As prediction markets grow in popularity, traders are facing a key question: The Internal Revenue Service hasn’t shared any details on how their winnings are to be taxed.
Story continues below
The year is more than halfway over, but the IRS has yet to share any guidance on the federal tax treatment for prediction market winnings and losses.
“I think it’s extremely confusing for the users of prediction markets because they’re getting a lot of [conflicting] guidance,” said Ryan Schutz, a former IRS special agent and founder of First There Tax.
Winnings from prediction markets could fit into several categories, tax experts said: gambling income, capital gains or treatment under a Section 1256 contract.
