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Kalshi and prediction markets in Rhode Island: taxes and legal status

Rhode Island taxes gambling winnings and prediction market profits as income (3.75% to 5.99%). It doesn't let you deduct gambling losses, so gambling winnings are taxed in full on your state return.

As of October 27, 2026, we found no court order in force stopping prediction markets in Rhode Island. Where it stands

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

Rhode Island at a glance

Income tax
3.75% to 5.99%
Gambling losses
No
2026 federal 90% rule
No state income tax
Prediction markets
State sued Kalshi, Polymarket

Income tax

How does Rhode Island tax gambling and prediction market winnings?

Rhode Island's 2025 income tax rates run from 3.75% to 5.99%, with 5.99% on taxable income over $181,650.

Gambling losses

Can you deduct gambling losses in Rhode Island?

Rhode Island doesn't allow itemized deductions. The RI-1040 uses a Rhode Island standard deduction on line 4, so gambling losses don't reduce your Rhode Island income.

  • There is no itemizing on the Rhode Island return. The standard deduction phases out at a modified federal AGI of $254,250 and above.

Timeline · 4 steps

Every step in Rhode Island, in order

4 steps since Apr 24, 2026, oldest first. Each links the filing, order or page it comes from.

  1. Apr 24, 2026

    Attorney general · Rhode Island Attorney General · Commonwealth of Massachusetts v. KalshiEX LLC (amicus brief) (SJC-13906)

    Attorney General Neronha signed the 38-state friend-of-the-court brief backing Massachusetts against Kalshi. It states Rhode Island's legal position and does not change what traders can do.

    Multistate amicus brief, SJC-13906

  2. May 21, 2026

    Attorney general · Rhode Island Attorney General · State of Rhode Island v. KalshiEX LLC and Polymarket (No. 1:26-cv-00333 (D.R.I.))

    Attorney General Neronha sued Kalshi and Polymarket in state court, asking for a ruling that their sports contracts are sports betting under state law, plus a permanent bar, restitution and disgorgement. A federal docket for the state's case was opened May 22.

    Attorney General press release

  3. May 21, 2026

    Court · U.S. District Court for the District of Rhode Island · KalshiEx LLC v. Furcolo (No. 1:26-cv-00327)

    Kalshi sued Rhode Island officials in federal court.

    CourtListener docket, KalshiEx v. Furcolo

  4. May 28, 2026

    Regulator · U.S. Commodity Futures Trading Commission · KalshiEx LLC v. Furcolo (motion to intervene) (D.R.I.)

    The federal commodities regulator moved to join the federal case to stop Rhode Island from applying state gambling law to exchanges it registers.

    CFTC press release 9238-26

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 Rhode Island

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. Rhode Island 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 Rhode Island 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 Rhode Island

Does Rhode Island tax gambling winnings?
Rhode Island taxes gambling winnings and prediction market profits as income (3.75% to 5.99%). It doesn't let you deduct gambling losses, so gambling winnings are taxed in full on your state return.
Can I deduct gambling losses in Rhode Island?
Rhode Island doesn't allow itemized deductions. The RI-1040 uses a Rhode Island standard deduction on line 4, so gambling losses don't reduce your Rhode Island income.
Is Kalshi legal in Rhode Island?
As of October 27, 2026, we found no court order in force stopping prediction markets in Rhode Island. The attorney general sued Kalshi and Polymarket in May 2026 asking a court to declare their sports contracts are sports betting, and Kalshi sued state officials in federal court. The federal commodities regulator moved to join the fight on Kalshi's side of the legal question.
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: Vermont, Wisconsin, Connecticut, Illinois, Indiana, Kansas. All states.

Tax facts checked against Rhode Island’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.

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