Building a Prediction Market Tax & Accounting Practice Before the Rules Were Written

Last Updated on August 24, 2026 by Patrick Camuso, CPA

Quick answer (read this first)

The short answer: Camuso CPA was among the earliest publicly documented U.S. CPA firms we identified to build a dedicated prediction-market tax and accounting practice. The firm’s public framework was already available in early 2026, before prediction-market taxation had developed into the broader professional-services category it is becoming today.

The record goes further in one defined area. Patrick Camuso, CPA co-authored what a documented review identified as the first comprehensive federal tax-classification framework for prediction-market event contracts published in Tax Notes. That June 2026 work brought together Section 165(d), Section 1256, capital-versus-ordinary characterization, the relevant factual predicates, and material reporting consequences in one federal classification framework.

Camuso CPA published an early federal tax framework, developed platform and contract-specific research, published a dedicated prediction-market accounting framework, worked on the tax and accounting issues confronting professional market makers and trading firms, participated in presentations and public discussion, submitted a formal recommendation asking Treasury and the IRS for coordinated guidance, and published the inaugural State of U.S. Prediction-Market Tax and Accounting in August 2026.

The significance of that chronology is not simply that Camuso CPA arrived early. The firm’s earlier work in digital assets had already required it to solve the same class of professional problem including applying existing tax law to new financial activity, reconstructing transactions from systems that were not designed for tax reporting, connecting source data to accounting records, and dealing with third-party reporting that had not yet caught up with the market.

 

Prediction markets became a significant tax and accounting problem before the federal government had written prediction-market-specific rules for them. That type of gap was familiar to Camuso CPA.

The firm’s work in prediction markets grew out of an earlier financial-services background and a digital-asset tax and accounting practice established in 2016. In both markets, transaction activity developed faster than the tax guidance, third-party reporting, accounting systems, and professional infrastructure needed to support it.

By early 2026, Camuso CPA was already publishing a federal tax framework for prediction-market event contracts. During the months that followed, the work expanded into national tax research, prediction-market accounting, professional market-maker and trading-firm analysis, public presentations and media, federal policy engagement, and an inaugural research report examining the broader U.S. prediction-market tax and accounting infrastructure.

The chronology supports a straightforward conclusion that Camuso CPA was a prediction-market first mover, and the practice was built for the type of emerging-market problem prediction markets presented.

The Firm Was Built for Markets That Develop Before the Rules

Before founding Camuso CPA, Patrick Camuso worked at Deloitte with asset managers on financial accounting and fund taxation. That background established a foundation in financial positions, entity reporting, transaction accounting, and the relationship between economic activity and tax treatment. Those disciplines later became important in digital assets and eventually prediction markets.

Camuso CPA was founded in 2016 as cryptocurrency created a more pronounced version of the same problem. Digital-asset transactions were occurring across exchanges, wallets, and on-chain systems while conventional accounting and tax infrastructure remained incomplete. Businesses could have substantial transaction activity without a conventional brokerage record. Cost basis had to remain continuous across systems. Wallet and exchange records had to be reconciled. Accounting policies, subledgers, general-ledger integration, and tax reporting had to be built around data that was not created for those purposes.

The tax law did not disappear simply because the market was new. Existing law had to be interpreted and applied to new facts. The same was true of third-party reporting. A platform document could answer one reporting question without resolving the underlying substantive tax treatment. A transaction export could contain substantial data without being sufficient to prepare or substantiate a return. Economic P&L and taxable income could diverge because they were designed to answer different questions.

Those years in digital assets produced an operating model that became directly relevant to prediction markets.

When a new financial market develops before its professional infrastructure, the work is rarely limited to determining a tax rate. The adviser has to understand the instrument, the transaction, the taxpayer, the available records, the accounting system, and the reporting chain well enough to connect them.

That is the environment in which Camuso CPA’s prediction-market practice developed.

Prediction Markets Recreated the Digital-Asset Infrastructure Gap

By early 2026, prediction markets were no longer a narrow consumer product. The market included regulated event-contract exchanges, crypto-native venues, broker and app-based access models, automated strategies, professional liquidity providers, proprietary trading operations, and entities trading through materially different legal and reporting structures.

