Prediction Market Taxes Explained
US users should assume prediction-market profits are taxable. Exactly how they are classified can depend on the platform, the product, and your personal circumstances — so the one piece of advice that always applies is to keep good records and ask a tax professional.
This guide is general information, not tax advice. Rules change and individual situations differ — confirm your reporting with a qualified tax adviser.
Assume it’s taxable income
The IRS treats gambling winnings as fully taxable and reportable, specifically naming sports betting, horse races, casinos and lotteries. Even where a prediction-market product isn’t “gambling,” taxable income is generally still taxable income — and reportable even if no form arrives.
Derivatives may be treated differently
Regulated event contracts may not be treated identically to sportsbook winnings, because some are structured as derivatives rather than wagers. That can change which forms apply and how gains and losses net out. A platform like Robinhood, which wraps event contracts in a brokerage, may issue tidy 1099 reporting; a sweepstakes-style product might not. This is exactly the kind of distinction a tax adviser sorts out.
Keep these records
- Deposits and withdrawals (dates and amounts)
- Every trade: entry, exit, and settlement
- Fees paid
- Realised gains and losses
- Any tax forms the platform issues
Good records turn tax season from guesswork into data entry — and they double as the trade log that makes you a better trader. See can you make money on prediction markets? for why tracking every trade pays off twice.