Form 1099-DA Explained for Polymarket and Hyperliquid Users

Form 1099-DA is the new IRS form custodial crypto brokers use to report your digital-asset sales. For 2025 it shows gross proceeds only; from 2026 it also shows cost basis for assets you bought at that broker on or after January 1, 2026. Polymarket's international exchange and Hyperliquid are non-custodial and are not expected to send one, but the exchange you used to buy or cash out USDC probably will, and that form has to be reconciled with your trading results.

OddsFile is software, not tax advice. The IRS has not issued guidance on how prediction-market contracts are taxed. This article explains how Form 1099-DA works and cites the sources; a tax professional can tell you how to report your situation.

What Form 1099-DA is

Form 1099-DA, "Digital Asset Proceeds From Broker Transactions," implements the broker reporting rules in IRC §6045 for digital assets (About Form 1099-DA). A broker files it with the IRS and sends you a copy when you sell, exchange or otherwise dispose of a digital asset through them.

The phase-in:

The 1099-DA instructions describe 2025 as mandatory gross-proceeds reporting with voluntary basis (Instructions for Form 1099-DA). In practice, most 2025 forms show proceeds with no basis, so the IRS sees a number that looks like 100% gain unless you report the basis yourself.

Who sends one, and who doesn't

Custodial brokers do. Coinbase, Kraken, Robinhood Crypto and other centralized platforms that hold your crypto must file. If you bought USDC or ETH on one of them to fund prediction-market trading, or sold USDC back to dollars there, expect a 1099-DA for those sales once you're above any applicable threshold.

Kalshi's crypto rail does. Kalshi's help center lists a 1099-DA for "digital asset transaction reporting from ZeroHash," alongside a 1099-B for crypto transfers, a 1099-INT for interest and a 1099-MISC for rewards (Kalshi tax documentation). Those cover crypto deposits and withdrawals, not your event-contract profit. More in Kalshi taxes and the 1099.

Polymarket (international) and Hyperliquid generally don't. In 2024 Treasury finalized a rule (T.D. 10021) that would have treated certain DeFi front-ends as brokers. Congress nullified it under the Congressional Review Act (H.J.Res. 25, signed April 10, 2025), and Treasury removed it from the regulations in July 2025. A rule overturned this way can't be reissued in substantially similar form without new legislation. Polymarket's international exchange and Hyperliquid are non-custodial, so today there's no rule requiring them to issue 1099-DAs. Polymarket US, the CFTC-regulated exchange operated by QCX LLC, is a different entity; check its own tax documentation for what it issues.

No form doesn't mean no tax. The IRS asks every filer the digital-asset question on Form 1040, and you're expected to report disposals whether or not a form exists (IRS digital assets). See does Polymarket send a 1099?.

Why a 1099-DA rarely shows your prediction-market P&L

Your profit happens on the venue. The 1099-DA shows what happens on the on-ramp and off-ramp. Here is a typical Polymarket year.

Example: USDC in, USDC out

1. March 2026: you buy 10,000 USDC on a custodial exchange for $10,000 and send it to your Polymarket wallet. A transfer between your own wallets isn't a sale.
2. During 2026 you trade and end with 12,500 USDC: a $2,500 trading profit on Polymarket.
3. November 2026: you send 12,500 USDC back to the exchange and sell it for $12,500.

What the forms show:

The exchange knows your basis for the 10,000 USDC it sold you, but the 12,500 units it sold were partly units it never sold you. The extra 2,500 USDC arrived from outside, so the exchange can't know their basis. Their basis is the $2,500 you already recognized on Polymarket (USDC valued at $1). Getting this right avoids two errors: paying tax twice on the $2,500 (once as trading profit, once as USDC "gain" with zero basis) or not reporting the $2,500 at all.

Stablecoins have a special rule. Brokers may use an optional aggregate method for qualifying stablecoins, reporting one total per stablecoin per year rather than each sale, and secondary sources describe a $10,000 annual threshold below which those sales needn't be reported. Read the 1099-DA instructions or ask your preparer how your broker reported them; the optional method also omits basis.

Hyperliquid example: ETH and perps

1. You sell 4 ETH on a custodial exchange for $12,000 (basis $8,000) and buy USDC. The ETH sale is a disposal: the 1099-DA shows $12,000 proceeds, and you report a $4,000 gain.
2. You bridge the USDC to Hyperliquid and trade perps. Realized perp P&L is +$1,800, minus $240 in fees, plus $90 in funding received.
3. None of step 2 appears on any form. You calculate it from your fills and funding history. See Hyperliquid taxes and Hyperliquid funding payments.

Form 8949 boxes G through L

Starting with 2025 returns, digital-asset sales have their own Form 8949 checkboxes (Instructions for Form 8949). Boxes C and F are no longer used for digital assets.

For most 2025 forms, USDC and ETH sales land in H or K (proceeds only). If you treat Polymarket outcome tokens as capital assets, those disposals have no 1099-DA, so they usually go in I or L. Many Hyperliquid positions follow the same logic, though whether a perp position is itself a "digital asset" is something to confirm with your preparer. Kalshi contracts are not digital assets; under capital treatment they would use the regular boxes (typically C). If you treat prediction-market results as gambling, other income or Section 1256, they don't go on Form 8949 at all. Walkthrough with sample rows: prediction-market Form 8949.

When a 1099-DA shows basis was reported, you report the basis shown and put any correction in column (g) with code B, per the 8949 instructions.

Basis is now tracked wallet by wallet

From January 1, 2025, basis has to be tracked per wallet or account rather than pooled across everything you own. Revenue Procedure 2024-28 gave a safe harbor for allocating your existing basis to each wallet as of that date. If you move USDC between an exchange, a Polymarket proxy wallet and Hyperliquid, each location keeps its own lot history. That matters for HIFO or specific-ID elections, and it's a reason to keep exports from every wallet. See multiple Polymarket wallets.

Common mismatches and what usually causes them

How OddsFile fits in

OddsFile imports Polymarket and Hyperliquid wallets and your Kalshi account, rebuilds every lot with fees, and produces a Form 8949 CSV with an audit trail. Box mapping for 1099-DA (G through L) is shown per venue and flagged for review with your preparer. You add your exchange 1099-DA separately so the on-ramp and off-ramp reconcile with your venue P&L.

Run the free OddsFile check: paste a Polymarket or Hyperliquid address and see your 2026 P&L under each treatment, no signup.

FAQ

Will I get a 1099-DA from Polymarket?

Not from the international, non-custodial exchange under current rules. Polymarket US is a separate CFTC-regulated exchange; check what it issues. You may still get a 1099-DA from the exchange where you bought or sold USDC.

Does Hyperliquid send a 1099-DA?

No. It's a non-custodial exchange, and the DeFi broker rule that might have covered such platforms was nullified in April 2025.

My 2025 1099-DA has no cost basis. Is that wrong?

No. For 2025, brokers had to report gross proceeds only. You supply the basis from your own records on Form 8949 (box H or K).

When does 1099-DA basis reporting start?

For covered digital assets acquired on or after January 1, 2026 and sold at the same broker, reported on forms issued in early 2027.

Do I owe tax if I didn't get any 1099?

Reporting duties don't depend on receiving a form. Taxable disposals and income are reportable either way.

Which Form 8949 box do I use for Polymarket trades?

If you treat them as capital assets and received no 1099-DA for them, usually box I (short-term) or L (long-term). Confirm with your preparer, since the IRS hasn't addressed outcome tokens specifically.