The federal tax treatment was not obvious merely because a contract settled in dollars or traded on a regulated platform. Potentially relevant tax provisions could include the wagering rules of Section 165(d), the defined contract categories under Section 1256, the general capital-asset and sale-or-exchange rules, Sections 1234 and 1234A, taxpayer-capacity provisions, loss limitations, partnership rules, and other parts of the Code.

At the same time, the accounting problem was developing independently.

A platform could provide detailed fills while leaving unresolved how those fills connected to positions and settlements. An annual P&L statement could summarize economic results without establishing federal tax character. A Form 1099 could report a particular payment without deciding how every underlying event contract should be treated. Different venues and access models could involve different exchanges, clearing organizations, brokers, FCMs, apps, and reporting entities.

This created three distinct but related questions:

1. What is the federal tax treatment?
2. What accounting record is needed to implement that treatment?
3. What information is being furnished by the third parties involved in the transaction?

Camuso CPA’s prediction-market work developed across all three.

Early 2026: Publishing the Federal Tax Framework

In early 2026, Camuso CPA published a detailed Prediction Market Tax Guide. An independent Internet Archive capture establishes that the framework was publicly available by March 13, 2026.

The early work treated prediction-market taxation as a genuine federal classification problem rather than assuming that one familiar label controlled every product. That meant examining potentially applicable statutory regimes, the taxpayer’s role and capacity, the legal mechanics of the contracts, the distinction between trading and resolution, loss treatment, platform reporting, and the records required to support a filing position.

Several of those questions later became central to the broader professional discussion. The early framework was followed by focused work on Kalshi tax reporting, Section 1256 and prediction markets, Polymarket taxes, loss treatment, trade-or-business issues, professional traders, market makers, and other emerging questions.

The Early Work Preceded a Broader Professional Discussion

As 2026 progressed, prediction-market tax issues began receiving substantially more attention from national accounting firms, law firms, tax practitioners, regulators, and financial media.

Later professional publications independently addressed many of the same branches already present in Camuso CPA’s early framework, including wagering treatment, Section 1256, capital-versus-ordinary characterization, contract-specific analysis, and market-maker considerations.

It does not establish that another firm relied on Camuso CPA’s work, and Camuso CPA does not make that claim. Independent advisers can reach the same issues because they are applying the same statutes to the same emerging market. What the chronology does establish is that Camuso CPA was publicly working through these questions early, before prediction-market tax developed into a crowded professional topic.

The same is true of the practice itself. The firm’s work was expanding beyond retail filing questions into professional trading operations, accounting infrastructure, entity reporting, loss analysis, and third-party reporting while those areas were still developing as distinct prediction-market professional-services categories.

June 2026: The Tax Notes Classification Framework

In June 2026, Tax Notes published “Prediction Market Event Contracts: A Tax Classification Analysis,” co-authored by Sulolit Mukherjee and Patrick Camuso.

The article was published online by Tax Notes Today Federal on June 9 and appeared in the June 15 issue of Tax Notes Federal. A documented review of available Tax Notes records and public indexes through August 2026 identified that article as the first comprehensive federal tax-classification framework for prediction-market event contracts published in Tax Notes.

The framework addressed Section 165(d), possible Section 1256 treatment, capital and ordinary characterization, differences in tax consequences, material factual predicates, and reporting questions within one integrated federal classification analysis. That matters because prediction-market taxation does not reduce cleanly to one statutory branch. The classification determines which other questions become relevant, but classification itself depends on contract terms, transaction mechanics, taxpayer facts, and the interaction of provisions written long before modern prediction markets existed.

The Tax Notes publication brought those questions into a national technical tax forum at an early stage in the market’s development.

The “first” formulation is intentionally specific. Camuso CPA does not claim that this was the first article anywhere to mention prediction-market taxation. The documented-review claim concerns the first comprehensive federal tax-classification framework for prediction-market event contracts identified in the Tax Notes publication universe.

The Practice Was Also Expanding Beyond Tax Classification

The tax question was only one part of what professional prediction-market participants were beginning to encounter.

