Prediction market taxes and legal status by state

Where states are acting against prediction markets

Arizona, Arkansas, California, Connecticut, Illinois, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, Ohio, Rhode Island, Tennessee, Utah, Washington, Wisconsin. Each state page has the cases, what each platform can still offer there, and a dated timeline with the filings.

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 October 27. New Jersey's petition to the Supreme Court, Flaherty v. KalshiEX (No. 26-299), is waiting on Kalshi's response due November 9, 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 latest steps

The newest court, regulator and attorney general actions across every state, newest first.

States with no personal income tax

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. Your winnings and short-term trading gains aren’t taxed by the state. Federal tax still applies.

States that don’t allow gambling losses

Connecticut, Illinois, Indiana, Kansas, Louisiana, Ohio, Rhode Island, Vermont, Wisconsin. In these states, gambling winnings are taxed in full on the state return, whatever you lost. If you report prediction market trades as gambling, this applies to them too.

Every state

Federal tax comes first

The method you use on your federal return usually carries onto your state return. How prediction market trades are taxed, sports betting taxes, and the 2026 gambling loss calculator.