Prediction Market Taxes in Florida: What Traders Need to Know

The Good News: Florida Has No State Income Tax

Florida is one of nine states with no state income tax. That means prediction market winnings are not subject to Florida state tax — only federal taxation applies. This is a genuine financial advantage compared to residents of states like California (up to 13.3%) or New York (up to 10.9%).

Federal Tax Treatment of Prediction Market Winnings

Prediction market profits are taxable at the federal level. We are not tax advisors — consult a tax professional for your specific situation.

Short-term vs. long-term

Most prediction market contracts resolve within days or weeks, making them short-term positions. Short-term capital gains are taxed at ordinary income rates (10%–37%). For longer-duration contracts — like a Florida governor race contract held more than a year — long-term capital gains treatment may apply (0%, 15%, or 20%), but this requires professional guidance.

How gains are calculated

Gain = (Payout received) – (Amount paid for contracts) – (Fees paid)

Example: You buy 100 Dolphins contracts at $0.45 = $45 cost. Dolphins win, you receive $100. Kalshi fee: $1.50. Taxable gain: $100 – $45 – $1.50 = $53.50.

Losses

Losing trades generate capital losses, which can offset gains. If you have $200 in gains and $80 in losses in a tax year, you're taxed on the net $120.

Do Kalshi and Polymarket Report to the IRS?

Yes. Like other financial platforms, Kalshi issues 1099 forms to US-based traders who meet reporting thresholds. Keep records of all your trades regardless of whether you receive a 1099.

Best practice: Export your full trade history from both platforms at year-end. Both have CSV export functions in account settings. Store these records for at least 3 years.

Crypto Complications (Polymarket)

Polymarket's global platform operates on blockchain rails (Polygon network) using USDC stablecoin. Depositing and withdrawing USDC may trigger crypto tax events; each on-chain trade generates a transaction record. Crypto tax software like Koinly or CoinTracker can import Polymarket history. The US Polymarket app (launched late 2025) aligns more closely with Kalshi for tax purposes.

Practical Tax Tips for Florida Traders

1. 1.Track every trade — use a spreadsheet or export from Kalshi monthly
2. 2.Keep Kalshi and Polymarket records separate for clean calculation
3. 3.Include fees — they reduce your taxable gain
4. 4.Don't forget small wins — there's no de minimis threshold for capital gains
5. 5.Use a tax professional — if you trade actively (50+ trades/year) or have meaningful gains ($1,000+)
6. 6.Remember Florida's advantage — no state tax means your effective rate is purely federal