Polymarket and Kalshi UK Tax Guide: Are Your Winnings Taxable?

Prediction markets have grown rapidly in popularity over recent years, with platforms such as Polymarket and Kalshi attracting millions of users worldwide.

These platforms allow individuals to speculate on the outcome of future events, including elections, sporting events, interest rate decisions, company announcements, weather events, and geopolitical developments.

As more UK residents begin using these platforms, one question is asked more than any other.

Do you have to pay UK tax on profits made through Polymarket or Kalshi?

Unfortunately, there is currently no simple answer.

Unlike shares, cryptocurrency, property, or traditional gambling, HMRC has not published specific guidance explaining how profits from prediction markets should be treated for UK tax purposes.

This means every taxpayer should carefully consider the nature of their activity before deciding how to report any profits or losses.

What Are Prediction Markets?

Prediction markets allow users to buy and sell contracts based on whether a future event will occur.

For example, you might purchase a contract that pays £1 if a particular event happens before a specified date.

As the perceived probability of the event changes, the market price moves up and down. Users may either hold their contracts until the event is settled or sell them beforehand.

This creates a marketplace that shares characteristics with both investing and gambling.

What Is The Difference Between Polymarket And Kalshi?

Although they operate differently, both platforms have similar economic characteristics.

Polymarket operates using cryptocurrency and blockchain technology. Users typically fund their accounts with digital assets and trade prediction contracts on a decentralised platform.

Kalshi is a regulated prediction market in the United States. Users trade event contracts through a regulated exchange without using decentralised blockchain infrastructure.

Despite these operational differences, both platforms allow users to speculate on future events through tradable contracts.

For UK tax purposes, the differences between the platforms may not necessarily determine the correct tax treatment. Instead, HMRC would be expected to consider the legal and factual nature of the transactions themselves.

Why Is The Tax Position Unclear?

HMRC publishes extensive guidance covering many forms of investment and gambling, including:

• Shares.
• Cryptocurrency.
• Financial derivatives.
• Spread betting.
• Traditional betting.
• Casino gambling.

However, there is currently no published HMRC guidance dealing specifically with prediction markets such as Polymarket or Kalshi.

Prediction markets sit somewhere between financial trading and gambling.

This creates genuine uncertainty.

The Gambling Argument

One possible analysis is that prediction markets are simply another form of gambling.

Participants stake money on uncertain future events and either win or lose depending on the eventual outcome.

Traditionally, gambling winnings received by individuals in the UK are not subject to Income Tax or Capital Gains Tax.

This treatment reflects the long standing principle that gambling is generally outside the scope of personal taxation, with gambling operators instead being subject to separate gambling duties.

If prediction markets are ultimately regarded as gambling, the consequences would normally be:

• Winnings would generally not be taxable.
• Losses would generally not be deductible.
• Occasional or frequent betting would not usually create taxable investment gains.

The Investment Argument

There is also a credible argument that prediction markets resemble financial investments rather than gambling.

Unlike placing a fixed bet with a bookmaker, users can usually:

• Buy and sell contracts throughout the life of the market.
• Exit positions before settlement.
• Trade based on changing probabilities.
• Apply investment strategies such as hedging, arbitrage, probability analysis, and portfolio management.

Many experienced users are not simply waiting to see whether an event occurs. Instead, they are actively trading market movements in much the same way as participants in financial markets.

If HMRC were to adopt this analysis, profits might potentially fall within the scope of Capital Gains Tax or, depending on the circumstances, Income Tax.

HMRC treats crypto-denominated prediction market winnings as follows:

• If trading is occasional (hobby): Winnings may be treated as gambling winnings — tax-free under current HMRC guidance for spread bets and gambling wins
• If trading is regular/systematic: HMRC may classify it as a trade — subject to Income Tax (20–45%)

The correct treatment would depend on the legislation that applies and the specific facts of the individual’s activity.

Could Someone Be Trading?

A further possibility is that, in exceptional cases, an individual’s activity could amount to a trade.

UK courts have developed a number of indicators, often referred to as the badges of trade, when determining whether an activity constitutes trading.

Relevant considerations may include:

• The frequency of transactions.
• The intention behind entering transactions.
• The organisation of the activity.
• The time devoted to it.
• Whether the activity is conducted in a commercial manner.

Simply using Polymarket or Kalshi does not automatically mean someone is trading.

However, individuals who conduct large scale, systematic, profit driven activities may wish to consider whether the badges of trade are relevant to their circumstances.

Professional advice should be sought where significant amounts are involved.

What About Losses?

One important point is consistency.

If HMRC were ultimately to conclude that profits from prediction markets are taxable because they represent investment or trading activity, it would generally be expected that qualifying losses arising from the same activity should also be recognised in accordance with the relevant tax legislation.

Conversely, if prediction markets are treated as gambling, then both winnings and losses would normally fall outside the tax system.

Although the precise tax treatment remains uncertain, consistency between profits and losses would be an important principle.

Should You Tell HMRC About Your Activity?

Where significant amounts are involved, many taxpayers choose to adopt a transparent approach.

If you complete a Self Assessment tax return, it may be appropriate to disclose your activity and explain the basis on which you have reached your tax treatment, particularly where the position is uncertain.

Providing a clear explanation can demonstrate that reasonable care has been taken and may assist if HMRC later reviews the return.

The most appropriate approach will depend on your individual circumstances and the facts of your activity.

Practical Record Keeping

Whether your activity ultimately proves taxable or not, maintaining comprehensive records is strongly recommended.

You should retain:

• Transaction histories.
• Purchase and sale prices.
• Settlement values.
• Platform statements.
• Wallet records where cryptocurrency has been used.
• Details of any fees or commissions.

Good record keeping will make it significantly easier to respond to any future HMRC enquiries.

Our View

Prediction markets are an emerging area of financial technology and UK tax law has not yet caught up with their development.

At the time of writing, there is no published HMRC guidance specifically confirming how profits generated through Polymarket, Kalshi, or similar prediction markets should be treated.

For some users, there are persuasive arguments that the activity is comparable to gambling.

For others, particularly those actively buying and selling contracts using sophisticated strategies, there are also arguments that the activity more closely resembles investment or, in exceptional circumstances, trading.

Until HMRC or the courts provide greater clarity, there is unlikely to be a single answer that applies to every taxpayer.

If you have generated significant profits through prediction markets, obtaining professional advice before submitting your Self Assessment tax return is sensible.

How TaxQube Can Help

At TaxQube, we specialise in advising individuals on complex and evolving areas of UK taxation, including cryptocurrency, foreign income, employee share schemes, and emerging financial products.

If you have used Polymarket, Kalshi, or another prediction market, we can review your activity, assess the available tax analyses, and help you determine an appropriate reporting position based on current UK legislation, HMRC practice, and your individual circumstances.

Frequently Asked Questions

Are Polymarket profits taxable in the UK?

There is currently no published HMRC guidance specifically dealing with Polymarket. The correct treatment depends on the legal analysis of the activity and the individual facts.

Are Kalshi profits taxable in the UK?

The same uncertainty applies to Kalshi. HMRC has not published platform specific guidance.

Can I ignore my prediction market winnings?

You should not assume that profits are automatically outside the scope of UK tax. Where significant amounts are involved, you should consider taking professional advice and whether disclosure is appropriate.

Can I claim losses?

That depends on the tax treatment ultimately adopted. If the activity falls outside the tax system as gambling, losses would generally not be deductible. If the activity is taxable under another part of the tax code, qualifying losses may also be recognised under the relevant legislation.

TaxQube Contact Info

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