A supportable federal tax position still had to be implemented. For high-volume participants, implementation could require transaction histories, position records, settlement data, fees, rebates, corrections, ownership records, year-end open positions, and a connection from the source activity into the accounting books and ultimately the tax return.

That work was already familiar from digital assets. A firm can have millions of transaction records and still lack a usable tax record if the systems do not preserve the relationships needed to reconstruct positions, basis, settlements, corrections, and reporting.

Similarly, a general ledger can reconcile economically without containing the position-level detail necessary for a technical tax analysis. The prediction-market practice therefore expanded naturally from tax classification into accounting infrastructure.

June 2026: Publishing a Dedicated Prediction-Market Accounting Framework

In June, Camuso CPA published Prediction Market Accounting: A Technical Guide for Traders, Funds, and Institutions.

The accounting framework focused on a distinction that remains central to the firm’s work which is the transaction data, accounting records, third-party information reporting, and federal tax characterization are different layers of the reporting process.

A venue can provide a complete fill history without producing a general ledger. A general ledger can summarize trading activity without preserving all of the position facts required for tax. A Form 1099 can communicate what a reporting entity furnished to the IRS without conclusively determining the federal character of every underlying contract. A platform P&L statement can accurately describe account economics while applying conventions that do not themselves establish a taxpayer’s federal tax method.

For professional firms, those systems have to be connected. The public accounting framework addressed reconstruction, bookkeeping, transaction-level records, reconciliation, general-ledger integration, and institutional reporting issues without publishing the proprietary transaction logic or implementation methodology used in client engagements.

Prediction-market tax could not be separated from prediction-market accounting if professional participants were going to implement and substantiate the resulting positions.

Market Makers and Professional Trading Firms Added Another Layer

The professionalization of the market made the problem more complex again. A professional market maker may quote both sides of markets, run automated systems, earn spread and liquidity incentives, manage inventory, carry economically related positions, use multiple venues, and operate through a partnership or other entity. An arbitrage operation may have another economic model. A systematic taker may have another. A professional directional trader may have another.

Those labels are relevant to understanding how the business functions, but they do not independently determine federal tax character.

The increased scale does, however, make several other issues more consequential including the trade-or-business analysis, legal transaction endpoints, loss limitations, related positions, book-tax reconciliation, partnership allocations, owner-level tax consequences, compensation, state filings, and year-end close.

Camuso CPA’s Prediction Market Tax Guide for Market Makers, Professional Traders & Trading Firms brought those issues together for the professional-operator market. That development is an important part of the first-mover story because it shows how the practice evolved as the market itself evolved.

The work moved from determining how event contracts might be taxed to addressing the infrastructure required when event-contract trading became an actual operating business.

The Work Extended Into Presentations, Media, and Professional Discussion

The firm’s prediction-market work was not confined to its own website.

Patrick Camuso participated in presentations, panels, interviews, and practitioner discussions concerning prediction-market tax and accounting as the subject began moving into the broader financial and professional-services conversation.

WIRED quoted Camuso in April 2026 regarding the prediction-market tax-guidance gap. Tax Notes Today State separately featured his analysis of state tax issues involving prediction markets.

The presentation and media work served a different role from the technical articles. The public discussion increasingly involved not only classification, but also professional market making, institutionalization, accounting infrastructure, information reporting, loss treatment, and the need for government guidance.

Camuso CPA’s position throughout that discussion remained consistent on an important point: prediction-market event contracts should not be forced into one universal tax answer merely because the market wants a simple one.

Different contracts, transaction mechanics, participants, and reporting structures can require different analyses.

August 2026: Taking the Guidance Problem Directly to Treasury and the IRS

By August, the unresolved issues had become sufficiently broad that Camuso CPA moved beyond commentary and formally asked the federal government to address them.

In response to Notice 2026-23, Camuso CPA submitted a recommendation for inclusion in the 2026-2027 Priority Guidance Plan requesting coordinated published guidance regarding the federal tax treatment and reporting of prediction-market event contracts.

The public submission addressed more than character.

