Key takeaway: Most jurisdictions levy tax on prediction market earnings. How those earnings are classified—whether as capital gains, wagering income, or standard income—hinges on your location and trading behaviour. Maintain comprehensive documentation of all transactions without exception.
The uncomfortable reality: are prediction market returns subject to taxation? The straightforward answer: in virtually all cases, yes. Below is a comprehensive country-by-country analysis of how tax authorities across the globe handle prediction market earnings.
United States
The IRS has not released targeted rules for prediction market taxation, though broad tax law applies:
- Capital gains treatment: Should prediction market shares qualify as property (similar to digital assets), gains face short-term capital gains tax (at standard income tax rates, reaching 37%) when held for less than twelve months
- Wagering income: When classified as wagering, all proceeds count as standard income reported on Schedule 1, Line 8b. Wagering losses may reduce wagering gains (Schedule A) yet cannot reduce other income sources
- Kalshi (regulated): Sends 1099 forms to US participants. Polymarket does not — nevertheless, you remain obligated to disclose earnings
United Kingdom
HMRC ordinarily views prediction market earnings as wagering proceeds, which remain untaxed for non-professional bettors. That said:
- Should trading represent your main occupation, HMRC might reclassify it as trading revenue (liable to income tax)
- Digital currency elements (USDC conversion) could create separate capital gains obligations
- Those engaged in professional trading ought to request HMRC clarification
European Union
Member states within the EU apply differing tax frameworks:
- Germany: Earnings taxed under private disposal rules or as speculative revenue (consult our German tax guide)
- France: Digital currency earnings subject to a uniform 30% levy (PFU) including prediction market settlements denominated in digital currency
- Netherlands: Portfolio levy applied to total holdings (Box 3) instead of actual gains realised
Australia
The ATO classifies prediction market earnings as taxable revenue. For those engaged in frequent trading, earnings constitute standard revenue. Occasional participants might pursue casual classification, yet the ATO has tightened scrutiny on digital-asset-related ventures.
Record-keeping best practices
Irrespective of location, document the following:
- All transactions: timing, venue, choice (YES/NO), entry point, volume
- Fund transfers in and out with exact times and sums
- USDC/fiat rates applicable at each transaction moment
- Platform charge documentation
- Settlement details and corresponding payouts
PolyGram's tax export feature creates IRS 8949-ready records and EU MiCA-format exports straight from your activity log. Start trading on PolyGram →