IRS Remains Silent on Taxation of $25 Billion World Cup Prediction Market Winnings
Prediction market bets tied to the FIFA World Cup have exceeded $25 billion in trading volume, yet the IRS has not issued guidance on how these winnings should be taxed. Traders are left uncertain about whether their profits fall under gambling income or capital gains — each with different tax implications and deductions. Experts suggest three possible classifications: gambling (with strict loss deductibility rules), capital assets (offering more favorable long-term rates for some traders), or Section 1256 futures treatment. The lack of clarity has created confusion among users, even those who are well-versed in taxation. One economist reported investing nearly all his savings into a prediction market bet and still being unsure how to report the profit. The issue is compounded by recent tax law changes that limit gambling loss deductions — reducing them from $1 per dollar lost to 90 cents under Trump’s One Big Beautiful Bill Act, effective January 2026. This has left traders with potential taxable losses even if they break even overall.
Topics: IRS taxation rules prediction markets World Cup betting