Phantom Brings Kalshi Prediction Markets to US Users via CASH Stablecoin
Phantom, the crypto wallet provider, began rolling out access to Kalshi's event-contract platform for US users on 23 October 2026. Trades are funded with CASH, Phantom's own dollar-pegged stablecoin, and settlements are converted to fiat before winnings cycle back into users' Phantom Cash accounts. For accounting firms, auditors, and CFOs working with clients who hold or transact in digital assets, this integration surfaces a set of accounting, tax, and compliance questions that go well beyond the novelty of in-wallet prediction markets. The right crypto compliance reporting framework matters now, before transaction volumes scale.
What the Phantom and Kalshi Integration Actually Does
At its core, the integration embeds Kalshi's full catalogue of event contracts inside the Phantom wallet interface. Phantom decides which markets to display; Kalshi provides the underlying infrastructure. Users who want to place a trade must first complete Know Your Customer verification on Kalshi's platform, not just Phantom's. That KYC requirement is significant: it means Kalshi, as the CFTC-registered designated contract market, holds primary compliance responsibility for user onboarding.
The Stablecoin Settlement Loop
The payment flow is what makes this arrangement accounting-relevant. A user holds CASH balances in a Phantom Cash account. Those funds are transferred to Kalshi and converted into fiat US dollars for trade settlement. When the user cashes out or collects winnings, the proceeds return to their Phantom Cash account, back in CASH. Every step in that cycle touches a different asset class or ledger treatment: the stablecoin balance, the in-transit conversion, the open event-contract position, and the returned stablecoin proceeds. Phantom quoted a feed of $0.02 per contract plus a network fee for moving funds to Kalshi. Users see a full cost breakdown before confirming.
Market Restrictions by State
Phantom is not offering uniform access across the country. Three states face specific restrictions at launch:
- Michigan: Sports markets are blocked.
- Nevada: Sports, elections, politics, and entertainment markets are blocked.
- Washington: All of the Nevada restrictions apply, plus culture, science and technology, mentions, and geopolitics markets are also blocked.
Phantom's general counsel, Kevin Jacobs, confirmed those restrictions could be revised as the respective state legal cases progress.
The Regulatory Foundation, and Where It Gets Complicated
Phantom's legal basis for offering access to Kalshi products rests on a conditional no-action letter the Commodity Futures Trading Commission issued to Phantom in March 2026. That letter relieves Phantom from registering as a futures commission merchant or introducing broker, provided its interactions with these products remain consistent with the conditions set out in the letter. The CFTC subsequently extended similar no-action relief to other software providers, a move that signals the regulator's posture but does not pre-empt state-level challenges.
State Challenges and the Supreme Court Question
Several US states have filed lawsuits arguing that Kalshi's event contracts constitute gambling under state law and that federal CFTC jurisdiction does not override state gambling statutes. Jacobs told The Block that Phantom views CFTC jurisdiction as clear and is "confident and comfortable" proceeding within the terms of its no-action position. He added that Phantom expects the Supreme Court will ultimately resolve the federal-versus-state jurisdiction question. Until it does, the regulatory status of these contracts, and by extension any stablecoin flows funding them, remains contested in at least three jurisdictions.
For accounting firms advising clients on how US crypto regulatory risk shapes financial reporting, that contested status is material. A position that is legally valid under CFTC rules today could be reclassified by a state court tomorrow, and any such reclassification has potential consequences for how open positions and associated stablecoin balances are disclosed.
Accounting and Bookkeeping Implications
This integration creates at least four distinct accounting questions for firms whose clients participate, or whose clients' platforms facilitate participation, in Kalshi markets through Phantom.
Classifying the CASH Stablecoin Balance
CASH is a dollar-pegged stablecoin. Under current US GAAP practice, most stablecoins that are fully backed by fiat or fiat-equivalent assets and redeemable on demand are treated as financial assets, often analogous to cash equivalents if they meet the short-term, negligible-risk criteria, or as other current financial assets if they do not. The key question is whether CASH meets the redemption conditions necessary for cash-equivalent treatment. Firms should review Phantom's published terms for CASH, including any redemption gates or delays, before classifying these balances on a client's balance sheet. Using reliable crypto bookkeeping software that can handle stablecoin-specific sub-ledger entries will be important here, particularly as balances move between wallet, in-transit, and Kalshi-held states.
