Polymarket Taxes 2026: How to Report Winnings When There's No 1099
Polymarket will not send you a 1099. Kalshi will send you a 1099-MISC. The IRS has never published a ruling classifying prediction-market contracts. And every dollar of profit is taxable regardless. That’s the 2026 situation in one paragraph — and it means US traders must choose among three defensible tax treatments, keep records good enough to survive an audit, and watch a new loss-limitation rule that took effect in 2026. Here is the full picture, with the numbers.
First fact: no 1099 does not mean no tax
This is the most common and most expensive misconception. Taxable income is taxable whether or not a platform reports it. Polymarket issues no 1099-B, no 1099-DA, no W-2G — its US-regulated platform and global site treat you as a crypto user, not a brokered account. Kalshi, as a CFTC-regulated exchange, issues 1099-MISC forms to qualifying traders. Either way, your filing obligation is identical: report gross winnings and deductible losses accurately yourself.
The three treatments (and why the IRS hasn’t chosen)
| Treatment | Character | Potential upside | Potential downside |
|---|---|---|---|
| Capital gains | Each contract = a capital asset; proceeds on resolution/sale | Netting against other gains; ordinary loss on worthlessness possible | Record-keeping heavy; short-term rates apply |
| Gambling (Section 165(d)) | Wagering income, losses deductible up to winnings | Clean one-line reporting | New 90% loss-deduction cap (2026) — see below |
| Section 1256 (60/40) | Regulated-futures style: 60% long-term + 40% short-term | Blended rate ~26.8% at top bracket; mark-to-market year-end | Hardest to defend — event contracts aren’t futures |
The honest position, echoed by most CPAs working in this niche: until the IRS rules, each treatment is arguable, and consistency matters more than optimization. Pick the treatment you can document and defend, apply it to every trade, and disclose the position in your records.
The 2026 change that matters: the 90% gambling-loss cap
Starting with the 2026 tax year, gambling-loss deductions are limited to 90% of the year’s gambling losses (previously 100% of losses up to winnings). For a trader electing gambling treatment, the arithmetic can turn ugly in a losing year: suppose you wagered such that you had $100,000 of losses and $80,000 of winnings. You can offset the winnings fully, but only 90% of the losses count against them — and the disallowed 10% can strand loss carryovers. Run both computations before choosing this treatment for a losing year.
Crypto settlement wrinkle
Polymarket settles in USDC/pUSD. Even under capital-gains treatment, your basis accounting may involve disposing of crypto to fund positions, which is itself a taxable event with its own gain/loss. Track two layers: the USDC/pUSD layer (acquisition and disposal of stablecoin) and the contract layer (entries and exits per market). Software that handles one layer and not the other produces numbers that fall apart under examination — see the withdrawal guide for the money-movement side.
The records that survive an audit
Keep, for every trade:
- Market identifier and resolution rules snapshot (screenshot the criteria at entry — they can be edited)
- Entry and exit data: date, UTC time, price, size, fees, tx hash
- Resolution proof: the final outcome as resolved, with the explorer link to the redemption
- The treatment memo: a one-page note stating your chosen treatment and why — written while the year is open, not during the audit
The Polymarket Data API exports the full trade tape per wallet, which covers items 2–3 programmatically — see the API guide. Export monthly; reconstructing a year from memory in March is how numbers drift.
What about state taxes?
States broadly follow the federal characterization but diverge on gambling-loss rules: some allow full loss deduction up to winnings regardless of the federal 90% cap, others don’t allow gambling losses at all for residents of certain states. If you elected gambling treatment federally, verify your state’s treatment separately — the interaction is where real bills surprise people.
FAQ
Are Polymarket winnings taxable in the US? Yes — every dollar of profit, whether or not any 1099 is issued. The platform’s silence doesn’t change your filing obligation.
Does Polymarket send a 1099? No. Kalshi issues 1099-MISC to qualifying traders; Polymarket issues nothing. Self-reporting is mandatory either way.
Which tax treatment should I choose? The one you can document consistently. Capital gains is the most common CPA recommendation for active traders; gambling treatment is simpler but now carries the 90% loss-deduction cap; Section 1256 is the most aggressive and least defensible.
What is the 90% gambling loss cap? A 2026-effective rule limiting gambling-loss deductions to 90% of losses for the year. In losing years it strands a share of losses even against winnings — model it before choosing gambling treatment.
Do I owe tax on markets that resolved at a loss? Losses are deductible under your chosen treatment (subject to the caps above). This is precisely why treatment choice and record-keeping matter: untaxed winning markets with unclaimed losing markets is the worst of both worlds.
Educational content, not tax advice — consult a CPA for your situation. Not affiliated with Polymarket or Kalshi. Last updated October 2026.
