The State of Information Reporting for Event-Based Contracts

Sports, elections, politics, culture, commodities, economics, companies—these are but a few of the various categories of event contracts offered by prediction markets such as Kalshi, Polymarket, and Crypto.com. Taking the over on prediction market expansion during 2026 would seemingly guarantee a payout—notional monthly trading exceeded $25.7 billion in March 2026, up from less than $100 million in early 2024,¹ and investment firm analysts estimate prediction market trading volume of $1 trillion a year by 2030.²

The rapid growth of these markets has triggered significant legal and regulatory scrutiny, as well as the practical question of how these contracts should be treated for U.S. tax purposes. Once the question of U.S. tax treatment is raised, that necessarily highlights the question of information reporting and withholding given its importance to effective tax administration. While the Internal Revenue Service (“IRS”) has not yet weighed in on the information reporting considerations, these should be top of mind for the various platforms given the unique nature of these contracts. Platforms already making these payments must choose a reasonable tax characterization and implement information reporting and withholding controls that are defensible under current law. They do not have the luxury of waiting for guidance.