Even tax nerds are stumped by prediction markets. Take Alan Cole. The 37-year-old senior economist at the right-leaning Tax Foundation told the Wall Street Journal that he used Kalshi to bet much of his life savings — $342,195.63 — against DOGE making major cuts to federal spending.
It paid off. Cole said he made $470,300 after government spending increases last year, netting a profit of around $128,000 — a 37% return.
But when it comes to recording his bounty on IRS forms, even Cole is flying somewhat blind.
“It’s far from clear whether Kalshi more resembles futures trading, which could go under something like section 1256, or gambling income, which could go as normal ordinary income on the 1040,” Cole told Business Insider in an email. “The 1256…
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Source www.businessinsider.com
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