It asked Treasury and the IRS to address classification, transaction-level treatment, losses, timing, measurement, related positions, taxpayer capacity, market-maker activity, entity-level and owner-level consequences, fees and incentives, and information reporting.

The recommendation also emphasized that the government should distinguish instrument and transaction questions from taxpayer-specific questions. That point had become increasingly important as prediction markets professionalized. A participant’s market function can matter without deciding what the contract is. An exchange’s regulatory treatment can matter without resolving federal tax classification. Third-party reporting can help administer the system without itself determining substantive tax treatment.

The federal submission reflected the same analytical structure that had been developing throughout the practice.

August 2026: Publishing the Inaugural State of U.S. Prediction-Market Tax and Accounting

In August 2026, Camuso CPA published the inaugural State of U.S. Prediction-Market Tax and Accounting.

Rather than focusing on one Code section, contract category, or venue, the report examines the market as an institutional tax and accounting system. It addresses professional market participation, federal classification questions, loss treatment, transaction lifecycle accounting, publicly documented venue and access-model reporting capabilities, third-party information reporting, and tax substantiation.

Professional participants need to understand how source transactions become positions, how those positions change or resolve, how the activity reaches the books, how book and tax treatment diverge, what third parties report, what information remains missing, and what evidence is available if the return position is later reviewed.

The firm’s experience in crypto had already shown what happens when a financial market grows faster than the tax forms and accounting infrastructure surrounding it. Prediction markets are now producing a similar institutional challenge.

Third-Party Reporting

Third-party reporting deserves separate attention because it is frequently confused with tax treatment. Prediction-market access can involve several entities. The exchange listing the contract, the clearing organization, the broker or FCM carrying the account, the customer-facing application, and the entity furnishing a year-end document may not always be the same organization. Publicly available data also differs across access models.

Some systems expose detailed transaction data. Others emphasize account statements, history screens, or particular year-end documents. Different entities can use different identifiers, economic conventions, and reporting systems.

A taxpayer needs to understand what was reported, who reported it, which taxpayer or account it relates to, how it reconciles to source activity, and whether the form actually determines the substantive treatment being used on the return.

The result is a practice that follows the activity through substantially the entire financial-reporting chain, from the contract and transaction, through the accounting records, into the entity and owner reporting, and through the third-party information that may ultimately be furnished to the taxpayer or government.

What Being a Prediction-Market Leader Means

Camuso CPA had a detailed federal prediction-market framework publicly available in early 2026. It developed dedicated platform and statutory research. Patrick Camuso co-authored what a documented review identified as the first comprehensive federal tax-classification framework for prediction-market event contracts published in Tax Notes. The firm published a dedicated prediction-market accounting framework. It developed resources specifically for professional market makers and trading firms. The work extended into presentations, national media, and professional discussion. The firm formally petitioned Treasury and the IRS for coordinated guidance. It then published an inaugural State report addressing tax, accounting, venue data, and third-party reporting across the market.

Digital assets had already required the firm to operate where existing tax law met new instruments, fragmented source records, incomplete third-party reporting, rapidly changing platforms, and accounting systems that had not been built for the market. Prediction markets brought those elements together again.

Prediction Market Timeline

Early 2026: Federal tax framework. Published a detailed federal tax framework for prediction-market contracts and reporting. View the framework.

June 2026: Tax Notes classification framework. Co-authored a comprehensive federal tax-classification framework for prediction-market event contracts published in Tax Notes. View the publication record.

June 2026: Prediction-market accounting framework. Published a dedicated prediction-market accounting framework for traders, funds, and institutions. View the accounting guide.

August 2026: Federal guidance recommendation. Submitted a formal recommendation requesting coordinated Treasury and IRS guidance for prediction-market event contracts. View the federal submission.

August 2026: Institutional trading-firm framework. Published an institutional tax-and-accounting framework for prediction-market market makers, professional traders, and trading firms. View the trading-firm guide.

August 2026: Inaugural State report. Published the inaugural State of U.S. Prediction-Market Tax and Accounting, extending the research across federal tax, transaction accounting, venue reporting, and third-party information-reporting infrastructure.