Accounting for Open Event-Contract Positions
Event contracts on a CFTC-regulated designated contract market are derivatives under US GAAP. ASC 815 governs derivative accounting, and unless a scope exception applies, open positions must be recognised at fair value with changes recorded in the income statement. For most retail or corporate participants, no hedge designation is likely, so these will be straightforward mark-to-market items. The challenge is obtaining reliable fair values for binary event contracts at each reporting date, particularly for contracts with illiquid or thinly traded markets.
The Conversion Leg: Stablecoin to Fiat and Back
When CASH is transferred to Kalshi and converted to fiat for settlement, a taxable event may occur under IRS Notice 2014-21 and subsequent guidance, which treats the disposal of a digital asset (including stablecoins) in exchange for fiat or goods and services as a realisation event. If CASH consistently trades at a $1.00 peg, the gain or loss on conversion may be negligible or nil, but the event still needs to be captured and documented. The reverse leg, converting fiat winnings back to CASH, creates a new cost basis. Digital asset accounting software that logs every conversion with timestamp, quantity, cost basis, and proceeds is essential for maintaining an auditable trail across what can be a high volume of small transactions.
Revenue and Income Recognition for Corporate Participants
For corporate treasury teams or trading desks that use Kalshi markets for risk management or speculative purposes, the accounting treatment of gains and losses on event contracts, and the treatment of the stablecoin balances held as margin, must be addressed in the entity's accounting policy. These are not standard equity or bond positions, and most existing crypto asset accounting policies will need to be explicitly extended to cover CFTC-regulated event contracts funded by stablecoins.
Tax Considerations for US Filers
Each Conversion Is a Taxable Disposal
The IRS has consistently treated digital asset disposals, including stablecoin-to-fiat conversions, as taxable events. If a client transfers CASH to Kalshi and Kalshi converts it to fiat, that conversion is a disposal of CASH at the prevailing exchange rate. If CASH holds its peg precisely, the gain is zero, but the transaction still has to be reported. Short-term capital gain or loss rules apply if the holding period is under one year. Firms should ensure clients are capturing every conversion event, not just the net winnings figure.
How Are Event Contract Gains Taxed?
This is an open question with meaningful stakes. Regulated futures contracts under Section 1256 of the Internal Revenue Code benefit from a 60/40 blended rate (60% long-term, 40% short-term) regardless of actual holding period, and are marked to market at year-end. Kalshi is a CFTC-designated contract market, and its contracts may qualify as Section 1256 contracts. If they do, the tax treatment of gains and losses is more favourable than standard capital gains treatment. However, the IRS has not issued specific guidance on binary or event contracts in this context, and the classification is not settled. Firms should flag this to clients and consider a conservative position pending formal guidance.
State Tax Exposure
State income taxes add another layer. Clients in the three states where Phantom is blocking certain markets face an additional complication: if a contract is legally ambiguous under state law, the state tax treatment of gains from that contract may also be uncertain. Firms should document the state-level regulatory status of any event contracts held by clients in Michigan, Nevada, and Washington.
Compliance and AML Considerations for Accounting Firms
The KYC requirement on Kalshi's side means Kalshi holds primary AML/BSA responsibility for user identification. For accounting firms, the relevant question is whether a client's use of Phantom Cash to fund Kalshi trades creates any enhanced-due-diligence obligations on the firm's own side. Under FinCEN's framework, accountants who provide certain financial services are covered persons, and stablecoin-funded derivatives activity of any material scale should be addressed in the firm's AML risk assessment.
The stablecoin-to-fiat-to-stablecoin settlement loop, while economically straightforward, creates a chain of transfers that could appear unusual in transaction monitoring systems. Firms advising clients on crypto compliance should review the stablecoin accounting implications for tokenized deposits for comparison on how similar settlement architectures have been treated elsewhere.
