPA or enrolled agent, then anything you need from me.
WagerMints doesn’t see or store what you type here. The prompt goes to the AI you pick, under that company’s terms. Never add your Social Security number, API keys or wallet keys. AI answers can be wrong, so check them against the linked sources and a preparer.
Questions
Questions about Tennessee
- Does Tennessee tax gambling winnings?
- Tennessee has no personal income tax, so the state doesn't tax your gambling winnings or short-term prediction market gains. You still owe federal tax.
- Can I deduct gambling losses in Tennessee?
- Tennessee has no personal income tax, so there is nothing to deduct them from on a state return. Federal rules still apply.
- Is Kalshi legal in Tennessee?
- As of October 27, 2026, Kalshi has no court protection in Tennessee after the Sixth Circuit vacated the injunction that had shielded it. The appeals court ruled on September 25, 2026 that Tennessee's gambling laws are not overridden by federal law, based on the early record. Kalshi has asked the full court to rehear the case, and Underdog filed a new suit on October 13, 2026.
- Does the court fight change how my trades are taxed?
- No. These cases decide whether a state can license or stop the platforms. None of them decides how your trades are taxed, and trades you already made still count in your tax year.
States with the same rule on losses: Texas, Washington, Wyoming, Alaska, Florida, Nevada. All states.
Tax facts checked against Tennessee’s own tax pages on October 26, 2026; legal status on October 27, 2026. Rules and cases change, so confirm with current instructions before you file.
See your own year four ways
WagerMints prices your Kalshi or Polymarket year under all four federal methods, side by side, so you can see what Tennessee is taxing before you file. Free, no account.
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