- Featured in Business Insider, Marketwatch, Finops and Morningstar for Prediction Market Tax Expertise.
You Traded on Kalshi or Polymarket. Now You Need a CPA Who's Actually Done This Before.
Recognized by Forbes as a 2025 Best-in-State Top CPA
Featured in Forbes for Leading the Charge on Crypto Accounting: Read the Forbes Feature
The IRS has not issued definitive guidance on prediction market contracts which means characterization errors are common, costly, and hard to fix after filing. Work with a CPA firm nationally recognized for prediction market tax expertise.
Nationally Recognized Crypto CPA Since 2016 and the first CPA firm in the U.S. to accept cryptocurrency for professional services.
Prediction Market Tax Reporting for Traders and Investors
Prediction market trading on platforms like Polymarket and Kalshi creates tax reporting challenges that most CPAs have never encountered. Event-based contracts involve unique acquisition and disposition mechanics, settlement timing considerations, and platform-reported data that is often incomplete or missing cost basis entirely.
The IRS has not issued definitive guidance on how prediction market contracts should be characterized for tax purposes. Depending on the platform, settlement method, and contract structure, these positions may be treated as Section 1256 contracts, short-term capital gains, or ordinary income. Getting the characterization wrong changes your effective tax rate significantly.
Camuso CPA provides specialized prediction market tax reporting built on direct experience with the platforms, the contract mechanics, and the open tax questions surrounding this asset class. We reconstruct transaction histories from available records, map contract acquisitions and dispositions to defensible reporting frameworks, and prepare filing-grade documentation that aligns reported figures with actual transaction mechanics.
Whether you’re trading USD-settled contracts on Kalshi or crypto-settled positions on Polymarket, we deliver accurate, defensible tax reporting tailored to your specific activity
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.
- Crypto Investors & Traders: High-net-worth individuals, DeFi participants, and multi-wallet portfolios
- Web3 Founders & Enterprises: Startups, protocols, token projects, mining operations, and digital asset funds.
- Prediction Market Traders: Kalshi, Polymarket and other platforms.
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.
Ready to get your prediction market reporting done correctly?
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 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 Taxes Explained: How U.S. Tax Law Applies (and Why Characterization Remains Unsettled)
Kalshi Tax Reporting: What Your 1099 Leaves Out
Section 1256 and Prediction Markets: Do Kalshi and Event Contracts Qualify?
Get Your Prediction Market Tax Reporting Right
We review how your prediction market activity is classified and reported for U.S. tax purposes, including contract dispositions, settlement mechanics, and tax treatment. Designed for Polymarket, Kalshi, and crypto-settled prediction market activity.
Prediction Market Tax Reporting FAQ
Prediction market activity is reported based on the structure of the contracts, how positions are entered and exited, and how settlement occurs. Reporting often requires transaction-level analysis rather than relying on platform net summaries.
Not necessarily. While prediction markets are sometimes compared to betting, the tax treatment depends on contract structure, settlement mechanics, and how the activity fits within existing U.S. tax frameworks. CFTC-regulated contracts on platforms like Kalshi carry different reporting considerations than crypto-settled contracts on platforms like Polymarket, and the characterization of each affects income type, applicable tax rate, and loss deductibility. Assumptions based solely on 'betting' labels often lead to reporting errors. Proper classification requires analyzing each contract against applicable tax authorities rather than defaulting to a single treatment.
Many platform reports summarize net outcomes without reflecting contract-level events, partial exits, or settlement timing. They may not distinguish between different contract types, may aggregate activity in ways that obscure individual position outcomes, and rarely address income characterization. This can misstate income type, overstate or understate reportable gains, and create mismatches with IRS third-party data. Accurate filing typically requires independent transaction-level reconstruction using raw export data rather than relying on platform-generated summaries.
No. Platform reports are informational summaries, not determinations of how activity should be reported under U.S. tax law. Kalshi provides 1099 forms for certain activity, but these forms reflect the platform's reporting obligations, not necessarily the correct tax characterization for your specific situation. Polymarket, as a crypto-settled platform, may provide limited or no formal tax documentation at all. In both cases, independent analysis is required to ensure that contract outcomes are correctly classified, properly calculated, and reported on the appropriate forms.
Section 1256 provides favorable tax treatment for certain regulated futures and options contracts, including a 60/40 long-term/short-term capital gains split. Whether prediction market contracts qualify for Section 1256 treatment depends on how they are structured, where they are traded, and whether they meet the statutory definition of a regulated futures contract or Section 1256 option. The IRS has not issued specific guidance on prediction market contracts under Section 1256, which means the position must be carefully analyzed and documented. Camuso CPA evaluates each platform and contract type to determine whether Section 1256 treatment is supportable
Crypto-settled contracts introduce additional reporting complexity related to valuation, settlement timing, and transaction tracing, requiring reconciliation across wallets and platforms.
Depending on scope, deliverables may include transaction-level reconciliation of all contract activity, gain and loss calculations by contract and settlement type, reporting classifications mapped to the appropriate tax forms, and written analysis supporting how activity is reported on filed returns. For higher-exposure cases, we also prepare written tax position memos documenting the methodology and authorities relied upon. Every engagement produces documentation designed to withstand IRS scrutiny, not just summaries for filing convenience.
This work is most commonly required by high-volume traders with significant contract activity across multiple platforms or settlement types, investors whose prediction market gains or losses are material enough to affect their overall tax position, advisors and funds that need defensible reporting methodology for client-facing documentation, and anyone who has received or expects to receive IRS correspondence related to prediction market activity. If your activity goes beyond occasional small positions, professional reporting analysis reduces the risk of mischaracterization and the exposure that comes with it
Traders should retain complete platform transaction histories, including contract purchases, sales, settlements, expirations, fees, and wallet or account identifiers. Platform-generated CSV exports, account statements, and settlement confirmations are essential.
Where available, traders should also preserve contract descriptions, market rules, and settlement criteria, as these help support how activity was classified and reported. Maintaining contemporaneous records is especially important given evolving reporting standards and the limited reliability of platform summaries alone.
If prior filings used incorrect characterizations, overstated or understated gains, or relied on incomplete platform data, you may need to file amended returns. The approach depends on the size of the discrepancy, how the activity was originally reported, and whether the error created an underpayment. Camuso CPA reviews prior filings, identifies misreported activity, and determines whether an amendment is necessary and how to structure it to minimize exposure.
