CENTER FOR ADDICTION SCIENCE, POLICY, AND RESEARCH

How much tax revenue is Kalshi taking from each state with legal online sports betting?

Kalshi, Polymarket, and other CFTC-regulated prediction markets transacted roughly $21.7 billion in U.S. sports event contracts in 2025. We estimate that $6.7 billion of that volume came from residents of the 33 jurisdictions that license online sports betting — taxable activity those states have direct authority to capture today, but currently collect zero from. This report tabulates the impact for each licensed jurisdiction.

Kalshi alone generated $234.7M in sports fee revenue in 2025 — 89% of its company-wide revenue. Yet Kalshi pays no state sports-wagering tax in any jurisdiction. Licensed sportsbooks on the same handle would have paid hundreds of millions in state excise taxes earmarked for problem-gambling services, education, and general funds. This report focuses on the 33 jurisdictions that have already legalized and licensed online sports betting — where the revenue loss is direct, immediate, and unambiguous.

Methodology — how we estimate per-state tax loss in licensed jurisdictions
  1. Total prediction-market sports volume (national context). We sum 2025 U.S. sports volume for the three categories of operators: Kalshi $17.16B (75% of Kalshi's $22.88B total volume; Kalshi reports 89% of fee revenue came from sports), Polymarket US $3.0B (estimate, given mid-2025 U.S. re-entry post-CFTC settlement), and other PM platforms ~$1.5B (Crypto.com, ForecastEx, Robinhood event contracts not already in Kalshi's totals). Total: $21.7B.
  2. Isolate the licensed-jurisdiction share. Per Eilers & Krejcik Gaming (EKG) geographic estimates, only 31% of Kalshi sports volume occurs in the 33 jurisdictions with legal online sports betting (the other 69% comes from non-legal states, which are excluded from this report). Applied to the $21.7B total, that's $6.71B of taxable PM sports volume happening inside licensed jurisdictions in 2025.
  3. Allocate by adult population. Within the licensed-jurisdictions bucket, we allocate the $6.71B across the 33 jurisdictions in proportion to each one's adult population. Exchanges do not publish state-level handle, so this population-weighted approach is a "principled approximation" (EKG's term) consistent with how legal sportsbooks' market share scales with population.
  4. Counterfactual sportsbook GGR. If those dollars had been wagered through licensed sportsbooks, operators would have held roughly 10% of handle as gross gaming revenue (the U.S. industry held 10.16% of $166.94B in 2025: $16.96B GGR). State allocated volume × 10% hold = state counterfactual GGR.
  5. Apply each state's actual online sports-betting tax rate (from CASPR's tax tracker) to that state's counterfactual GGR. Examples: NY 51%, PA 34%, IL 30% blended, OH 20%, MA 20% online, NJ 19.7%, FL 13.75%.
  6. What this is. The figures below represent direct, current fiscal harm to states that have already chosen to license sports betting and built a tax-collection infrastructure for it. Every dollar shown is revenue the state's tax authority should be receiving on activity inside its borders — but isn't, because the activity ran through a CFTC-regulated exchange instead of a state-licensed sportsbook. Non-legal jurisdictions are excluded from this analysis to keep the focus on demonstrable, recoverable revenue.

Caveats: (1) Kalshi has been ordered to cease sports event contracts in ~11 states via cease-and-desist letters, but most are in active litigation and trading continues in nearly all states. (2) Hold rates vary across sportsbooks (8–11% range); we use 10% as the U.S. industry midpoint. (3) "Other PM" volume is a rough aggregate; Crypto.com and Robinhood prediction-market volume is partially captured in Kalshi totals because Kalshi powers Robinhood's event contracts. (4) Tax rates reflect online sports-betting excise; some states impose graduated rates (IL) or revenue-share lottery models (DE, NH, OR, RI) — we use the most representative figure from the statute.

The fiscal impact, visualized

Top 15 licensed jurisdictions — 2025 tax revenue lost

Direct fiscal harm — money each state's tax authority should have collected on PM sports volume inside its borders. High-tax-rate states (NY, PA, IL) lead despite smaller volume shares.

Concentration of impact

A handful of states bear the bulk of the loss because tax rates vary so widely (6.75% in IA & NV vs. 51% in NY, NH, OR, RI).

The top 5 jurisdictions (NY, PA, IL, FL, OH) account for roughly half of all 2025 tax revenue lost across licensed states.

