The Supreme Court will decide whether prediction market operators must collect federal wagering taxes on their sports contracts. Robinhood, Kalshi, and Crypto.com have petitioned the Court, with all three cases now scheduled for responses on December 7.
Robinhood filed its petition on September 10 after losing in the Ninth Circuit to Nevada's gambling commission. Crypto.com's derivatives arm followed on September 11 with its own Nevada appeal, while New Jersey filed a separate petition on September 2 challenging Kalshi's Third Circuit win.
Current Tax Practices
Robinhood disclosed in its October 28 quarterly report that it has not collected or remitted federal excise tax on event contracts. The company stated it does not believe these contracts are subject to such tax. However, Robinhood warned investors that an unfavorable ruling could be material and potentially make event contracts uneconomical.
Robinhood reported $173 million in event contracts revenue in its most recent quarter, more than six times its revenue a year earlier. Customers traded a record 16.4 billion contracts during this period.
The Legal Question
Federal tax code defines a taxable wager as sports or event bets placed with a business or person engaged in accepting such wagers. Prediction market operators argue they operate marketplaces where participants trade with one another, rather than against the house, and therefore do not accept taxable wagers.
In October 2026, researchers at New York University's Tax Law Center concluded that sports event contracts on prediction markets likely qualify as taxable wagers under federal law, subject to excise taxes and ordinary income tax treatment.
State Regulatory Actions
Most prediction market operators are navigating state regulations and making concessions to avoid casino or gambling classifications. Robinhood struck a deal on October 26 to stop offering new sports contracts in Ohio while its legal appeals proceed.
The Supreme Court typically issues substantive opinions during December and January. The Court has broad discretion over ruling timing and has not published its winter schedule.
