How Are Polymarket Winnings Taxed? Complete 2025 Guide

Quick Answer: Yes, Polymarket Winnings Are Taxable

All net profits from Polymarket prediction markets are subject to federal income tax and potentially state taxes.The IRS treats these winnings as taxable income, similar to other investment gains. You must report all net gains on your tax return, regardless of whether Polymarket sends you a tax form.

Understanding Polymarket Tax Classification

Why Capital Gains, Not Gambling?

Unlike traditional sports betting or casino gambling, the IRS classifies prediction market trades as investment transactions. This classification is beneficial for traders because:

• You can deduct losses against gains (gambling losses can only offset gambling wins)
• No automatic 24% withholding like gambling winnings
• More favorable treatment for professional traders
• Potential for trader tax status (mark-to-market election)

Tax Rates for Polymarket Winnings in 2025

Since Polymarket positions typically resolve within a year, most winnings are taxed as short-term capital gains. These rates are the same as your ordinary income tax rates:

How to Calculate Your Polymarket Tax Liability

Step 1: Calculate Net Gains/Losses

Step 2: Apply Your Tax Rate

If you're in the 22% tax bracket, you would owe approximately $1,540 in federal taxes on $7,000 of net Polymarket gains. Don't forget to account for state taxes if applicable.

Reporting Requirements

What You Need to Report

• Every resolved trade - Both wins and losses
• Date acquired - When you bought the position
• Date sold/resolved - When the market settled
• Cost basis - Amount you paid for the position
• Proceeds - Amount you received when it resolved

Required Tax Forms

1. Form 8949 - Report each individual transaction
2. Schedule D - Summarize your capital gains and losses
3. Form 1040 - Include the net gain/loss on your main tax return

Important Deadlines

• January 31, 2026 - Polymarket may send 1099 forms (if applicable)
• April 15, 2026 - Federal tax return deadline
• October 15, 2026 - Extended deadline if you file for extension

State Tax Considerations

Most states that have income tax will also tax your Polymarket winnings. States with no income tax include:

• Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming

Some states have different rules for capital gains, so check your state's specific requirements.

Common Questions

Do I need to report if I only won $100?

Yes, technically all income must be reported to the IRS, regardless of the amount. However, if your total net gains are minimal and you had no other capital gains transactions, the tax impact would be very small.

What if I lost money overall?

You can deduct up to $3,000 in net capital losses against your ordinary income. Any losses beyond $3,000 can be carried forward to future tax years.

Does Polymarket send tax forms?

Polymarket operates on blockchain technology and may not send traditional 1099 forms. This doesn't exempt you from reporting - you're still responsible for tracking and reporting all taxable transactions.

Conclusion

Polymarket winnings are definitely taxable, but the capital gains treatment offers some advantages over traditional gambling taxation. The key is maintaining good records and reporting all your transactions accurately. Using a specialized tool like PolyTax can simplify this process significantly and ensure you stay compliant with IRS requirements.