CFTC (Commodity Futures Trading Commission)

The Commodity Futures Trading Commission (CFTC) is the U.S. federal agency that oversees futures, options, and swaps markets. For prediction market traders, the CFTC matters because it determines which platforms are legally regulated — and that regulation directly affects your tax options.

Why CFTC regulation matters for taxes

Section 1256 of the Internal Revenue Code provides favorable tax treatment (60% long-term / 40% short-term) for "regulated futures contracts." To qualify, the contracts must be traded on a CFTC-regulated exchange. This is why:

• Kalshi — CFTC-regulated as a Designated Contract Market (DCM). Strongest argument for Section 1256 treatment.
• Polymarket — Not CFTC-regulated. Section 1256 is unlikely to apply.
• Robinhood — Regulated by FINRA for securities, not CFTC. Section 1256 status is uncertain for their event contracts.
• DraftKings — State gaming-regulated. Section 1256 does not apply.

CFTC vs. other regulators

Not all "regulated" platforms fall under the CFTC. DraftKings and FanDuel are regulated by state gaming commissions. Robinhood is regulated by FINRA and the SEC. Only CFTC regulation is relevant for Section 1256 tax treatment.

The ongoing debate

Even for CFTC-regulated platforms like Kalshi, the IRS has not explicitly confirmed that event contracts qualify as "regulated futures contracts" under Section 1256. Most tax professionals believe the argument is strong but not settled. This is why predictiontaxes.com labels Section 1256 as an "aggressive" tax position.