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Kalshi and prediction markets in Idaho: taxes and legal status

Idaho taxes gambling winnings and prediction market profits as income (5.3% flat). Gambling losses only reduce your state tax if you itemize, and only up to your winnings.

As of October 27, 2026, we found no Idaho lawsuit, order or letter aimed at prediction market platforms, and no federal case naming a platform in Idaho. Where it stands

Checked October 27, 2026 against Idaho’s tax department, court dockets and regulator records.

Idaho at a glance

Income tax
5.3% flat
Gambling losses
Only if you itemize
2026 federal 90% rule
Follows it
Prediction markets
No state action found

Income tax

How does Idaho tax gambling and prediction market winnings?

Idaho's flat income tax rate is 5.3%, effective January 1, 2025. The Tax Foundation's 2026 table shows the same rate.

Idaho taxes short-term trading gains as ordinary income at the flat rate.

Gambling losses

Can you deduct gambling losses in Idaho?

Idaho lets you deduct gambling losses only if you itemize. Losses are deductible only up to the same year's winnings, and you need records. The Idaho return uses your federal Schedule A itemized deductions (with Idaho adjustments) or the standard deduction, so losses help only if you itemize.

  • Idaho taxes gambling winnings. Winnings from gambling in Idaho are Idaho-source income, so nonresidents owe Idaho tax on them too (Tax Commission decision, tax year 2018, a $50,000 Idaho Lottery prize won by a Utah resident). Residents subtract Idaho Lottery prizes under $600 per prize on Form 39R, line 16.
  • The 2025 instructions say you can use either your federal itemized deductions or the standard deduction, whichever benefits you more.
  • Idaho Lottery prizes over $5,000 have 5.3% Idaho tax withheld. Idaho Code 63-3035A sets lottery withholding at the top individual rate.
  • Idaho conforms to the Internal Revenue Code as of January 1, 2026 and builds its itemized deductions from your federal Schedule A, so the federal 90% limit applies on the Idaho return.

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 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.

  1. 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, 2026

  2. Aug 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, 2026

  3. Sep 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 November 9, 2026 after an extension. 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. 26-299

  4. Sep 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, 2026

  5. Sep 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, 2026

  6. Oct 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, 2026

  7. Oct 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 Idaho

The IRS hasn’t said how prediction market trades are taxed, so you pick one of four federal methods: capital gains, ordinary income, gambling or Section 1256. Idaho starts from your federal figures, so the method you choose federally generally carries onto your state return. If you report as gambling, the loss rules above apply. The four methods, compared.

Questions

Questions about Idaho

Does Idaho tax gambling winnings?
Idaho taxes gambling winnings and prediction market profits as income (5.3% flat). Gambling losses only reduce your state tax if you itemize, and only up to your winnings.
Can I deduct gambling losses in Idaho?
Idaho lets you deduct gambling losses only if you itemize. Losses are deductible only up to the same year's winnings, and you need records. The Idaho return uses your federal Schedule A itemized deductions (with Idaho adjustments) or the standard deduction, so losses help only if you itemize.
Is Kalshi legal in Idaho?
As of October 27, 2026, we found no Idaho lawsuit, order or letter aimed at prediction market platforms, and no federal case naming a platform in Idaho. Idaho Attorney General Raul Labrador joined a 39-state brief in 2026 arguing states can regulate sports betting, which is a statement about the CFTC and not an action against a platform.
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: Iowa, Kentucky, Maine, Maryland, Michigan, Minnesota. All states.

Tax facts checked against Idaho’s own tax pages on October 27, 2026; legal status on October 27, 2026. Rules and cases change, so confirm with current instructions before you file.

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