How Are Polymarket Winnings Taxed? The 2026 US Guide
Polymarket winnings are taxable in the United States whether or not you receive a tax form: the global on-chain platform issues no 1099, Polymarket US has 1099 reporting practices arriving for the 2026 tax year (forms in January 2027), and the IRS has never issued guidance classifying prediction-market income. Practitioners use three defensible approaches — and the new 90% loss-deduction cap makes the choice materially expensive if you guess wrong.
What are the three tax treatments?
| Approach | How gains/losses work | Practical fit |
|---|---|---|
| Capital gains | Each position’s P&L is a disposal; Form 8949 line items | Most common for on-chain traders |
| Gambling income | Net winnings per session; losses offset winnings only | Matches state-law wagering analogies |
| Section 1256 analogy | 60/40 long/short-term split | Used by some pros; contested |
The classification affects both the rate and the loss treatment — which is where 2026 changed the math: the new 90% cap on gambling-loss deductions means a break-even trader using the gambling classification can owe tax on phantom income.
What reporting does each platform actually send?
| Platform | Form | Status |
|---|---|---|
| Polymarket global (on-chain) | None | You self-report from records |
| Polymarket US | 1099 practices for 2026 | Announced; forms January 2027 |
| Kalshi | 1099 | Established practice |
No form does not mean no tax: the absence of a 1099 shifts the documentation burden entirely to you — exports of trades, fills, and on-chain records become your substantiation.
How do I compute my taxable outcome?
For the capital-gains approach (the most common for on-chain activity):
- Export every fill (Data API, trade history) with timestamps and prices
- Match entries and exits per position (or per tax lot)
- Short-term gains (held ≤ 1 year — nearly everything on event markets) tax as ordinary income
- Losses net against gains; capital-loss limits apply beyond that
- Deposits and withdrawals are not taxable events by themselves
The gambling-income approach nets winnings and losses per session instead — simpler arithmetic, harsher loss caps, and a state-law overlay that varies.
What records should I keep?
- Full trade history export (every fill, not net positions)
- Resolution outcomes for held-to-settlement positions
- Deposit and withdrawal hashes (Polygon/on-chain or bank records)
- Fee statements — the taker formula’s fees are part of basis
- A dated note of the classification approach you chose, applied consistently
What do practitioners actually advise?
- Consistency first — pick an approach, document it, apply it every year; methodology whiplash is what triggers scrutiny
- The 90% cap changes defaults — for active traders with heavy two-sided flow, the capital-gains approach often produces the saner loss treatment post-2026
- Watch for 1099 mismatches — when Polymarket US forms arrive, reconcile them against your own records before filing; platform aggregates can misclassify resolution payouts
FAQ
Q: Are Polymarket winnings taxable if I got no 1099? A: Yes. The global platform issues no forms; the reporting obligation exists regardless. Self-document from trade exports and on-chain records.
Q: Is Polymarket income capital gains or gambling income? A: Unsettled — the IRS hasn’t classified prediction markets. Practitioners defend capital-gains treatment (Form 8949), gambling-income treatment, or a 1256 analogy; consistency matters more than the choice itself.
Q: Will Polymarket US send a 1099? A: 1099 reporting practices are in place for the 2026 tax year, with forms issued in January 2027. The global platform sends nothing.
Q: What is the 2026 loss-deduction cap? A: The new 90% cap on gambling-loss deductions — it makes the gambling-income classification potentially expensive for break-even traders, who can owe tax on phantom income.
Q: Are deposits and withdrawals taxable? A: Moving your own funds generally isn’t — the taxable events are position closures and resolutions. Keep hashes and records anyway; they substantiate everything else.
Sources
Disclaimer
Not tax or financial advice. Educational purposes only — consult a qualified professional for your situation. Updated October 2026.