Polymarket Taxes
The IRS has not issued formal guidance on how prediction market profits are taxed. In the UK and Australia, casual betting winnings are generally tax-free for individuals. Every settled market is a separate taxable event in jurisdictions where prediction markets are taxable.
Calculate your Polymarket taxes automatically. Connect your wallet and DYOR.tax reads all settled markets, calculates P&L per market, and generates a report in your local currency.
Try the Polymarket Calculator →What counts as taxable
Each Polymarket or Kalshi market that settles is a separate taxable event. Whether you win or lose, the settlement needs to be reported (in jurisdictions where prediction markets are taxable).
The tax treatment depends on your country. In the US, the IRS has not issued specific guidance - gambling income, capital gains, and other frameworks have all been argued by practitioners. The UK and Australia generally exempt casual gambling winnings from tax. Canada's treatment depends on whether the activity is casual, speculative capital activity, or a business.
Polymarket uses USDC. Each settled market pays out in USDC. For non-US users, converting local currency to USDC and back may create additional foreign exchange gains or losses.
Kalshi is CFTC-regulated and USD-settled. Kalshi operates as a CFTC-regulated designated contract market, which creates a different regulatory context than offshore crypto-settled Polymarket. Whether this translates to different tax treatment - including potentially Section 1256 treatment as a regulated futures contract - remains unsettled. Kalshi users avoid the USDC crypto layer entirely, which simplifies the reporting picture but does not resolve the underlying classification question.
How DYOR.tax handles Polymarket taxes
- Connect your Polymarket wallet. Enter your EVM wallet address used on Polymarket.
- Settled markets read on-chain. The scanner detects all resolved positions from your on-chain history.
- P&L calculated per market. Each win and loss is computed in your selected local currency.
- Country-specific report. Your PDF includes filing guidance mapped to the correct forms for your country.
Country-specific prediction market tax rules
United States
The IRS has not issued formal guidance on how prediction market profits are taxed. Three frameworks are commonly discussed: gambling income (Schedule 1, losses deductible only against winnings); capital gains under Section 1001 (property treatment, losses offset gains with up to $3,000 against ordinary income); and Section 1256 contracts (60/40 long/short split, more defensible for CFTC-regulated Kalshi than for offshore Polymarket). Keep records of every settled market regardless of which framework you use.
The One Big Beautiful Bill Act (2026) made the gambling framework significantly less attractive by capping gambling loss deductions at 90% of winnings - meaning a break-even trader can face phantom taxable income. Most practitioners now lean toward the capital gains approach as more defensible, but no court has ruled on prediction market contracts and no IRS guidance exists. See the US Polymarket tax calculator page for a full framework breakdown.
United Kingdom
HMRC treats betting and gambling winnings as tax-free for individuals who bet casually. However, if you trade prediction markets systematically (high volume, algorithmic strategies, or as a primary income source), HMRC may classify your activity as trading and apply income tax.
Canada
Similar to the UK: casual gambling winnings are generally not taxable. But if you trade prediction markets systematically or as a business, the CRA may treat winnings as business income. The line between casual and systematic is fact-dependent.
Australia
The ATO generally exempts gambling winnings from tax unless you're in the business of gambling. Casual Polymarket use is typically tax-free. Professional or systematic prediction market trading may trigger income tax obligations.
The USDC layer
Polymarket runs on USDC, a USD-pegged stablecoin on Polygon. Each settled market pays out USDC, which is technically a crypto disposal event. For US-based users, USDC trades at roughly 1:1 with USD, so the stablecoin layer rarely creates meaningful tax events.
For non-US users, USDC is a foreign-currency-denominated asset. Converting GBP, CAD, or AUD to USDC creates an FX position. If the exchange rate moves between when you buy USDC and when you convert back, you may have a foreign exchange gain or loss to report.
DYOR.tax handles this automatically. All USDC amounts are converted to your local currency at the exchange rate on the date of each transaction.
Common mistakes
- Assuming prediction markets are always tax-free. This is true in the UK and Australia for casual bettors, but not in the US. Americans owe tax on every winning market.
- Netting wins and losses incorrectly. In the US, gambling losses can only offset gambling winnings, not your salary or investment income. Report gross winnings and claim losses separately.
- Ignoring the USDC conversion. Non-US users may owe tax on FX gains when converting USDC back to local currency, even if the underlying market was a loss.
- Not keeping per-market records. Each settled market is a separate event. A single annual total isn't enough. You need the date, cost, and payout for each position.