• Featured in Wired, Business Insider, Marketwatch, Finops and Morningstar for Prediction Market Tax Expertise.

The Prediction Market CPA For Serious Traders

Forbes Best-in-State Top CPAs 2025

Recognized by Forbes as a Best-in-State Top CPA in 2025 and 2026

Featured in Forbes for "Leading the Charge on Crypto Accounting": Read the Forbes Feature

For prediction market traders whose activity has outgrown general tax advice. Defensible characterization, contract-level reporting, and formal position documentation.

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Nationally Recognized.

Patrick Camuso and Camuso CPA named as Forbes Best-In-State Top CPA
Bloomberg Tax
Patrick Camuso and Camuso CPA featured in Accounting Today
Forbes
Patrick Camuso and Camuso CPA featured in The Financial Times
Patrick Camuso and Camuso CPA featured in Vice
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Patrick Camuso and Camuso CPA featured in Coinmarketcap
Marketwatch features Camuso CPA
Morningstar
Patrick Camuso and Camuso CPA featured in Business Insider on prediction market tax reporting.

Most CPAs Will File It. Few Can Defend It.

For prediction market traders with material activity, accurate tax reporting begins with a characterization question that existing law does not answer directly. Contracts on platforms like Kalshi and Polymarket involve unique acquisition and disposition mechanics, settlement timing considerations, and platform data that rarely maps cleanly to any established tax reporting framework. Most CPAs can file a return. Very few can analyze or defend how the income was treated.

As a specialized prediction market CPA firm, we begin by establishing a defensible analytical framework. We evaluate each client’s specific contracts, platforms, settlement currencies, and trading patterns to determine the appropriate characterization position before a single number goes on a return.

From there, we reconstruct transaction histories from available records, validate or rebuild platform-reported data, and prepare filing-grade documentation that aligns reported figures with actual contract mechanics. For traders with material exposure, we prepare formal written position memos documenting the treatment applied and the reasoning behind it, built to support the position taken if the filing is ever reviewed.
Prediction market tax reporting requires fluency in derivatives characterization, digital asset mechanics, and an area of law where professional judgment and documented reasoning matter more than software defaults. That is the standard we apply.

Patrick Camuso’s work  has been published in Tax Notes alongside a former head of the IRS Office of Digital Assets and has been covered by Bloomberg Tax, Accounting Today, Business Insider, MarketWatch, Morningstar and other major publications. 

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Patrick Camuso | Forbes Best-In-State Top CPA
Patrick Camuso, CPA is a Forbes 2025 Best-in-State Top CPA and founder of Camuso CPA.

Our Prediction Market Reporting Process

Step 1: Prediction Market Intake & Scope Review Consultation

Meet 1-on-1 with a CPA experienced in prediction markets to review your platforms (Polymarket, Kalshi, etc.), settlement mechanics, trade volume, and data availability. We determine whether platform-generated summaries are sufficient for filing or whether transaction-level reconstruction is required.

Step 2: Validation & Classification

Where platform reports are clean, we validate the assumptions underlying the reporting. Where reporting is incomplete, ambiguous, or mismatched to tax treatment, we perform targeted transaction-level analysis to ensure correct classification. This step focuses on economic substance, not just reported totals.

Step 3: Reporting Integration

We translate validated results into reporting outputs that integrate cleanly with your broader tax filings and withstand third-party matching and IRS scrutiny.

Step 4: Written Tax Position Support

For higher exposure cases, we prepare written documentation supporting the tax characterization and reporting methodology used, built for defensive purposes if the IRS questions your filings.

Prefer to book a time directly?

Prefer to reach us directly? Email info@camusocpa.com or call (704) 249-3179.

Who We Help: Prediction Market Traders & Digital Asset Investors

Camuso CPA has a track record of guiding early adopters through uncharted tax territory. We were one of the first firms advising Bitcoin investors in 2016, among the first to build compliance frameworks for DeFi and NFT activity, and now we’re leading the way on prediction market tax reporting before the IRS has issued definitive guidance.

Our prediction market clients are active traders on Polymarket, Kalshi, and emerging platforms who need accurate reporting in a space where the rules are still being written.

