How do you file taxes on prediction market profits? It seems like the type of straightforward question any halfway decent bookkeeper should be able to answer. Right now, though, it’s a conundrum for tax experts across the country. “You have a vacuum of guidance,” says Patrick Camuso, an accountant who specializes in digital assets. “It puts the taxpayer in a bad position.”
Prediction markets have been around for decades, so this isn’t a new issue. But platforms like Kalshi and Polymarket have exploded in popularity since last year, which means the question of how to properly account for prediction market gains has shifted from a niche concern to something far more urgent for many people. While only a small sliver of the population actually uses the markets—around 3 percent, according to a recent poll—that still means millions of US residents are obligated to report their wins and losses to the Internal Revenue Service. There’s big money in play here. Kalshi, which has a predominantly American user base, saw over $12 billion in monthly trade volume this past March, according to markets tracker Defi Rate.
Kalshi declined to comment. The IRS and Polymarket did not respond to requests for comment.
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