Last Updated on May 26, 2026 by Patrick Camuso, CPA
Quick answer (read this first):
What Robinhood provides: An Event Contracts Annual Statement. Not a 1099-B or a 1099-DA. Robinhood explicitly states it is not a substitute tax reporting form. Taxpayers are left to determine the treatment for robinhood prediction market taxes.
What is unsettled: The IRS has issued no guidance on prediction market contract characterization. Robinhood’s CFTC-regulated structure is relevant to the Section 1256 analysis but does not resolve it. The framework depends on the types of contracts traded.
The contract category problem: Specific contract types on Robinhood may require separate characterization analyses. A single framework applied to a mixed account is likely incorrect. This is the most common reporting error.
What Makes Robinhood Structurally Different
Robinhood entered prediction markets in October 2024, offering presidential election contracts through Robinhood Derivatives LLC via ForecastEx. In March 2025, Robinhood launched its full Prediction Markets Hub through a partnership with KalshiEX. Orders route through Robinhood Derivatives, with KalshiEX serving as the underlying CFTC Designated Contract Market.
Robinhood’s infrastructure changed materially in early 2026. Through a joint venture with Susquehanna International Group, Robinhood acquired MIAXdx, a CFTC-licensed Designated Contract Market and Derivatives Clearing Organization. The acquisition gives Robinhood the ability to list, clear, and manage risk for prediction market contracts directly. The exchange began operations in 2026. Trades settle in USD through the standard Robinhood account structure.
What Robinhood Actually Reports (and What It Does Not)
The Event Contracts Annual Statement summarizes aggregate trading activity for the calendar year. Robinhood explicitly states it is not a substitute tax reporting form. No 1099-B or 1099-DA is issued for event contract dispositions. Robinhood may issue a 1099-MISC for referral bonuses reaching the $600 threshold and a 1099-INT for interest on cash balances reaching $10. Neither covers event contract trading activity.
What the statement does not provide is what matters for filing. It reports aggregate gains and losses, not individual contract acquisitions and dispositions with dates and basis figures. Sports contracts and macro/political contracts appear together, so a trader running separate analyses by category must reconstruct the breakdown from transaction-level data. The statement reports gain and loss without asserting a tax framework. That determination is entirely the trader’s responsibility.
The full reporting burden rests with the taxpayer. The Annual Statement is a reconciliation starting point, not a filing document.
How Robinhood’s CFTC Structure Affects the Tax Analysis
Robinhood Derivatives is a Futures Commission Merchant. Orders route through KalshiEX and MIAXdx, both CFTC-regulated DCMs. That structure satisfies one requirement for Section 1256 since contracts must trade on a qualified board or exchange, which includes CFTC-designated contract markets.
What CFTC regulation does not do is establish that the contracts qualify under Section 1256’s enumerated contract types. The non-equity option path is unresolved. The CFTC has characterized prediction market contracts as binary options in public filings. If the contracts qualify as non-equity options under Section 1256(g)(3), and if they trade on a qualified board or exchange, a threshold KalshiEX’s DCM status supports, Section 1256 may be available. A non-equity option under Section 1256(g)(3) is an option that is not an equity option, meaning an option to buy or sell property, or an option with respect to any rate, price, amount, index, or similar item. A prediction market event contract that pays $1 or $0 based on whether a discrete factual outcome occurs is structurally different from an option on a reference instrument. Whether a contract with no underlying reference asset, no exercise mechanics, and no relationship to the value of any property satisfies the option definition at all is a genuine threshold question the IRS has not addressed.
The IRS has not addressed this for prediction market contracts. For a full analysis of Section 1256 as applied to prediction market event contracts, see our Section 1256 prediction market analysis.
The Contract Category Problem
The characterization analysis runs at the contract level, not the platform level. A Robinhood trader with a mixed book cannot apply a single characterization framework to the full year. The sports portion and the macro portion require separate analyses and may land in different frameworks. Reporting a mixed account under a single framework without analyzing the category breakdown is the most common error in Robinhood prediction market tax preparation.
Characterization Frameworks in Practice
Ordinary Income Reporting
Under this framework, Robinhood contracts produce ordinary income or loss as contingent financial instruments. Gains and losses net fully. Within a trade or business, net losses reduce other ordinary income without a $3,000 annual cap. For analysis of when prediction market activity rises to the level of a trade or business under Section 162, see our prediction market trade or business analysis. Outside a trade or business, loss deductibility depends on how the activity is classified.
Ordinary income treatment and gambling treatment are not the same framework. Both produce income taxed at ordinary rates, but the loss mechanics are entirely different.
Capital Gain and Loss Reporting
Contracts are property under Section 1221. Gains and losses are capital. Net capital losses offset other capital gains and up to $3,000 of ordinary income per year, with unlimited carryforward. Cross-asset netting, using prediction market losses to offset stock gains, is available under capital treatment but not under gambling treatment.
Section 1256 Treatment
The 60/40 blended rate and three-year loss carryback are analytically attractive. The non-equity option path is the most viable route but is unresolved. Section 1256 should not be claimed without formal analysis establishing the contracts satisfy the applicable statutory definitions.
