How Polymarket gains are taxed
Polymarket is even more hands-off than Kalshi at tax time: it generally sends no tax forms at all. Combined with crypto settlement, that puts the entire reporting burden, and a recordkeeping challenge, squarely on you.
Here is how to think about it. As always, this is educational, not advice, and the treatment of these instruments is unsettled.
No forms, full obligation
Polymarket does not issue a 1099 for your trading. That does not change anything about your obligation: the income is reportable, and the IRS can examine unreported gains. You self-report from your own records.
Crypto settlement changes the analysis
Polymarket positions are settled in stablecoin rather than cash through a regulated exchange. A common conservative analysis treats the outcome tokens as property, where each disposition is a taxable event reported as a capital gain or loss, similar to other crypto.
The Section 1256 argument that some raise for Kalshi is weaker here, because Polymarket is not a CFTC-regulated Designated Contract Market. That regulatory difference is central to the analysis.
Recordkeeping is the real challenge
Because activity is on-chain and there is no broker statement, reconstructing cost basis and proceeds across many trades is harder than on a centralized platform. Keep thorough records of every entry, exit, and the stablecoin value involved.
Where ContractTax fits
ContractTax is built to turn raw prediction-market activity into clean P&L and tax figures. Bringing order to a messy trade history is exactly the problem it solves, so you and your preparer can work from real numbers rather than a wallet full of transactions.