About this episode

Clinton Donnelly discusses the complexities of taxation in prediction markets like Kalshi and Polymarket, focusing on the implications of losses and IRS regulations.

Are you trading on Kalshi, Polymarket, or other prediction markets? In this episode, Clinton Donnelly explains why prediction market taxes can be confusing, especially when activity may be treated differently depending on whether it looks like gambling or capital asset activity. One of the biggest issues discussed is the 90% loss rule. In some cases, a trader could lose money overall and still have taxable income because gambling losses may be limited and treated differently from capital losses. Clinton covers: • Why prediction market taxes are still a gray area • Why the IRS has not issued clear guidance on this specific issue • The difference between event-driven prediction markets and financial market predictions • Why sports, elections, and outcome-based markets may look more like gambling or wagering • How gambling loss limits can create a tax trap • What the standard deduction trap means • Why financial-market-based prediction activity may be closer to capital gains treatment • Why 1099 reporting from regulated platforms may matter Prediction markets are growing fast, but the tax treatment is not always simple. If you are active on Kalshi, Polymarket, or similar platforms…

More episodes of The Clinton Donnelly Show

• Should the IRS Offer Crypto Tax Amnesty? Crypto Traders Need to Speak Up · May 28, 2026 · 2 min
• Your 1099-DA Could Make It Look Like You Made $1 Million · May 19, 2026 · 4 min
• Why Is My 1099-DA So High? Crypto Tax Strategy for Traders · May 12, 2026 · 3 min

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