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Common Prediction Market Tax Reporting Challenges We Solve

  • You're unsure how prediction market gains and losses should be classified for U.S. tax reporting.
  • Platform summaries don't clearly map to capital, ordinary, or contract-based treatment.
  • You've traded across multiple contracts, outcomes, or platforms and need transaction-level clarity.
  • Your activity includes USD-settled, crypto-settled, or hybrid prediction contracts with different reporting requirements.
  • Your current CPA can file the return but can't explain or defend the tax position if the IRS questions it.
  • You need a clear, documented methodology for how tax outcomes were characterized and reported.
Patrick Camuso, Forbes 2025 Best-in-State Top CPA was featured in Forbes for leading the charge on crypto accounting
Patrick Camuso, CPA. Featured in Forbes for Leading the Charge on Crypto Accounting.

Prediction Market Tax & Reporting Services

A focused engagement model built for Kalshi, Polymarket, and event-based contracts.

Prediction Market Tax Reporting

We prepare tax-ready reporting for prediction market activity, including USD-settled and crypto-settled contracts. Our work goes beyond platform summaries to ensure each contract outcome is correctly characterized, aggregated, and defensible under U.S. tax principles.

Transaction Review & Tax Position Validation

For traders with material volume or edge-case activity, we provide formal review of prediction market transactions and validate the tax position taken. This is not generic compliance, it is structured analysis designed to withstand professional and regulatory scrutiny.

Written Tax Memos & Opinion Support

For high-value traders, founders, or advisors, we prepare written tax analysis addressing the treatment of prediction market activity. These memos document the logic applied, relevant authorities considered, and assumptions used, providing a clear record of how and why the position was taken.

Integrated Crypto Accounting

If your prediction market activity intersects with broader crypto trading, wallets, or DeFi activity, we can integrate reporting into a unified crypto accounting framework. This ensures prediction market outcomes are correctly reflected alongside digital asset activity.

Why Prediction Market Traders Trust Camuso CPA

Prediction market tax reporting sits at the intersection of derivatives, event-based contracts, and evolving tax interpretation. While most CPA firms can file a return, very few can clearly explain or defend how prediction market outcomes were treated.

Camuso CPA helps traders, founders, and advisors correctly characterize prediction market activity, validate reporting positions, and document the logic behind them so filings are not just completed, but defensible.

Service Camuso CPA Typical Accounting Firm
Prediction market–specific reporting ✔ ✖
Contract-level gain/loss analysis ✔ ✖
USD vs crypto-settled contract treatment ✔ ✖
Ordinary vs capital characterization analysis ✔ ✖
Platform statement validation (Kalshi, Polymarket) ✔ ✖
Written tax position memos ✔ ✖
High-Net-Worth Individual Tax Returns ✔ ✔
Partnership & Corporate Tax Returns ✔ ✔
Prediction Market Tax

Case Study

$2.1M Kalshi Trading Volume — Defensible Tax Position Built from No Framework

Client Type High-Income Individual
Platform Kalshi
Annual Volume $2.1M
Focus Macro and Political Contracts

The Problem

Client assumed gains from hundreds of Kalshi contract dispositions qualified for Section 1256 treatment by default. No formal tax framework, no transaction-level documentation, and no audit defense position were in place. Exposure included recharacterization to ordinary income or wagering treatment, loss limitation mismatches under Section 165(d), and inconsistent reporting across the portfolio.

What We Did

Performed a contract-level classification analysis evaluating four frameworks: Section 1256 regulated futures, capital asset treatment, ordinary income, and Section 165(d) wagering. Built a formal position memo supporting the selected treatment with documented rationale for each framework assessed and rejected. Reconstructed the full transaction history across all contracts and standardized reporting methodology across the entire portfolio.

The Outcome

Established a defensible reporting position aligned with the client's actual trading activity. Eliminated risk of inconsistent treatment across contracts. Delivered filing consistency across the full portfolio with a documented, audit-ready methodology the client can carry forward year over year.

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Prediction Market CPA FAQ

A prediction market CPA analyzes the specific contracts traded, the platform regulatory structure, and the settlement mechanics to determine the correct characterization framework before preparing the return. General CPAs typically apply a default treatment without the contract-level analysis required to support it under examination. The difference is not just in how the return is filed — it is in whether the position taken can be explained and defended if the IRS questions it.

