Kalshi's New Perpetual Futures: How Are They Taxed?

Nobody knows yet, and this time a federal lawsuit is part of the reason. Perpetual futures are even less settled for tax than Kalshi’s yes/no contracts. The one thing practitioners agree on is the funding payments: they are ordinary income or expense, every time. Everything else depends on whether a perp is a future or a swap, and CME is suing the CFTC over exactly that.

What just happened

• October 5: the CFTC’s market oversight staff issued a no-action letter letting exchanges remove the expiration date from their “perpetual-style” broad-based stock index futures, turning them into true perpetuals.
• October 6 and 7: as reported in Event Horizon, Kalshi got the go-ahead for and launched a US 500 index perpetual, putting it head to head with stock index futures on CME and Cboe. Kalshi has offered crypto perps since earlier in the year.

So a Kalshi account can now hold three very different things: yes/no event contracts, crypto perps, and a stock index perp. They do not share a tax answer.

Why perps don’t fit the tax code

A perpetual future has two features the tax rules were not written for:

• It never expires. A normal future has a settlement date. A perp stays open until you close it or get liquidated.
• It pays funding. Several times a day, cash moves between longs and shorts to keep the perp’s price near the index. A periodic payment on a notional amount is what a swap looks like.

The three readings

The case for Section 1256 is that a Kalshi perp is margined daily and trades on a CFTC-regulated exchange, which are the two tests for a regulated futures contract. The case against is the same clause that troubles event contracts: Section 1256(b)(2)(B) excludes swaps and any “similar agreement,” and a funding leg looks a lot like a swap leg. (What the 60/40 split is worth, and why it is contested even for plain event contracts, is in our Section 1256 explainer.)

The lawsuit that decides it

In June, CME sued the CFTC (CME v. Selig, D.D.C. No. 1:26-cv-02157) to undo the approval of Kalshi’s Bitcoin perpetual. CME’s argument is that perps are swaps under Dodd-Frank, because there is no set future delivery. CME’s chief executive, Terry Duffy, has also warned of a tax risk most traders have not noticed: anyone who files perp gains as Section 1256 contracts could face a retroactive reclassification if perps are later held to be swaps.

That makes a Section 1256 position on a perp a heavier bet than on an event contract. On an event contract you are taking a view nobody has tested. On a perp you are taking one side of a live federal case.

Index, crypto and single-stock perps are not the same

• Broad-based index perps (like the US 500) sit closest to the S&P futures that have long been taxed 60/40. They still face the swap question.
• Crypto perps face the same swap question, and nothing else is different on Kalshi, because they settle in dollars, not coins.
• Single-stock perps, which Kalshi has reportedly asked to offer, would likely be securities futures. Section 1256(b)(2)(A) excludes securities futures outright for anyone who is not a dealer, so the 60/40 route would be closed regardless of the swap debate.

The part everyone agrees on: funding

Under every reading, funding is separate from the position’s gain or loss, and it is ordinary. Funding you receive is income at each payment, not when you close. Funding you pay is an expense. On Kalshi it is a clean dollar amount, so at least this part is easy to add up, if you keep the records.

Interest Kalshi pays on cash in your account is ordinary interest too, reported on a 1099-INT once it reaches $10. Kalshi sends no trade-level 1099 for perps.

What to do this year

1. Keep perps separate from event contracts in your own records. They will likely end up on different lines of your return.
2. Track funding on its own. Total received and total paid, by year.
3. Note your December 31 positions and prices. If you or your preparer choose Section 1256, you need them, and they are hard to rebuild later.
4. Treat a Section 1256 filing as aggressive, and talk to a preparer about a Form 8275 disclosure.