Key takeaway: Earnings from prediction markets face taxation across virtually all countries. How they are taxed—whether as capital gains, wagering income, or standard income—depends on your location and how frequently you trade. Maintain comprehensive documentation of all your transactions without exception.
The uncomfortable reality many traders avoid: are prediction market gains subject to tax? The answer is straightforward: in nearly all cases, yes. Below is a detailed country-by-country examination of how tax authorities worldwide handle prediction market earnings.
United States
The IRS has not published dedicated rules for prediction market taxation, though standard tax law principles apply:
- Capital gains treatment: Should prediction market shares qualify as property (similar to digital assets), gains face short-term capital gains tax (taxed at ordinary income rates, reaching 37% maximum) when held for less than twelve months
- Gambling income: When classified as gambling activity, all gains count as ordinary income reported on Schedule 1, Line 8b. Losses may reduce gains (Schedule A) yet cannot reduce other income sources
- Kalshi (regulated): Sends 1099 statements to American participants. Polymarket does not—yet you remain obligated to declare earnings
United Kingdom
HMRC typically views prediction market earnings as gambling proceeds, which remain untaxed for non-professional participants. That said:
- Should trading become your primary occupation, HMRC may reclassify it as trading income (subject to income tax)
- Stablecoin conversions (such as USDC) may create separate taxable events
- Those engaged in full-time trading ought to obtain formal HMRC advice
European Union
Member states within the EU apply differing tax rules:
- Germany: Earnings taxed either as private asset sales or speculative gains (consult our German tax guide)
- France: Stablecoin gains subject to a uniform 30% levy (PFU) covering prediction market earnings denominated in crypto
- Netherlands: Annual wealth assessment on holdings (Box 3) instead of actual profit realisation
Australia
The ATO deems prediction market earnings as taxable income. Those who engage in frequent trading face taxation on all earnings as standard income. Occasional traders might claim hobbyist status, yet the ATO has grown stricter regarding blockchain-related ventures.
Record-keeping best practices
Across all jurisdictions, document the following:
- All transactions: entry date, contract name, position type (YES/NO), entry price, share count
- Account funding and withdrawals including exact dates and values
- Exchange rates for stablecoin and fiat conversions at each transaction moment
- Invoices for platform charges
- Final contract outcomes and settlement proceeds
PolyGram's tax export feature creates IRS 8949-ready documentation and EU MiCA-formatted records directly from your trading activity. Start trading on PolyGram →