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.
- Polymarket does not issue a 1099 for your trading.
- Polymarket positions are settled in stablecoin rather than cash through a regulated exchange.
- 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.
- ContractTax is built to turn raw prediction-market activity into clean P&L and tax figures.
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.