Last Updated on July 19, 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 mixed account should not be assigned a single framework without first analyzing whether materially different contract categories require separate treatment.
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. A joint venture controlled by Robinhood in partnership with Susquehanna International Group 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 transaction closed in January 2026, and MIAXdx has since been renamed Rothera Exchange and Clearing LLC. Trades settle in USD through the standard Robinhood account structure.
What Robinhood Actually Reports (and What It Does Not)
The Event Contracts Annual Statement includes individual event-contract transactions, closing dates, costs, proceeds, fees and commissions, and net profits and losses. Robinhood states that it is not a substitute tax reporting form. The statement does not determine federal tax characterization or replace the underlying records needed to support the return. No 1099-B or 1099-DA is issued for event contract dispositions. Robinhood may issue other 1099 forms for items outside event contracts; none covers event contract trading activity.
Sports contracts and macro/political contracts appear together, so a trader running separate analyses by category must organize the breakdown from the 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. Robinhood currently offers event contracts through KalshiEX, ForecastEX, or Rothera Exchange and Clearing LLC, formerly MIAXdx, all CFTC-designated contract markets. That structure is relevant to one element of Section 1256: contracts must trade on a qualified board or exchange, and CFTC-designated contract markets are one route to that status.
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 nonequity option under Section 1256(g)(3) is a listed option that is not an equity option. 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 prediction-market event contract is an ‘option’ at all for federal tax purposes remains an unresolved threshold question.
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
Characterization may differ among materially different contract categories, and platform-level reporting does not determine whether separate treatment is required. A mixed account should not be assigned a single framework without first analyzing whether materially different contract categories require separate treatment. Reporting a mixed account under a single framework without that analysis may produce an unsupported result.
Characterization Frameworks in Practice
Ordinary Income Reporting
Under this framework, Robinhood contracts produce ordinary income or loss as contingent financial instruments. Ordinary character alone, however, does not establish recognition, deductibility, placement, limitation, or netting. For an individual, an otherwise allowable ordinary nonbusiness loss outside a sale or exchange is a miscellaneous itemized deduction currently disallowed under Section 67(h). For the full loss analysis, see our prediction market loss deductions article.
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
If the contracts are capital assets in the taxpayer’s hands 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 loss carryback features explain the attention Section 1256 receives. Section 1256 is not a taxpayer election, the non-equity option question is unresolved, and Section 1256 should not be claimed without formal analysis establishing the contracts satisfy the applicable statutory definitions.
Gambling Treatment
If Section 165(d) applies, wagering losses may not exceed wagering gains. Placement depends on taxpayer capacity; for an individual’s nonbusiness wagering activity, the deduction generally requires itemizing. For tax years beginning after December 31, 2025, the deduction is limited to 90 percent of wagering losses. Published guidance does not establish a required transaction or session unit for continuous prediction market activity, which adds a material measurement and documentation burden under the wagering framework.
Common Robinhood Prediction Market Reporting Errors
Potential errors include 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 adopting a wagering position without records supporting the measurement unit used.
When Specialized Analysis Makes Sense
DIY reporting may be sufficient where activity is modest and the relevant contract categories and reporting treatment are straightforward.
Specialized analysis is warranted where net gains or losses are material, where the account contains materially different contract categories that may require separate 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
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 may satisfy the qualified board or exchange threshold in Section 1256, but the contracts must independently qualify under one of the enumerated contract types. The regulated futures contract definition requires qualified-board-or-exchange status and a contract for which required deposits and permitted withdrawals depend on a system of marking to market. Whether current contract structures satisfy that definition remains part of the analysis. The non-equity option path raises a prior threshold question: a nonequity option under Section 1256(g)(3) is a listed option that is not an equity option, and whether a prediction-market event contract is an ‘option’ at all for federal tax purposes remains an unresolved threshold question. 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?
No contract category is automatically wagering. Whether Section 165(d) applies depends on the particular contract and facts. If it does, placement and limitations depend on whether the activity is a trade or business, and that status is a facts-and-circumstances question. Under neither path do losses automatically offset non-gambling income. For tax years beginning after December 31, 2025, the amended limitation applies regardless of trade-or-business status: the deduction is limited to 90 percent of wagering losses and may not exceed wagering gains. For 2024 and 2025 returns, the pre-OBBBA rule governs and losses are deductible up to winnings with no percentage cap.
I Traded Both Sports and Macro Contracts. Do I Use One Framework for Everything?
Not necessarily. Materially different contract categories may require separate treatment, and sports and macro/political contracts may land in different frameworks. A mixed account should not be assigned a single framework without first analyzing whether materially different contract categories require separate treatment.
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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