Kalshi 2025 fee revenue, by source

Sports event contracts dominate Kalshi's economics — and would dominate any state tax collected from PM platforms.

Kalshi 2025: $263.5M total fee revenue on $22.88B volume; 89% of fees from sports.

Monthly PM sports volume in licensed states

Estimated monthly volume happening inside the 33 licensed jurisdictions (31% of full-US PM sports volume per EKG). The Q4 NFL ramp doubled the licensed-state monthly run-rate; Q1 2026 doubled it again.

Growth rate of lost tax revenue — 5 example licensed states

Cumulative state tax revenue lost to prediction-market sports volume, month-by-month from January 2025 through April 2026. Each curve is the state's population-weighted share of monthly PM sports volume × 10% counterfactual hold × the state's actual online sports-betting tax rate. Five jurisdictions are shown to span the rate spectrum from NY's 51% down to FL's 13.75%.

Cumulative tax revenue lost, by licensed state

Hover any line to see the running total at that month. The hockey-stick shape reflects Kalshi's NFL-season ramp in Q4 2025 and continued Q1 2026 acceleration.

Tax rates: NY 51% online · PA 34% · IL 30% blended · MA 20% online · FL 13.75% (Seminole compact revenue share). All five are licensed online sports-betting jurisdictions.

2026 Estimate

2× year-over-year (across the 33 licensed jurisdictions)

~$290M

Doubling tracks Kalshi's late-2025 run-rate and the Polymarket U.S. ramp through Q1 2026.

All 33 licensed jurisdictions — 2025 estimated tax revenue lost

Sortable. Click any column header to re-sort. Each row is a jurisdiction that has already legalized online sports betting and built a tax-collection apparatus for it.

State Adult pop. (M) Est. PM sports volume ($M) Counterfactual GGR ($M) Tax rate Tax revenue lost 2025
33-jurisdiction total — — — weighted ~21.6% —

Tax rate reflects each state's online sports-betting excise (per CASPR tax tracker; blended where graduated; lottery-revenue-share figures used for DE, NH, OR, RI). Volume share within the licensed-jurisdiction bucket allocated by adult population.

Why prediction markets pay no state sports-betting tax in licensed jurisdictions

Kalshi, Polymarket, and Crypto.com run sports event contracts under CFTC Designated Contract Market registration — a federal commodities-exchange license that, the platforms argue, preempts state gambling law. Even in states that have already legalized and built a sports-betting tax regime, PM platforms route around it:

State attorneys general and gaming regulators in roughly 11 licensed-SB jurisdictions — Nevada, New Jersey, Maryland, Connecticut, Tennessee, Ohio, Arizona, Massachusetts, New Hampshire, Illinois, and Montana — have issued cease-and-desist letters or filed enforcement actions arguing Kalshi/Polymarket/Crypto.com sports event contracts are de facto unlicensed sports wagering. A 36-state attorney general coalition has filed amicus briefs supporting state authority. Most challenges remain in active litigation.

If volume was redirected to licensed channels — three illustrative states

All three jurisdictions below have legal online sports betting and an established tax-collection apparatus. Every dollar shown is revenue the state should already be collecting today.

New York (51% online tax)

Estimated 2025 PM sports volume from NY residents: $643M. At a 10% sportsbook hold and 51% NY tax rate, NY would have collected ~$33M in additional sports-betting tax in 2025 alone — roughly 2.5% of NY's $1.32B sports tax haul.

Pennsylvania (34% tax)

Estimated 2025 PM sports volume from PA residents: $424M. PA's 34% tax on the counterfactual GGR translates to ~$14.4M lost in 2025 — a year in which PA sports-betting tax revenue was already under pressure from offshore operators.

Florida (13.75% Seminole compact rate)

Estimated 2025 PM sports volume from FL residents: $727M — the largest of any licensed jurisdiction by volume. At the 13.75% revenue-share rate from Florida's tribal compact, that translates to ~$10M lost in 2025, with the Seminole Tribe's exclusive online-sports-betting deal being directly undercut by Kalshi and Polymarket.

Sources and references

CASPR is the Center for Addiction Science, Policy, and Research. Estimates above are CASPR's own analysis built on public data; they are intended to inform state-level policy discussions and should not be cited as audited financials. Methodology and assumptions are documented above and in scripts/build_pm_tax_loss.py. Last updated 2026-05-05.