How to File Prediction Market Taxes (2026): Step by Step

Which prediction markets send a tax form for your trades?

None that we have checked. Each venue below either says it does not report trading results to the IRS or describes no form that does. What it gives you instead is history in a file, a statement or an API, and that is where step 1 starts.

Two things are true on every venue. No form does not mean no filing: the reporting duty is yours whether a 1099 arrives or not. And withdrawing is not what creates the tax. A result counts when a position closes, so money left in the account is already counted.

What does each position need on a return?

Six facts, whichever venue it came from: a description, the date you bought, the date it closed, what it paid, what it cost, and the fees.

• Proceeds are contracts times the exit price. A market that settles pays $1.00 or $0.00 a contract.
• Cost is contracts times the entry price. The common convention adds the opening fee to cost and takes the closing fee out of proceeds.
• A contract that expired worthless is still a sale, for zero. Dropping it drops the cost that makes it a loss.
• A position bought in several fills is one row with their combined cost, not a duplicate.

Most rows will be short-term, held a year or less. Event contracts resolve on an event, and most events come within weeks. Fees, fractional quantities and the traps in each file are on each venue's how-to-file guide, and matching closes to opens is in the cost basis guide.

What happens to positions open on December 31?

It depends on the route. Under standard capital and gambling treatment, a position counts only when it closes. Under §1256(a)(1), a contract held at year end is treated as sold at its fair market value, so it lands on that year's return. Its year-end price then becomes the starting cost for next year.

No venue export lists what you held on December 31 with a price for that day. If your return uses Section 1256, that list is the one part you build from the API or a statement. How each venue prices the day is in what happens to positions open on December 31.

Which filing route does your return use?

There is no IRS guidance on how event contracts are taxed. Of the people we've seen file, these are the four most common ways they file, and each fills different forms from the same rows:

Ordinary income is a newer way some people file. The argument is that a contract that is neither a capital asset nor a wager produces ordinary income, so a loss is deducted in full against other income. The argument against it is that the contracts trade on exchanges like other capital assets.

Each route has precedent and arguments against it, and the choice is about timing as much as rate: paying less now and possibly more later, or the reverse. Each is set out in full, with one worked year priced each way, in how prediction markets are taxed. The calculator above shows your own year the same way.

None of the four is an election you check on a form. Whether Section 1256 applies, or whether a contract is a wager, is a question about what the contract is. The answer holds every year, and an earlier year filed differently is an amendment question.

How do the rows go on each form?

Under standard capital, each closed row goes on Form 8949. No 1099-B reports these trades, so short-term rows use box C and long-term rows box F. Part I totals to Schedule D line 3, Part II to line 10.

Under gambling treatment, total winnings go on Schedule 1 line 8b. A losing session does not reduce that line. Losses go on Schedule A line 16 only for people who itemize, capped at winnings, and at 90% of the loss for tax years beginning after December 31, 2025. The rules are in are prediction markets taxed as gambling.

Under Section 1256, rows go on Form 6781 Part I. Line 1 takes every position closed during the year plus every position open on December 31 at its year-end price. With no 1099-B to copy, the instructions have you list each transaction separately. The net splits 40% short-term and 60% long-term, however long anything was held. Line by line, it is in Form 6781 for event contracts.

What if you traded on more than one venue?

You file one return, not one per venue. Rows from every venue go on the same forms. Form 6781 is one form per return, and column (a) of line 1 identifies each account, so each venue keeps its own row. Futures or broad-based index options filed under Section 1256 sit on the same form.

Results net only inside one treatment. A leg filed as gambling does not net against a leg filed as capital or Section 1256, which is the trap in arbitrage betting taxes.

What if the year was a loss?

It goes on the same forms as a winning year. What the loss can be worth depends on the route:

• Capital: it offsets capital gains, then up to $3,000 of other income a year ($1,500 married filing separately), and the rest carries forward with no end date.
• Gambling: losses come off only up to winnings, only for people who itemize, and nothing carries forward.
• Ordinary income: the loss is deducted in full against other income, with no annual cap.
• Section 1256: the same offset as capital, and a net Section 1256 loss can be carried back three years against earlier Section 1256 gains, on Form 1045 or amended returns. See the carryback guide.

A large loss is a lot of money to claim. Some people have a licensed CPA prepare that claim. More is in prediction market losses.

How Realize helps

Realize builds the rows for every venue above. Connect a venue read-only, or upload its statements, and Realize rebuilds each position from the raw trades, prices what was open on December 31 from the venue's published close, and shows your year under each common route. From there you can file it yourself with our forms, e-file through our self-filing partner, or have our licensed CPAs prepare it. DFS Accounting Services reviewed the engine that builds the forms; how each number is checked is in how Realize checks its numbers.

Every term on this page is defined in one line in the tax glossary.

Sources

• Kalshi, Polymarket US, Novig, Robinhood, Coinbase and Gemini documents: quoted and dated on each venue's how-to-file and forms guides linked in the table, checked October and November 2026.
• 26 U.S.C. §1256, year-end marking and the 60/40 split. Checked November 9, 2026.
• 26 U.S.C. §1211 and §1212, the capital loss limit, carryforward and the Section 1256 carryback. Checked November 9, 2026.
• 26 U.S.C. §165(d), wagering losses, as amended by Pub. L. 119-21 §70114. Checked November 9, 2026.
• IRS Form 8949 and Form 6781 and their instructions. Checked November 9, 2026.