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

Prediction Market Accounting for Traders, Trading Firms, and Market Makers

Forbes Best-In-State Top CPA for 2025 and 2026

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

Camuso CPA provides accounting services for prediction market traders, trading firms, and market makers operating on Kalshi, Polymarket, and other event contract venues.

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Nationally Recognized Crypto CPA Since 2016 and the first CPA firm in the U.S. to accept cryptocurrency for professional services.

Patrick Camuso and Camuso CPA named as Forbes Best-In-State Top CPA
Patrick Camuso quoted in WIRED.
Patrick Camuso and Camuso CPA featured in Business Insider on prediction market tax reporting.
Marketwatch features Camuso CPA
Bloomberg Tax
Forbes
Patrick Camuso and Camuso CPA featured in Accounting Today
Patrick Camuso and Camuso CPA featured in The Financial Times
tax section odyssey aicpa cima
Patrick Camuso and Camuso CPA featured in Vice
Patrick Camuso and Camuso CPA featured in Coinmarketcap
Morningstar
Tax Notes
Federal & Global
Published Research

Prediction Market Event Contracts: A Tax Classification Analysis

Co-authored with the former head of the IRS Office of Digital Assets and co-author of the §6045 digital asset broker reporting regulations. A federal tax classification analysis examining how prediction market event contracts may be treated under §165(d) wagering rules, §1256 contract treatment, and general capital or ordinary income rules. Published in Tax Notes Federal and Tax Notes Global.

Read in Tax Notes → Read All Publications →

Prediction Market Accounting For Traders, Trading Firms, And Market Makers

Prediction market trading on platforms like Kalshi and Polymarket creates accounting challenges that most commercial software was not designed to handle. Event contracts settle on outcomes rather than prices, positions often realize at resolution rather than through an offsetting trade, and the venues generally provide execution data rather than accounting records. What the platform exports is typically a starting point rather than a set of books.

The gap tends to widen with scale. Crypto subledgers are built primarily to process on-chain dispositions and generally offer limited support for USD-settled contracts on a regulated exchange. Traditional trading software is built around securities and futures reporting, which relies on broker statements and standardized identifiers that may not be available for event contracts. Standard cost basis methodology assumes long-only inventory, which can produce unreliable results when a firm quotes both sides of a market and carries simultaneous long and short exposure in the same contract.

Camuso CPA builds prediction market accounting infrastructure fitted to the venues and the trading style. We reconstruct realized results from available trading history, treat settlement as a primary realization event, reconcile platform balances against cash movement, and produce records where figures can be traced back to source data. For entities, that foundation extends to a chart of accounts that supports partnership capital requirements and venue-level reporting.

Whether you are an individual trader with a year of activity to reconstruct or a firm processing large trade volumes across regulated and on-chain venues, prediction market accounting generally has to be built rather than exported.

Book a Prediction Market Accounting Consultation
Patrick Camuso | Forbes Best-In-State Top CPA
Patrick Camuso, CPA. Forbes 2025 Best-in-State Top CPA. Featured in Business Insider, Marketwatch, Finops and Morningstar for prediction market tax reporting expertise.

Our Prediction Market Accounting Process

Step 1: Prediction Market Intake & Scope Review Consultation

Meet 1-on-1 with a CPA experienced in prediction markets to review your platforms (Kalshi, Polymarket, and others), trading style, entity structure, and the data available from each venue. We assess what your current records support and determine the scope of work required before anything is built.

Step 2: Accounting Policy & System Design

We establish the accounting framework before any entries are made. This includes a written accounting policy covering revenue recognition by venue, treatment of settlement events, and methodology for open positions, along with a chart of accounts designed around your actual activity, with venue-level reporting and, for entities, partnership capital account requirements.

Step 3: Reconstruction & Subledger Build

We work from available trading history rather than platform summaries, matching acquisitions and dispositions to settlement outcomes, reconciling platform balances against cash movement, and building the subledger infrastructure that carries this activity into your general ledger. Figures can be traced back to source data.

Step 4: Ongoing Accounting & Reporting

We maintain the system on the cadence your operation requires, delivering period close, reconciliations, and reporting that supports your tax filings and stands up to diligence. For firms, that includes the documentation an institutional counterparty or examiner would expect to see.

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.

Common Prediction Market Accounting Challenges We Solve

  • You have no accounting policy or chart of accounts governing how prediction market activity should be recorded.
  • Your trading activity isn't posted to the general ledger, and the books don't reflect what the business actually did.
  • Standard cost basis tracking produces unreliable results because your positions carry both long and short exposure in the same contract.
  • Your activity spans USD-settled and crypto-settled venues that require different accounting treatment.
  • Platform balances, deposits, and withdrawals don't reconcile to your bank activity.
  • You're approaching a filing deadline, a raise, or a diligence process and your records won't support the numbers.
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.

