WagerMintsKalshi and prediction markets in Tennessee: taxes and legal status
Tennessee has no personal income tax, so the state doesn't tax your gambling winnings or short-term prediction market gains. You still owe federal tax.
As of October 27, 2026, Kalshi has no court protection in Tennessee after the Sixth Circuit vacated the injunction that had shielded it. Where it stands
Checked October 27, 2026 against Tennessee’s tax department, court dockets and regulator records.
Tennessee at a glance
- Income tax
- None
- Gambling losses
- No state income tax
- 2026 federal 90% rule
- No state income tax
- Prediction markets
- Injunction overturned on appeal
Income tax
How does Tennessee tax gambling and prediction market winnings?
Tennessee has no personal income tax on wages, gambling winnings or short-term trading gains.
Tennessee does not tax capital gains, because it has no state income tax on them.
Legal status
Is prediction market trading legal in Tennessee?
As of October 27, 2026, Kalshi has no court protection in Tennessee after the Sixth Circuit vacated the injunction that had shielded it. The appeals court ruled on September 25, 2026 that Tennessee's gambling laws are not overridden by federal law, based on the early record. Kalshi has asked the full court to rehear the case, and Underdog filed a new suit on October 13, 2026.
Where each platform stands
Kalshi
Being fought in courtA federal judge protected Kalshi in February 2026; the Sixth Circuit vacated that injunction on Sept. 25, 2026 and sent the case back, and Kalshi seeks a rehearing.
Underdog
Being fought in courtUnderdog Exchange DCM sued Tennessee officials in federal court in Nashville on Oct. 13, 2026; no ruling yet.
What happens next: The Sixth Circuit has not ruled on Kalshi's Oct. 9, 2026 request for a rehearing by the full court.
Timeline · 5 steps
Every step in Tennessee, in order
Jan 9, 2026
Court · U.S. District Court, M.D. Tennessee · KalshiEX LLC v. Orgel (No. 3:26-cv-00034)
After the Tennessee Sports Wagering Council sent a cease-and-desist letter, Kalshi sued Tennessee officials in Nashville federal court and got a temporary restraining order.
CourtListener docket, KalshiEX v. OrgelFeb 19, 2026
Court · U.S. District Court, M.D. Tennessee · KalshiEX LLC v. Orgel (No. 3:26-cv-00034)
A federal judge in Nashville granted Kalshi a preliminary injunction against the state officials, finding its contracts are swaps under federal law. Tennessee appealed on Mar. 20.
CourtListener docket, KalshiEX v. Orgel, entries of Feb. 19 and Mar. 20, 2026Sep 25, 2026
Court · U.S. Court of Appeals for the Sixth Circuit · KalshiEX LLC v. Orgel (decided with KalshiEX LLC v. Schuler) (No. 26-5235)
The Sixth Circuit vacated Kalshi's injunction and sent the case back to the Nashville judge. It held Kalshi had not shown its sports contracts are swaps and that federal law would not override Tennessee's gambling laws even if they were. This was a preliminary-stage ruling, not a final judgment.
Sixth Circuit opinion, Sept. 25, 2026Oct 9, 2026
Court · U.S. Court of Appeals for the Sixth Circuit · KalshiEX LLC v. Orgel (No. 26-5235)
Kalshi petitioned for the full Sixth Circuit to rehear the Tennessee and Ohio appeals.
CourtListener docket, Sixth Circuit No. 26-5235Oct 13, 2026
Court · U.S. District Court, M.D. Tennessee · Underdog Exchange DCM, Inc. v. Skrmetti (No. 3:26-cv-01461)
Underdog's exchange sued Tennessee officials, including the attorney general, in federal court in Nashville.
CourtListener docket, Underdog v. Skrmetti
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 Tennessee
Tennesseedoesn’t tax them, but the federal rules do, and the method you choose can change your federal bill by thousands. The four methods, compared.
The court cases are about whether Tennessee 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 Tennessee
- Does Tennessee tax gambling winnings?
- Tennessee has no personal income tax, so the state doesn't tax your gambling winnings or short-term prediction market gains. You still owe federal tax.
- Can I deduct gambling losses in Tennessee?
- Tennessee has no personal income tax, so there is nothing to deduct them from on a state return. Federal rules still apply.
- Is Kalshi legal in Tennessee?
- As of October 27, 2026, Kalshi has no court protection in Tennessee after the Sixth Circuit vacated the injunction that had shielded it. The appeals court ruled on September 25, 2026 that Tennessee's gambling laws are not overridden by federal law, based on the early record. Kalshi has asked the full court to rehear the case, and Underdog filed a new suit on October 13, 2026.
- 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: Texas, Washington, Wyoming, Alaska, Florida, Nevada. All states.
Tax facts checked against Tennessee’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 Tennessee is taxing before you file. Free, no account.
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