WagerMintsWagerMintsbeta
Taxes by stateSports contracts halted

Kalshi and prediction markets in Michigan: taxes and legal status

Michigan taxes gambling winnings and prediction market profits as income (4.25% flat). Gambling losses only reduce your state tax if you itemize, and only up to your winnings.

As of October 27, 2026, Kalshi, Robinhood and Coinbase are barred or have agreed to stop offering sports event contracts to people in Michigan. Where it stands

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

Michigan at a glance

Income tax
4.25% flat
Gambling losses
Only if you itemize
2026 federal 90% rule
Follows it
Prediction markets
Sports contracts halted

Income tax

How does Michigan tax gambling and prediction market winnings?

Michigan taxes income at a flat 4.25% for tax year 2025.

The City of Detroit levies a city income tax.

Short-term gains are taxed like other income at 4.25%.

Gambling losses

Can you deduct gambling losses in Michigan?

Michigan allows gambling losses only if you itemize on your federal return. Since 2021, you subtract on Schedule 1 the wagering losses you deducted on federal Schedule A. Nonresidents subtract only losses from wagers placed at a Michigan casino or race track, up to winnings from those. Other federal itemized deductions are not allowed.

  • Winnings are taxable to the extent they are included in federal AGI. Nonresidents are taxed on winnings from Michigan casinos, race tracks and the lottery.
  • You must have itemized on your federal return. If you took the federal standard deduction, you can't claim the Michigan subtraction.
  • Michigan withholds 4.25% from nonresidents on reportable winnings at Michigan casinos, racetracks and off-track betting. Charitable gaming winnings are also covered.
  • Michigan's subtraction is the amount you deducted on federal Schedule A, so the federal 90% limit carries through from 2026.

Timeline · 8 steps

Every step in Michigan, in order

8 steps since Mar 5, 2026, oldest first. Each links the filing, order or page it comes from.

  1. Mar 5, 2026

    Attorney general · Michigan Attorney General · People v. KalshiEX (Ingham County Circuit Court)

    Attorney General Dana Nessel announced a state-court lawsuit saying Kalshi runs unlicensed sports betting in violation of Michigan's Lawful Sports Betting Act.

    Michigan AG press release, Mar. 5, 2026

  2. Jun 17, 2026

    Court · U.S. District Court, W.D. Michigan · QCX, LLC v. Nessel (No. 1:26-cv-00710)

    A federal judge in Michigan denied Polymarket US's request for a preliminary injunction against Michigan's enforcement. Polymarket US appealed.

    CourtListener docket, QCX v. Nessel

  3. Jun 25, 2026

    Court · U.S. District Court, W.D. Michigan · Nessel v. KalshiEX, LLC (No. 1:26-cv-00731)

    A federal judge sent the state's lawsuit against Kalshi back to the Ingham County state court after Kalshi tried to move it to federal court. Kalshi appealed to the Sixth Circuit, where briefing is on hold.

    CourtListener docket, Nessel v. KalshiEX

  4. Jun 29, 2026

    Court · Ingham County Circuit Court (state) · People v. KalshiEX

    A state judge issued a temporary restraining order halting Kalshi's sports betting operation and advertising in Michigan.

    Michigan AG press release, June 29, 2026

  5. Aug 6, 2026

    Court · U.S. District Court, E.D. Michigan · Coinbase Financial Markets, Inc. v. Nessel (No. 4:25-cv-14092)

    A federal judge denied Coinbase's request for a preliminary injunction. Coinbase appealed (Sixth Circuit No. 26-1693).

    CourtListener docket, Coinbase v. Nessel

  6. Sep 1, 2026

    Court · Ingham County Circuit Court (state) · People v. KalshiEX

    A state judge entered a preliminary injunction requiring Kalshi to block people in Michigan from its sports contracts, with a $500,000 per day fine. It stays in place until a final order.

    Michigan AG press release, Sept. 2, 2026

  7. Sep 9, 2026

    Regulator · Michigan Gaming Control Board · Robinhood Derivatives, LLC v. Nessel (No. 1:26-cv-00730)

    Robinhood agreed in a court-approved stipulation to stop new sports event contracts in Michigan and close positions by Oct. 9. The state agreed not to enforce against it while the appeals run; neither side gave up its legal position.

    Michigan Gaming Control Board announcement, Sept. 9, 2026

  8. Oct 7, 2026

    Regulator · Michigan Gaming Control Board · Coinbase Financial Markets, Inc. v. Nessel (No. 4:25-cv-14092)

    Coinbase agreed to stop new sports event contracts in Michigan by Oct. 10 and close remaining positions. The state agreed not to enforce against it while the Sixth Circuit appeals proceed.

    Michigan Gaming Control Board announcement, Oct. 7, 2026

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 Michigan

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. Michigan 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.

The court cases are about whether Michigan can license or stop the platforms. None of them decides how your trades are taxed. Trades you already made, including positions an order made you close, still count in your tax year.

Questions

Questions about Michigan

Does Michigan tax gambling winnings?
Michigan taxes gambling winnings and prediction market profits as income (4.25% flat). Gambling losses only reduce your state tax if you itemize, and only up to your winnings.
Can I deduct gambling losses in Michigan?
Michigan allows gambling losses only if you itemize on your federal return. Since 2021, you subtract on Schedule 1 the wagering losses you deducted on federal Schedule A. Nonresidents subtract only losses from wagers placed at a Michigan casino or race track, up to winnings from those. Other federal itemized deductions are not allowed.
Is Kalshi legal in Michigan?
As of October 27, 2026, Kalshi, Robinhood and Coinbase are barred or have agreed to stop offering sports event contracts to people in Michigan. A state judge ordered Kalshi to block Michigan users from its sports contracts on Sept. 1, 2026, and Robinhood and Coinbase signed agreements with the state. Polymarket US lost a bid for a federal injunction and its appeal is on hold.
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: Minnesota, Missouri, Montana, Nebraska, New Mexico, New York. All states.

Tax facts checked against Michigan’s own tax pages on October 26, 2026; legal status on October 27, 2026. Rules and cases change, so confirm with current instructions before you file.

ShareXRedditLinkedInFacebookWhatsAppTelegramBlueskyThreadsEmail

See your own year four ways

WagerMints prices your Kalshi or Polymarket year under all four federal methods, side by side, so you can see what Michigan is taxing before you file. Free, no account.

Run your report