Kalshi's Single-Stock Perps Are Security Futures. That Rules Out 60/40

Kalshi’s single-stock perps are taxed like the stock they track, not like S&P futures. The CFTC approved them on November 3 as security futures, and Section 1256 excludes security futures for anyone who isn’t a dealer. That means no 60/40 split and no December 31 mark. Gains and losses are capital, and a short position is always short-term.

What did Kalshi launch?

On November 5, Kalshi launched perpetual futures on more than 50 stocks listed on the New York Stock Exchange and Nasdaq, with McDonald’s, Palantir and Meta among them. A perp has no expiry date. You go long or short on the price, with leverage, and hold as long as you like. Dustin Gouker’s Event Horizon newsletter ran the announcement the next day.

Two days earlier, CFTC Chairman Michael Selig said these “Equity Perps” were approved “as security futures products under the Commodity Futures Modernization Act of 2000.” Only exchanges registered with both the CFTC and the SEC can list them. That one phrase, security futures, is what sets the tax.

Why is there no 60/40 split?

Section 1256 gives regulated futures the 60/40 treatment: 60% of the gain is long-term and 40% short-term, however briefly you held. But Section 1256(b)(2)(A) carves out “any securities futures contract” unless it is a dealer securities futures contract. A dealer here means someone dealing in these contracts in the normal course of business. A person trading on the Kalshi app isn’t one.

Our October post on Kalshi perps said single-stock perps would likely be security futures. The CFTC statement settles that. Index and crypto perps are different: they are still argued over as futures or swaps, and 60/40 is at least on the table for them.

How are they taxed instead?

Section 1234B covers security futures. Your gain or loss has the same character the stock would have in your hands. For anyone who isn’t a dealer, a stock is a capital asset, so a stock perp gives a capital gain or loss.

• Short positions are always short-term. Section 1234B(b) says so for a contract to sell, however long you hold it.
• Long positions follow the holding period. A perp never expires, so a long held more than a year can be long-term, taxed at the lower rate.
• No year-end mark. An open position on December 31 isn’t taxed until you close it, the same as a share you haven’t sold.
• Net losses follow capital loss rules. They offset capital gains, then up to $3,000 a year of other income, and the rest carries forward. There is no Section 1256 carryback.

Does the wash sale rule apply?

For short positions, yes. Section 1091(e) applies the wash sale rule to a loss on closing a security futures contract to sell, when you sold the same stock or opened another short on it within 30 days either side.

For long positions it may. Section 1091(a) blocks a stock loss if within 30 days you entered into a “contract or option so to acquire” the same stock. Whether a cash-settled long perp counts is untested. If you sell Palantir shares at a loss and go long the Palantir perp the same week, assume the loss could be disallowed and ask a preparer. How the wash sale rule works.

Holding the shares and shorting the perp against them is a hedge, and Section 1092 straddle rules can defer losses on one leg. That is preparer territory.

How is funding taxed?

No rule speaks to funding on a security future. We treat funding received as ordinary income and funding paid as an expense, as in our earlier perps post. That is our reading, not settled law. Track the totals each year, received and paid, separately from your gains.

Kalshi hasn’t said which tax form, if any, it will send for stock perps. Keep your own records from day one.

What should you do if you trade stock perps?

• Keep stock perps apart from event contracts and from index or crypto perps. They land on different lines.
• Log each position’s open date, close date, side and result. Shorts and longs follow different rules.
• Check the 30 days around any loss for trades in the same stock, in your brokerage account too.
• Total your funding received and paid for the year.

For your event contracts, WagerMints shows the year under all four federal methods, free. The prediction market tax guide explains how they differ.

Questions about stock perps and taxes

General information about US tax, not tax or legal advice.