Characterization depends on the specific contracts, platforms, and facts of each trader's activity. Current law does not provide a single definitive answer. Reasonable practitioners analyze four frameworks: capital gain or loss under Section 1221, ordinary income under a contingent contract theory, gambling income under Section 165(d), and Section 1256 treatment for qualifying contracts. The framework that applies determines the effective rate, how losses are treated, and whether a 2026 statutory change creates tax liability on breakeven activity.

No. Section 1256 is not an election and does not apply automatically because a platform holds CFTC regulatory status. Three independent statutory requirements must each be satisfied: the contract must trade on a qualified board or exchange, it must fall within one of the enumerated statutory categories, and for regulated futures contracts, it must be required to be marked to market daily. Whether Kalshi event contracts satisfy those requirements is an unresolved analytical question. Treating Section 1256 as a default without a formal analysis and documented position is not supportable under current law.

Not automatically. Whether gambling treatment applies under Section 165(d) depends on the economic substance of the specific contract, the nature of the underlying event, and the regulatory structure of the platform. Sports-outcome contracts carry higher gambling characterization risk than macro-economic or political contracts. The analytical question is contract-specific, not platform-wide, and it matters significantly given the 2026 One Big Beautiful Bill Act cap that limits deductible gambling losses to 90 percent of winnings — creating taxable income even in breakeven years under gambling treatment.

Yes. The reporting obligation exists regardless of whether the platform issues any tax documentation. Polymarket does not issue tax forms because it operates as a decentralized protocol without KYC. The absence of a 1099 does not reduce the obligation to report income from contract dispositions. All income is reportable unless specifically excluded by statute, and no statutory exclusion covers prediction market winnings.

Kalshi is a CFTC-registered Designated Contract Market that settles contracts in USD and issues limited 1099-series forms for certain transactions. Polymarket operates as a decentralized protocol, settles in USDC on the Polygon blockchain, and issues no tax documentation. The differences affect Section 1256 analysis, documentation requirements, and the reconstruction process. Polymarket activity also requires affirmative answers to the digital asset disclosure question on Form 1040 and may implicate separate digital asset gain or loss on USDC movements.

The appropriate response depends on the nature of the error, the magnitude of the discrepancy, and the years involved. Where characterization was incorrect or inconsistent, the position should be analyzed before concluding whether an amended return is required. Where losses were misreported or the wrong framework was applied, the exposure includes additional tax, interest, and accuracy-related penalties under Section 6662. Working with a CPA to assess the filing before the IRS surfaces the issue is materially more protective than responding after a notice arrives.

Contract-level records showing acquisition date, cost, settlement date, and proceeds for each contract. Platform transaction exports in their raw form. Any correspondence or account statements that document the basis for positions held. For Polymarket, on-chain transaction records from the Polygon blockchain. For Hyperliquid, HyperCore L1 transaction data. Where gambling treatment applies, session-level records are also required. The documentation standard is higher than most traders assume and platform summaries alone are rarely sufficient for a defensible filing.

Before the return is filed, not after. The characterization framework needs to be established before reporting, it cannot be selected after the fact based on which treatment produces the lowest current-year result. Traders with material annual volume, activity across multiple platforms, or any situation where the characterization question is genuinely contested should engage professional help before filing. If the return has already been filed under an unanalyzed assumption, the right time to assess the exposure is now, before the IRS matching process surfaces any discrepancy.

Most CPAs have never analyzed a prediction market contract. Fewer still can defend the characterization if the IRS questions it.

Prediction market tax reporting requires understanding how event-based contracts are structured, how platform reporting gaps affect characterization, and how to build a documented analytical position that holds up under examination. Most firms have never encountered a Kalshi contract, let alone analyzed whether it qualifies for Section 1256 treatment or how to reconstruct a Polymarket position history from on-chain data.

Camuso CPA has been advising prediction market traders since the first filing season with material volume. 

Camuso CPA is also the only crypto-focused CPA on the Forbes Best-in-State Top CPA list. That distinction reflects depth of specialization. Prediction market traders are not a client type added to a broader practice. They are a core part of a firm that has handled nothing outside digital assets since 2016.

When a client's prediction market characterization is questioned under examination, the position is supported by a formal analytical memo, documented transaction history, and a CPA who can explain and defend every number on the return. That is the standard every prediction market trader with material activity should demand from their advisor.

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