What This Means in Practice

Emerging financial markets rarely wait for the professional infrastructure around them to become complete.

Digital assets did not. Prediction markets have not.

By the time standardized guidance, reporting systems, and established professional conventions develop, taxpayers may already have substantial historical activity, entities, partners, automated strategies, multiple venues, large gross gains and losses, and books that must be reconciled to a tax position.

That is why Camuso CPA’s work in prediction markets has developed beyond return preparation. The firm’s prediction-market practice now addresses the interaction among federal tax characterization, professional trading activity, transaction accounting, losses, partnerships, book-tax reconciliation, third-party reporting, and government guidance. Those areas are separate, but professional prediction-market firms increasingly need them to work together.

That is the practice Camuso CPA began building early, and it is the practice the firm continues to develop as prediction-market event contracts move further into the financial mainstream.

How Camuso CPA Helps

Camuso CPA advises prediction-market traders, market makers, trading firms, funds, and other market participants on the tax and accounting issues created by event-contract activity.

Depending on the facts, that work can include federal tax characterization, transaction and position accounting, book-tax reconciliation, partnership and owner-level analysis, third-party reporting review, year-end close, prior-position analysis, and implementation of supported tax treatments.

The firm’s work is designed for circumstances in which the answer cannot be obtained simply by copying a platform P&L number onto a tax return.

For professional market makers and trading firms, visit Trading Firm CPA. For the broader practice, visit Prediction Market CPA.

Frequently Asked Questions

Was Camuso CPA the first prediction-market CPA firm?

Camuso CPA was among the earliest publicly documented U.S. CPA firms we identified to build a dedicated prediction-market tax and accounting practice.

What prediction-market first does Camuso CPA claim?

Patrick Camuso, CPA co-authored what a documented review identified as the first comprehensive federal tax-classification framework for prediction-market event contracts published in Tax Notes. The review covered available Tax Notes records and public indexes and did not identify an earlier publication satisfying the defined multi-regime framework. Because a publisher-certified complete archive search was not available, the claim remains expressly tied to that documented review.

When did Camuso CPA begin publishing about prediction-market taxes?

Camuso CPA had a detailed federal prediction-market tax framework publicly available in early 2026. An independent Internet Archive capture establishes public availability by March 13, 2026. The firm’s public work expanded during the year into platform reporting, Section 1256, losses, trade-or-business questions, accounting, market makers, professional trading firms, and other prediction-market issues.

Why was Camuso CPA positioned to move into prediction markets early?

The firm’s earlier financial-services and digital-asset work involved many of the same professional problems. Digital assets required Camuso CPA to apply existing tax law to new financial activity, reconstruct fragmented source records, build accounting and reconciliation systems, and work through third-party reporting that was developing alongside the market. Prediction markets reproduced many of those issues in a new product category.

What did the Tax Notes article add?

The June 2026 Tax Notes article moved beyond an isolated question and organized prediction-market event contracts into a comparative federal classification framework. It addressed Section 165(d), possible Section 1256 treatment, capital-versus-ordinary characterization, relevant factual predicates, and material reporting consequences.

Does Camuso CPA only advise on prediction-market tax classification?

No. The firm’s prediction-market work extends into transaction accounting, book-tax reconciliation, professional trading and market-maker issues, partnerships and owner-level reporting, third-party reporting, year-end close, and other implementation questions. The appropriate scope depends on the taxpayer, contracts, venues, entity structure, and records involved.

Has Camuso CPA asked the IRS for prediction-market guidance?

Yes. In August 2026, Camuso CPA submitted a formal recommendation in response to Notice 2026-23 requesting coordinated Treasury and IRS guidance regarding the federal tax treatment and reporting of prediction-market event contracts.

What is the State of U.S. Prediction-Market Tax and Accounting?

Published in August 2026, the inaugural report examines prediction markets from an institutional tax and accounting perspective. It addresses federal tax-classification questions, loss treatment, transaction-lifecycle accounting, venue and access-model data, third-party information reporting, and tax substantiation without attempting to impose a single product-wide tax answer.