At the rapidly evolving intersection of U.S. finance and gambling, the prediction market platform Kalshi is making waves with its unique "event contract" model. Users can "bet" on future events such as sports games and election outcomes, and the platform has easily surpassed the $1 billion mark in cumulative bets. However, behind its rapid development lies a deep game of legal characterization, tax attribution, and regulatory power. Kalshi cleverly navigates the gray area between federal commodity futures and state gambling regulations, not only challenging the traditional regulatory framework but also potentially reshaping the gambling tax landscape worth billions of dollars in the coming years. To understand how global regulatory dynamics affect market patterns, keep an eye on the professional analysis on the PASA official website.
"Financial derivative" or "gambling"? Legal positioning as a talisman
Kalshi's core advantage lies in its ambiguous legal positioning. The platform insists that its trading contracts are "financial derivatives" regulated by the Commodity Futures Trading Commission (CFTC), not "gambling" as defined by state laws. This strategy has successfully allowed it to bypass many states' gambling license requirements and high double-digit state taxes. For example, when New York tried to pass the "Oracle Act" in 2025 to shut down sports prediction markets, Kalshi successfully obtained temporary injunctions in states like New Jersey and Nevada, arguing that its business nature belongs to the financial category. This "federal shield" strategy has allowed it to find a rapid expansion gap in a highly fragmented regulatory environment.
Tax loopholes highlighted, a "perfect timing" for professional gamblers
As the platform grows, tax disputes have quickly heated up. Currently, the Internal Revenue Service (IRS) has not clearly defined whether prediction markets are subject to traditional gambling tax rules, leaving a huge operational space. Shrewd professional gamblers have keenly seized this window, cleverly raising the tax deduction ratio for gambling losses from the original 90% to 100% to avoid the stricter tax reform policies that will take effect in 2026. This phenomenon not only leads to potential tax revenue losses but also sparks widespread discussions about tax fairness. If future regulations tighten, these loophole-exploiting behaviors may be the first to be impacted.
The intensification of regulatory games may trigger an industry reshuffle
The disputes over law and taxes ultimately need a court's decision to settle. And this decision could ignite a new round of industry competition. Experts generally believe that once the court finally rules that Kalshi must comply with state gambling laws and pay the corresponding taxes and license fees, its cost advantage will be significantly reduced. At that time, traditional gambling giants like FanDuel and DraftKings may enter the prediction market field with their mature compliance systems, large user bases, and strong capital. This tug-of-war between federal regulatory power and state autonomy not only concerns the fate of Kalshi alone but will also continue to affect the survival space of innovative businesses and the redistribution of government tax benefits. For practitioners and investors, following the policy interpretations on the PASA official website is key to grasping this changing situation.
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This article is from "PASA-Global iGaming Leader" gambling news channel: https://t.me/pasa_news
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