If you have been telling yourself that prediction market taxes are an unsettled question and therefore not your problem, stop. That excuse works better in Ohio than in Oridhra. The United States genuinely has a gray area here, and two tax professors are publicly begging the IRS to close it. India does not have the same gray area. Indian law taxes “winnings from any game of any sort” at a flat 30%, with no deductions, no basic exemption cushion and no sympathy for the argument that you were really just trading probabilities.
That gap between American ambiguity and Indian bluntness is the whole story. Here is what the US fight is actually about, and what it does and doesn’t change for anyone in India holding a balance on a prediction platform.
What the IRS prediction markets argument is really about
In a forthcoming Tax Notes article titled “Betting on Tomorrow,” Jay A. Soled of Rutgers Business School and Mirit Eyal-Cohen of the University of Alabama School of Law argue that gains from prediction markets should generally be taxed as ordinary income, and that losses should face the same restrictions the US applies to traditional gambling losses. Their complaint is not that the answer is unknowable. It is that the IRS has not said it out loud.
“The issue of the taxation of gains and losses associated with prediction market participation is too significant to ignore,” they write, urging the agency to “lift the veil of uncertainty.”
Why now? Scale. The professors cite global monthly trading volume across leading platforms climbing from under $5 billion in September 2025 to roughly $24 billion by April 2026. When a market grows that fast, silence stops being neutral. Their worry is competitive distortion: if a contract on an election or a cricket result can be dressed up as a financial instrument taxed like a capital asset, prediction platforms get a tax advantage over sportsbooks selling an economically identical bet.
The possible readings are all defensible on paper, which is exactly the problem. Ordinary income. Gambling winnings with restricted loss offsets. Capital gains on the disposal of a contract. Same trade, three different tax bills.
Myth: India hasn’t decided either
India decided a long time ago, and then decided again in 2023 to close the loophole people were leaning on.
Section 115BB of the Income-tax Act taxes winnings from lotteries, crossword puzzles, races including horse races, card games and “other game of any sort or from gambling or betting of any form” at a flat 30%. Add the 4% health and education cess and the effective rate is 31.2% for most individuals, higher if surcharge applies.
What makes this rate bite harder than a 30% slab rate:
- No deductions or expenses. Not your subscription to a data service, not your internet bill, not the losing positions.
- No benefit of the basic exemption limit. Even if your total income sits below the threshold, this slice is still taxed at 30%.
- No Chapter VI-A deductions and no Section 87A rebate against it.
- No set-off of losses from this income against other heads, and no carry forward.
Then came the Finance Act 2023, which added Section 115BBJ for “net winnings from online games” and Section 194BA for TDS on those net winnings. This matters more than people realise, because 115BBJ deliberately sidesteps the old skill-versus-chance fight. Indian courts have long held that some contests are games of skill — the Supreme Court treated rummy that way in State of Andhra Pradesh v. K. Satyanarayana, and horse racing in K.R. Lakshmanan v. State of Tamil Nadu. That distinction still governs whether an activity is legal to offer. For income tax on online games, it no longer buys you a lower rate.
| Provision | Covers | Rate | Practical note |
|---|---|---|---|
| Section 115BB | Lotteries, card games, races, gambling and betting of any form | 30% flat (+cess) | Gross winnings taxed; no expenses allowed |
| Section 115BBJ | Net winnings from online games | 30% flat (+cess) | Skill vs chance is irrelevant to the rate |
| Section 194B | TDS on lottery, crossword and card game winnings | 30% | Applies above a ₹10,000 threshold; check the current wording, as its application has been amended |
| Section 194BA | TDS on net winnings from online games | 30% | No minimum threshold; deducted on withdrawal and at year end |
Separately, online money gaming attracts 28% GST on the amount players pay in, a cost operators generally pass along. And since 2025 the Promotion and Regulation of Online Gaming Act has prohibited offering online money games in India, which is a legality question rather than a tax one. Income tax does not care whether the activity was permitted. Income is income.
Where prediction markets sit under Indian betting tax rules
Honest answer: no notification, circular or court ruling has squarely addressed prediction market contracts in India. But the drafting leaves very little room to manoeuvre.