Ready to get your prediction market reporting done correctly?

Book a Prediction Market Accounting Consultation

Prediction Market Accounting 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.

Prediction Market Tax Planning

For traders who want to understand the tax consequences of their activity before filing, we provide characterization analysis, estimated tax guidance, and documented reporting positions built before deadlines create pressure. The right framework, established in advance, shapes every subsequent reporting decision. Learn more about our prediction market tax planning services.

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.

Prediction Market Accounting Guides & Reporting Analysis

In-depth analysis on how prediction market activity is reported for U.S. tax purposes. These guides address contract structure, settlement mechanics, reporting classifications, and common filing errors across platforms like Kalshi and Polymarket that are written for traders, advisors, and firms navigating emerging reporting standards.

Prediction Market Accounting: A Technical Guide for Traders, Funds, and Institutions
Prediction Market Accounting: A Technical Guide for Traders, Funds, and Institutions
Kalshi Tax Reporting: What Your 1099 Leaves Out
Kalshi Tax Reporting: What Your 1099 Leaves Out
Section 1256 and Prediction Markets: Do Kalshi and Event Contracts Qualify?

Section 1256 and Prediction Markets: Do Kalshi and Event Contracts Qualify?

 

Get Your Prediction Market Accounting Right

We review how your prediction market activity is recorded and reported in your books, including trade capture, settlement events, and reconciliation to cash. Designed for Polymarket, Kalshi, and crypto-settled prediction market activity.

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Prediction Market Accounting FAQ

Prediction market accounting covers how event contract activity is captured, recorded, and reconciled in a trader's or firm's books. It requires specialized treatment because the underlying mechanics differ from securities and crypto trading. Contracts settle on outcomes rather than prices, positions often realize at resolution rather than through an offsetting trade, and the venues generally provide execution data rather than accounting records. Most accounting software and most preparers have not been built around these fact patterns.

Platform exports generally show trade execution but may not include settlement outcomes, which is where much of the economic result occurs. They also present balances in formats that may not reconcile directly to cash activity, and they do not produce journal entries, a chart of accounts, or the documentation an accounting system requires. The export is typically a starting point rather than a set of books.

Engagements generally begin with a scope review, followed by an accounting policy and chart of accounts designed around the activity, reconstruction of trading history including settlement events, subledger and general ledger integration, and ongoing period close and reporting. Scope varies with trading volume, entity structure, and the venues involved.

Recording entries without a documented policy tends to produce results that cannot be explained or supported later. A written policy establishes how revenue is recognized by venue, how settlement events are treated, and what methodology applies to open positions. Once that framework exists, the entries follow from it consistently, which is what allows the books to hold up in examination or diligence.

Crypto-settled activity on venues like Polymarket settles in stablecoins on a public blockchain, which places it within established digital asset accounting methodology, with each settlement treated as a disposition event. USD-settled activity on a regulated venue follows a different path and is generally not supported by crypto subledger platforms. Firms operating across both typically need distinct treatment for each venue rather than a single approach.

Standard methodology assumes long-only inventory acquired and later disposed. A trader or firm quoting both sides of a market carries simultaneous long and short exposure in the same contract, which can produce unreliable results under conventional tracking. Accounting for two-sided activity generally requires methodology built for that exposure profile.

Support is limited. Crypto subledgers are built primarily for on-chain dispositions and generally offer limited coverage of USD-settled contracts on regulated venues. Traditional trading software is built around securities and futures reporting that relies on broker statements and standardized identifiers. Traders and firms with material activity often require purpose-built infrastructure rather than an off-the-shelf platform.

Individual traders with material activity that platform summaries cannot support, trading firms and market makers with entity-level reporting requirements, and companies with prediction market activity that needs to appear correctly in financial statements. Firms preparing for outside capital or diligence are a common engagement trigger.

Yes. We review the existing records, identify where the treatment does not reflect the underlying activity, and rebuild from available trading history under a documented methodology. Where prior periods were closed on unsupportable figures, we quantify the differences and document the corrected basis.

The accounting produces the figures the tax positions rest on. Characterization and reporting decisions depend on the underlying numbers being accurate and traceable, which is why the accounting generally precedes the filings rather than following them. Camuso CPA handles both, and our prediction market tax reporting service covers the characterization and filing side.

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