WagerMintsKalshi and prediction markets in Pennsylvania: taxes and legal status
Pennsylvania taxes gambling winnings and prediction market profits as income (3.07% flat). It allows gambling losses only in limited cases.
As of October 27, 2026, we found no lawsuit, cease-and-desist order or court case by Pennsylvania against Kalshi, Polymarket US, Robinhood, Coinbase or Crypto.com, and no federal case naming a prediction market in the state. Where it stands
Checked October 27, 2026 against Pennsylvania’s tax department, court dockets and regulator records.
Pennsylvania at a glance
- Income tax
- 3.07% flat
- Gambling losses
- Limited
- 2026 federal 90% rule
- No state income tax
- Prediction markets
- No state action found
Income tax
How does Pennsylvania tax gambling and prediction market winnings?
Pennsylvania taxes income at a flat 3.07% on each of its eight classes of income (2025 PA-40 instructions).
Gains and losses from selling property go in a separate class (PA-40 line 5, Schedule D). Pennsylvania does not split short-term from long-term. You can net your own gains against your own losses in that class, but a net loss can't reduce income in other classes.
Gambling losses
Can you deduct gambling losses in Pennsylvania?
Pennsylvania lets you subtract only the cost of your wagers (bets, tickets) from winnings received in the same tax year, on Schedule T. The result can't go below zero, and a loss in this class can't reduce income in any other class. Travel, meals and other expenses are not deductible. Spouses can't use each other's costs.
- Gambling and lottery winnings are their own income class, reported on Schedule T and PA-40 line 8. Residents are taxed on winnings from every source, wherever the wager is placed. Nonresidents are taxed only on Pennsylvania-source winnings. Noncash Pennsylvania Lottery prizes are excluded. Pennsylvania Lottery cash prizes paid on or after Jan 1, 2016 are taxable.
- Pennsylvania has no itemized deductions. For Pennsylvania Lottery tickets, only tickets bought on or after Jan 1, 2016 count.
- Pennsylvania Lottery cash prizes over $5,000 paid after July 12, 2016 have mandatory withholding at the Pennsylvania income tax rate. Many Pennsylvania casinos offer voluntary withholding. Withholding in box 15 of the W-2G goes on Schedule T line 7.
- Not applicable. Pennsylvania does not follow the Internal Revenue Code and taxes gambling under its own rules.
Legal status
Is prediction market trading legal in Pennsylvania?
As of October 27, 2026, we found no lawsuit, cease-and-desist order or court case by Pennsylvania against Kalshi, Polymarket US, Robinhood, Coinbase or Crypto.com, and no federal case naming a prediction market in the state. The attorney general signed a multistate brief backing Massachusetts against Kalshi, and a bill to license and tax prediction markets sits in a House committee.
State laws on prediction markets
HB 2497 (2025-2026 session) (pending)
Would allow and tax 'event outcome prediction wagering' under the Gaming Control Board; introduced May 8, 2026 and referred to the House Gaming Oversight Committee.
Pennsylvania General Assembly, HB 2497
Timeline · 1 steps
Every step in Pennsylvania, in order
Apr 24, 2026
Attorney general · Pennsylvania Attorney General · Commonwealth of Massachusetts v. KalshiEX LLC (amicus brief) (SJC-13906)
Attorney General Dave Sunday signed the 38-state friend-of-the-court brief backing Massachusetts against Kalshi. It states Pennsylvania's legal position and does not change what traders can do.
Multistate amicus brief, SJC-13906
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.
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, 2026Aug 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, 2026Sep 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. 26-299Sep 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, 2026Sep 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, 2026Oct 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, 2026Oct 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 Pennsylvania
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. Pennsylvania uses its own definitions, so check how it treats the method you choose federally. If you report as gambling, the loss rules above apply. The four methods, compared.
Questions
Questions about Pennsylvania
- Does Pennsylvania tax gambling winnings?
- Pennsylvania taxes gambling winnings and prediction market profits as income (3.07% flat). It allows gambling losses only in limited cases.
- Can I deduct gambling losses in Pennsylvania?
- Pennsylvania lets you subtract only the cost of your wagers (bets, tickets) from winnings received in the same tax year, on Schedule T. The result can't go below zero, and a loss in this class can't reduce income in any other class. Travel, meals and other expenses are not deductible. Spouses can't use each other's costs.
- Is Kalshi legal in Pennsylvania?
- As of October 27, 2026, we found no lawsuit, cease-and-desist order or court case by Pennsylvania against Kalshi, Polymarket US, Robinhood, Coinbase or Crypto.com, and no federal case naming a prediction market in the state. The attorney general signed a multistate brief backing Massachusetts against Kalshi, and a bill to license and tax prediction markets sits in a House committee.
- 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: Utah, West Virginia, Massachusetts, Mississippi, Oklahoma. All states.
Tax facts checked against Pennsylvania’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.
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 Pennsylvania is taxing before you file. Free, no account.
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