Three readings are theoretically available:
- Winnings from betting. The phrase “game of any sort or from gambling or betting of any form” in Section 115BB is about as wide as statutory language gets. A yes/no contract on an outcome you cannot influence looks like betting to a plain reader.
- Speculative business income. Section 43(5) defines a speculative transaction as one settled otherwise than by actual delivery. Exchange-traded derivatives are carved out because they trade on recognised stock exchanges under SEBI oversight. Contracts on an offshore prediction platform are not.
- Capital gains. This requires the position to be a capital asset you transferred. Given the SEBI carve-out reasoning and the width of 115BB, arguing for a 12.5% or 20% capital gains treatment on an election contract is an uphill claim, not a filing strategy.
The default assumption any sensible adviser will start from is the 30% winnings treatment. If you think your facts support something else, that is a conversation with a chartered accountant who will put their name on the return, not a conclusion to reach from a Reddit thread.
One more thing worth knowing: under FEMA rules, remittance abroad for lottery and gambling-related activity is prohibited. So funding an offshore platform is not merely a tax question.
Myth: TDS was deducted, so you’re square with the department
TDS is an advance payment, not a settlement. You still declare the income, claim the credit and pay any balance.
Practically, that means:
- Report winnings under Income from Other Sources, in the schedule for income chargeable at special rates. Most people with this income cannot use ITR-1.
- Reconcile against Form 26AS and the Annual Information Statement before filing. Operator reporting and your own numbers should match.
- If you hold a balance or account on a foreign platform, foreign asset and income disclosure obligations may apply. Non-disclosure carries penalties well beyond the tax itself.
- The ₹10,000 TDS threshold is a withholding trigger, not a tax-free allowance. A ₹4,000 win with no TDS deducted is still taxable.
Keep records even where the platform provides statements: deposit and withdrawal confirmations, bank and UPI references, per-position history, and any tax certificates. If a query lands three years later, screenshots of an app you no longer use are a poor defence. You can verify forms and filing requirements on the Income Tax Department portal, and our guides on how gambling winnings are taxed in India and TDS on online gaming winnings go deeper on the mechanics.
The global picture on prediction market taxes
Every jurisdiction is answering the same question with a different instinct.
The UK does not tax a punter’s gambling winnings at all; duty sits on the operator. Australia and Canada broadly leave recreational winnings alone but can treat sustained, business-like activity differently. The US taxes gambling winnings as income and restricts loss deductions, which is precisely why the classification fight matters there. India went the other way and wrote a flat special rate into statute, which is inflexible but at least legible.
Clarity, when it arrives anywhere, will probably look like what Soled and Eyal-Cohen are asking for: a formal position that treats economically identical bets the same way regardless of the platform’s branding. Until then, the safest planning assumption for an Indian user is the least favourable plausible treatment — 30% flat, gross-ish base, losses stranded.
Common questions
How are prediction market winnings taxed?
In India, there is no dedicated provision naming prediction markets, but the wide language of Sections 115BB and 115BBJ means they are most likely to be taxed as winnings at a flat 30% plus cess. In the US, the question is still formally open, which is why tax academics are pressing the IRS to state a position.
Are betting winnings taxable in India?
Yes. Winnings from betting, gambling, card games, lotteries and online games are taxable at a flat 30% plus applicable cess and surcharge, with no deductions and no benefit of the basic exemption limit.
What tax rate applies to gambling wins?
30% under Section 115BB or 115BBJ, which works out to an effective 31.2% for most individuals once the 4% cess is added. TDS at 30% is deducted by the payer under Section 194B or 194BA.
Can I offset losing positions against winning ones?
Under 115BBJ the “net winnings” computation accounts for deposits and withdrawals within the platform framework, but you cannot set off gambling or betting losses against other income, and you cannot carry them forward. Treat every loss as final.
This article is general information, not tax advice, and rates, thresholds and disclosure rules change. Get advice specific to your situation from a qualified chartered accountant before you file. And the obvious point the tax code will never make for you: a 30% flat rate on winnings sits on top of a negative expected return in the first place. Set deposit limits, treat any stake as money you can lose, and use self-exclusion tools if it stops feeling like a hobby.
