How to Report Prediction-Market Trades on Form 8949

If you and your preparer treat prediction-market contracts as capital assets, each closed position becomes a row on Form 8949: description, date acquired, date sold or resolved, proceeds, cost basis and gain or loss. Polymarket outcome tokens are usually reported as digital assets with no 1099-DA (box I short-term, box L long-term). Kalshi contracts without a 1099-B usually go in box C or F. Totals then flow to Schedule D.

OddsFile is software, not tax advice. The IRS has not issued guidance on how prediction-market contracts are taxed, and capital-asset treatment is one of several positions. This article shows how Form 8949 works if that position is used; a tax professional can tell you whether it fits your situation.

When Form 8949 applies

Form 8949 is only for the capital-asset treatment. If your results are reported as Section 1256 contracts, they go on Form 6781 instead. If they're treated as other income or gambling, they go on Schedule 1 (and Schedule A for gambling losses). The choice is covered in gambling vs capital gains for event contracts.

The columns

From the Instructions for Form 8949:

Holding period is short-term if you held one year or less; long-term only if you sold after the one-year anniversary of the purchase. Most event contracts resolve within a year.

Which box: C, I, L or G/H?

Starting with 2025 returns, digital assets have their own boxes and boxes C and F can't be used for them:

Polymarket outcome tokens are blockchain tokens (on Polygon), which is why they're usually treated as digital assets. The IRS hasn't addressed them specifically, so confirm the box with your preparer. Hyperliquid perp positions are less clear-cut; many preparers report them in I/L too. Background in 1099-DA explained.

Worked rows

Row 1: Polymarket position that won and was redeemed

• March 4, 2026: buy 1,000 YES at $0.42 = $420.00, taker fee $2.10
• May 10, 2026: market resolves YES, redeem 1,000 × $1.00 = $1,000.00

Box I. The fee is added to basis. Polymarket's activity feed shows the fee as the difference between the USDC paid and shares × price.

Row 2: Polymarket losing position, never redeemed

• Buy 600 NO at $0.50 = $300.00, fee $1.50, on June 2, 2026
• Market resolves YES on August 15, 2026. You never click redeem (nothing to redeem).

The loss is real even without an on-chain sale. Many trackers miss these rows; see unredeemed losing positions.

Row 3: Kalshi contract sold before settlement

• Buy 200 NO at $0.63 = $126.00, fee $1.40
• Sell 200 NO at $0.80 = $160.00, fee $1.12

Box C (not a digital asset, no 1099-B for event contracts). The sell fee reduces proceeds. Alternatively, report gross proceeds of $160.00 and enter −1.12 in column (g) with code E; the result is the same.

Row 4: Partial sales and FIFO

Buy 500 YES at $0.30 (Jan 5), buy 500 YES at $0.50 (Jan 20), sell 600 at $0.70 (Feb 1). Under FIFO the 600 sold are 500 from Jan 5 plus 100 from Jan 20, which is two rows with different acquisition dates (or one row marked "VARIOUS" if your preparer accepts it for short-term lots). Fees ignored for brevity:

The remaining 400 shares from January 20 stay open until sold or resolved. Kalshi's P&L statement uses FIFO (Kalshi help); for crypto you may use specific identification if you keep adequate records.

Do you need one row per trade?

The 8949 instructions allow two shortcuts:

• Exception 1: Report totals directly on Schedule D line 1a or 8a, but only for sales on a 1099-B or 1099-DA with basis reported and no adjustments. That rarely applies to prediction markets.
• Exception 2: Enter combined totals per box on Form 8949 and attach a statement containing every transaction in the same format.

Either way, the per-trade detail has to exist. Active traders with thousands of fills usually use Exception 2 with an attached CSV or PDF.

Things that don't go on Form 8949

• USDC moves between your own wallets. Not a disposal.
• Deposits and withdrawals on Kalshi. Not a disposal.
• Rewards and liquidity incentives. Generally income when received, not a sale. Kalshi reports some on 1099-MISC.
• Hyperliquid funding payments. Their treatment is unsettled; see Hyperliquid funding payments.

Selling USDC for dollars at a custodial exchange is a disposal, usually with near-zero gain, and appears on that exchange's 1099-DA.

Netting and the $3,000 limit

Form 8949 totals flow to Schedule D, where short- and long-term results net across all your capital transactions, stocks included. A net capital loss deducts up to $3,000 a year ($1,500 if married filing separately), with the rest carried forward (IRC §1211, §1212). Wash-sale rules in §1091 apply to stock or securities, and many practitioners take the position they don't reach event contracts or crypto. See Polymarket losses.

How OddsFile builds your 8949

OddsFile imports your Kalshi, Polymarket and Hyperliquid history, matches lots (FIFO, HIFO or specific ID), allocates fees, closes worthless positions at resolution, and exports a Form 8949 CSV with an audit trail linking every row to its source fills. Dates are in UTC. Box mapping (C, I, L and so on) is flagged for confirmation with your preparer.

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

For entering the result in software, see Kalshi and Polymarket in TurboTax. The full Polymarket picture is in Polymarket taxes: the complete guide.

FAQ

What date do I use for a position that resolved?

The resolution or settlement date. For losing Polymarket positions you never redeemed, that's when the market resolved and the tokens became worthless.

Is Polymarket box I or box C?

If outcome tokens are treated as digital assets with no 1099-DA, box I (short-term) or L (long-term). Boxes C and F are no longer used for digital assets.

Where do Kalshi trades go on Form 8949?

Under capital treatment, usually box C (short-term) or F (long-term), because Kalshi doesn't issue a 1099-B for event contracts and they aren't digital assets.

How do I handle fees?

Add buy fees to basis and subtract sell fees from proceeds, or report them as an adjustment with code E. Be consistent.

Can I report one line per market?

Each disposal needs its own acquisition date and holding period. Exception 2 lets you put totals on the form if the attached statement has the detail.