2025 Polymarket Tax Guide
Updated guidance for reporting Polymarket trades on IRS Form 8949, Schedule D, and popular filing software.
Need U.S.-specific steps?
Our dedicated USA landing page covers deadlines, quarterly estimates, and TurboTax workflows.
Explore Polymarket Tax USA →Import into TurboTax
Bring PolyTax CSVs directly into TurboTax Desktop with our import walkthrough.
Follow the workflow →Wondering about 1099s?
See why Polymarket doesn’t issue 1099s and how to respond if the IRS asks for proof.
Read the 1099 FAQ →Table of Contents
What is Polymarket Tax?
Polymarket tax refers to the tax obligations arising from trading on Polymarket, a decentralized prediction market platform. Every time you win a prediction or profit from trading shares in prediction markets, you create a taxable event that must be reported to the IRS.
Unlike traditional investments, Polymarket doesn't issue 1099 forms, making it your responsibility to track and report all transactions. This includes:
- Winning predictions that resolve in your favor
- Profits from buying and selling shares before market resolution
- Market making activities and liquidity provision
- Any USDC gains from currency fluctuations
Tax Implications of Prediction Markets
Important Tax Notice
The IRS requires you to report all income, including earnings from prediction markets. Failure to report can result in penalties, interest, and potential criminal charges for tax evasion.
Prediction market earnings have several unique tax implications:
1. No Tax Withholding
Unlike traditional employment, Polymarket doesn't withhold taxes. You're responsible for calculating and paying taxes on your earnings.
2. Self-Reporting Required
Without 1099 forms, you must maintain accurate records and self-report all taxable events to the IRS.
3. Quarterly Payments May Apply
If you have significant earnings, you may need to make quarterly estimated tax payments to avoid underpayment penalties.
How Polymarket Earnings Are Taxed
Capital Gains Treatment (Most Common)
Most Polymarket trades are treated as capital gains, similar to stock trading:
- •Short-term capital gains (held ≤ 1 year): Taxed at your ordinary income tax rate (10-37%)
- •Long-term capital gains (held > 1 year): Taxed at preferential rates (0%, 15%, or 20%)
Alternative Tax Treatments
Gambling Income
Some tax professionals argue prediction markets could be gambling. This treatment requires reporting all winnings as income and only allows loss deductions as itemized deductions.
Other Income
The most conservative approach treats earnings as miscellaneous income, potentially subject to self-employment tax.
IRS Reporting Requirements
⚠️ All Polymarket earnings must be reported, regardless of amount
The IRS requires you to report:
- Every winning prediction (market resolution in your favor)
- All profits from selling shares before market resolution
- Any losses (which can offset gains)
- The date acquired and date sold for each position
- Your cost basis and proceeds for each transaction
Record Keeping Requirements
- • Transaction hashes for all trades
- • Screenshots of your trading history
- • Bank statements showing deposits/withdrawals
- • Detailed transaction logs with dates and amounts
Required Tax Forms
Form 8949
Reports each individual Polymarket transaction with:
- • Description of property
- • Date acquired
- • Date sold
- • Proceeds
- • Cost basis
- • Gain or loss
Schedule D
Summarizes your capital gains and losses:
- • Total short-term gains/losses
- • Total long-term gains/losses
- • Net capital gain or loss
- • Carryover losses
Calculating Your Tax Liability
Step-by-Step Calculation
- 1. Determine Your Gains/Losses
Proceeds - Cost Basis = Gain/Loss for each trade
- 2. Separate by Holding Period
Short-term (≤ 1 year) vs Long-term (> 1 year)
- 3. Calculate Net Amounts
Total gains - Total losses in each category
- 4. Apply Tax Rates
Short-term: Your income tax rate | Long-term: 0%, 15%, or 20%
Quarterly Estimated Tax Payments
2025 Payment Deadlines
Q1: April 15, 2025
For Jan 1 - Mar 31 income
Q2: June 16, 2025
For Apr 1 - May 31 income
Q3: Sept 15, 2025
For Jun 1 - Aug 31 income
Q4: Jan 15, 2026
For Sep 1 - Dec 31 income
You may need to make quarterly payments if:
- • You expect to owe $1,000+ in taxes
- • Your withholding won't cover 90% of current year tax
- • Your withholding won't cover 100% of prior year tax
Common Tax Mistakes to Avoid
❌ Not Reporting Because No 1099
The IRS expects you to report all income, even without a 1099. Blockchain transactions are traceable.
❌ Forgetting Cost Basis
Failing to track your purchase price leads to overpaying taxes or IRS penalties.
❌ Missing Quarterly Payments
Large gains require quarterly payments. Missing them results in underpayment penalties.
❌ Wrong Tax Treatment
Using gambling treatment when capital gains apply (or vice versa) can trigger audits.
Author & Methodology
Prepared by Elaine Wong, CPA. Reviewed February 2025. Trade data is aggregated from the Polymarket API, converted to USD using historical exchange rates, reconciled against wallet movements, and then formatted into Form 8949 and Schedule D summaries.
Educational information only — speak with a qualified tax advisor for personal guidance.
Ready to File Your Polymarket Taxes?
Generate your complete tax documents in under 60 seconds