Gambling Treatment
Under Section 165(d), losses are deductible only against gambling winnings, only for taxpayers who itemize, and beginning in 2026, only up to 90 percent of winnings. Standard deduction filers receive zero benefit from gambling losses. The session tracking requirement, which the IRS has not defined for continuous digital prediction market activity, adds a documentation burden that does not exist under other frameworks.
Common Robinhood Prediction Market Reporting Errors
The most common errors are treating the Annual Statement as a complete tax document rather than a reconciliation starting point; applying a single characterization framework to a mixed sports and macro account without category-level analysis; claiming Section 1256 without documented analysis establishing the contracts satisfy the statutory definitions; conflating ordinary income treatment and gambling treatment as the same framework and reporting gambling income without session-level records or a documented session methodology.
When Specialized Analysis Makes Sense
DIY reporting may be sufficient where net activity is modest, ordinary income treatment is acceptable, and sports contract exposure is limited.
Specialized analysis is warranted where net gains or losses are material, where the account contains both sports and macro contracts requiring separate category analysis, where Section 1256 or capital treatment is under consideration, where professional gambler status is a genuine question, where activity spans multiple tax years with carryforward or carryback implications, or where the 2026 OBBBA phantom income calculation materially affects estimated tax planning.
Camuso CPA works with Robinhood prediction market traders to evaluate which framework is supportable, reconstruct contract-level activity by category, and prepare returns with written analysis documenting the framework and reasoning. For traders who need a formal written position document before filing, see our prediction market tax reporting services. For the full analytical framework covering prediction market tax characterization across platforms and contract types, see our Prediction Market Tax Guide.
The analysis in this article is unsettled law applied to a novel instrument class. No position constitutes legal or tax advice. The applicable framework depends on the specific contracts, activity pattern, and facts of each taxpayer’s situation. Professional analysis is required before any filing position is taken.
Frequently Asked Questions
Frequently Asked Questions
Does Robinhood Issue a 1099 for Prediction Market Trades?
No. Robinhood provides an Event Contracts Annual Statement and explicitly states it is not a substitute tax reporting form. No 1099-B or 1099-DA is issued for event contract activity. The full reporting burden rests with the trader.
Does Robinhood’s CFTC Structure Mean My Contracts Qualify for Section 1256 Treatment?
Not automatically. The CFTC exchange structure satisfies the qualified board or exchange threshold in Section 1256, but the contracts must independently qualify under one of the enumerated contract types. Regulated futures contracts require daily mark-to-market margining, which Robinhood binary contracts do not have. The non-equity option path raises a prior threshold question: a Section 1256(g)(3) non-equity option is an option on property or on a rate, price, index, or similar item, and whether a contract that pays $1 or $0 based on a discrete factual outcome satisfies that definition at all is an open question the IRS has not addressed. The CFTC’s binary option characterization is relevant but does not control how the IRS defines option for Section 1256 purposes. Section 1256 requires affirmative documented analysis before it can be responsibly claimed.
I Traded Only Sports Contracts on Robinhood. What Framework Applies?
Sports contracts carry the highest wagering characterization risk. The threshold question is whether the activity constitutes wagering under Section 165(d). If it does, the framework is professional gambler treatment under Groetzinger for full-time systematic activity, or recreational gambler treatment otherwise. Under neither path do losses automatically offset non-gambling income. The 2026 OBBBA 90 percent cap applies to both. For 2024 and 2025 returns, the pre-OBBBA rule governs and losses are fully deductible against winnings with no cap.
I Traded Both Sports and Macro Contracts. Do I Use One Framework for Everything?
No. The analysis runs separately by contract category. Sports and macro/political contracts may land in different frameworks. A single framework applied to the full account where the mix is material is likely incorrect and is one of the most common errors in Robinhood prediction market reporting.
Are Robinhood Prediction Market Contracts Digital Assets for Form 1040 Purposes?
No. Robinhood event contracts settle in USD through standard brokerage infrastructure. The digital asset question applies to transactions in digital assets such as Bitcoin, Ethereum, or stablecoins, not USD-settled event contracts.
Can I Offset Robinhood Prediction Market Losses Against Stock Gains?
Under capital treatment, yes. Under gambling treatment, no: losses are deductible only against gambling winnings.
Does the 2026 OBBBA Gambling Loss Cap Apply to My 2024 or 2025 Return?
No. The OBBBA amendment to Section 165(d) applies only to tax years beginning after December 31, 2025. For 2024 and 2025 returns, gambling losses are deductible against gambling winnings dollar for dollar with no percentage cap. The phantom income problem begins with the 2026 tax year.
This article is provided by Camuso CPA for general informational purposes and does not constitute legal, tax, accounting, or investment advice. Tax laws and regulations are evolving rapidly and the information presented may not reflect current guidance. Reading this article does not create a CPA-client relationship. For advice on your specific situation, schedule a consultation with Camuso CPA.
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