Last Updated on August 24, 2026 by Patrick Camuso, CPA
Quick answer
Camuso CPA has released the inaugural State of U.S. Prediction-Market Tax and Accounting 2026.
The report addresses a practical issue facing a growing class of professional participants: federal tax analysis, internal accounting systems and records, and tax information reporting are separate disciplines. Each draws on the same underlying activity, yet each serves a different purpose and may require a different record.
The report does not assign a federal tax result to any venue, event contract, or participant. It identifies the questions that may need to be evaluated under the applicable facts and law, along with the accounting and reporting records needed to support that work.
Why the report was needed
Prediction-market activity has grown beyond the simple retail use case often assumed in public discussion. Professional traders, market makers, trading firms, funds, and multi-venue participants may have high transaction volume, complex position histories, fees and rebates, year-end open positions, entity-level accounting requirements, and third-party reporting records that do not answer every tax question.
A platform P&L, participant statement, or year-end tax form can be useful evidence. It may not provide a complete transaction history, establish the legal endpoint of a position, show the impact of corrections, or reconcile activity to the entity books and tax workpapers.
Three disciplines that need to work together
Federal tax analysis
Prediction-market tax treatment can depend on the contract, the legal rights it creates, the transaction that changes or ends those rights, the taxpayer’s activities, and other facts that platform terminology or aggregate P&L may not establish. The report examines potentially relevant federal tax frameworks, including section 1256, section 165(d), general income and loss principles, sections 1234 and 1234A, section 475, loss limitations, timing, and taxpayer-level consequences.
It does not publish a preferred treatment or a decision rule for a particular contract. Those conclusions remain dependent on applicable law and facts.
Internal accounting systems and records
Internal accounting serves a separate function from tax information reporting. It is concerned with the records needed to normalize source activity, preserve position and lifecycle history, reconcile balances to the general ledger, support period-end close, and prepare book-to-tax reconciliation workpapers. For a professional participant, the core institutional record is a transaction-lifecycle accounting record that reconciles venue activity to the entity books and supports the tax position ultimately reported.
Tax information reporting
Tax information reporting is an administrative layer with its own questions. Participant statements, Forms 1099, annual account reports, and other third-party records may provide reporting data and reconciliation inputs. They do not independently establish substantive federal tax treatment.
The report also reviews publicly documented reporting and data capabilities across selected U.S.-relevant access models. That venue matrix is a dated documentation study. It does not rank venues, assess internal capability or compliance, or determine that any venue, broker, clearing firm, or reporting entity has a particular obligation.
Why this matters for professional participants
For a market maker, trading firm, fund, or other high-volume participant, the question is often broader than whether activity generated a gain or loss.
The records may need to establish what occurred, when it occurred, what remained open at year end, how corrections affected the transaction lifecycle, and how source records connect to the entity books and the return position ultimately taken. The issue becomes more significant where activity spans multiple venues, access models, funding methods, accounts, or entities. It can also affect partnership and owner-level reporting, digital-asset funding, cash and collateral reconciliation, fees and rebates, and period-end close.
The report is intended to help readers identify those issues before they become a year-end reconstruction problem.
Read the report
Download the State of U.S. Prediction-Market Tax and Accounting 2026.
For participants seeking prediction-market tax, accounting, or reporting support, schedule a consultation with Camuso CPA.
This article is provided by Camuso CPA for general informational purposes and does not constitute legal, tax, accounting, or investment advice. Tax laws and regulations are evolving rapidly and the information presented may not reflect current guidance. Reading this article does not create a CPA-client relationship. For advice on your specific situation, schedule a consultation with Camuso CPA.
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