Volume Context and Why This Scales Fast
Kalshi has recorded more than $291 billion in trading volume in 2026 to date, according to The Block's data. October volume alone had already reached $55.33 billion with nine days still remaining in the month, putting it on track to exceed the previous monthly record of $59.32 billion set in September. Phantom's integration is designed explicitly to bring new users and additional liquidity to Kalshi. If it succeeds, the volume of stablecoin-funded event-contract transactions flowing through a single wallet interface will be substantial. For accounting firms, that scale means the per-transaction accounting questions outlined above are not academic: they will appear in client books at volume, and the need for structured, automated crypto bookkeeping software capable of handling stablecoin sub-ledgers alongside derivatives mark-to-market entries is immediate.
What Accounting Firms Should Do Now
Client Outreach and Policy Updates
Any client who uses Phantom, holds CASH balances, or has expressed interest in event-contract markets should be contacted proactively. The accounting policy questions around CASH classification, event-contract fair valuation, and conversion-leg reporting need to be resolved before year-end, not during audit fieldwork.
State-Specific Risk Mapping
For clients in Michigan, Nevada, and Washington, document the current market restrictions and flag that the restrictions may change as court cases progress. If a client's event-contract positions change legal character mid-period due to a court ruling, the accounting and tax implications of that change need to be addressed in real time.
Section 1256 Analysis
Engage your tax team now on whether Kalshi event contracts qualify as Section 1256 contracts. The answer affects year-end mark-to-market elections and the blended tax rate applicable to any gains. A conservative position is defensible, but the analysis needs to be documented.
Transaction-Level Data Capture
Ensure your firm's digital asset accounting software can ingest Phantom and Kalshi transaction data at the granular level: each CASH transfer, each conversion to fiat, each open and closed contract position, and each return of proceeds. Aggregated data will not be sufficient for a defensible tax filing or audit.
Source: The Block
Frequently Asked Questions
Is the CASH stablecoin treated as cash or a crypto asset on a US GAAP balance sheet?
That depends on whether CASH meets the criteria for cash-equivalent treatment under ASC 230, principally that it is readily convertible to a known amount of cash with an insignificant risk of value change. If Phantom's CASH redemption terms include any delays, gates, or discretionary conditions, it is more likely classified as a current financial asset rather than a cash equivalent. Firms should review the specific terms before making a classification decision.
Are gains from Kalshi event contracts subject to Section 1256 treatment?
Possibly. Kalshi is a CFTC-designated contract market, and contracts traded on such markets can qualify as regulated futures contracts under Section 1256, which would apply a 60/40 long-term/short-term blended rate and require year-end mark-to-market. The IRS has not issued specific guidance on binary event contracts in this context, so the classification is not certain. A conservative approach is to treat them as short-term capital transactions unless and until the IRS confirms otherwise, while documenting the analysis either way.
Does each CASH-to-fiat conversion inside the Phantom and Kalshi flow trigger a taxable event?
Under existing IRS guidance, disposing of a digital asset, including a stablecoin, in exchange for fiat constitutes a taxable realisation event. If CASH holds its dollar peg at exactly $1.00, the taxable gain or loss is nil, but the transaction still needs to be recorded and reported. Firms should not assume that a zero-gain transaction can be omitted from the client's digital asset transaction log.
What AML obligations apply to accounting firms whose clients use this integration?
Kalshi, as the CFTC-regulated designated contract market, holds primary AML and BSA obligations for user onboarding. However, accounting firms that provide financial services to clients engaged in material stablecoin-funded derivatives activity should review whether that activity falls within the scope of their own AML risk assessment. FinCEN's framework for covered service providers is the relevant reference point.
How should open Kalshi event-contract positions be valued at a reporting date?
Under ASC 815, derivatives that are not designated as hedges are carried at fair value with unrealised gains and losses recognised in net income. For binary event contracts, fair value is typically the mid-market price of the contract at the reporting date. If the market for a specific contract is illiquid at the reporting date, a Level 3 fair value measurement may be required, with appropriate disclosures about the valuation inputs and uncertainty.