The 2026 FIFA World Cup prediction market has reached trading volumes potentially exceeding $25 billion, with Polymarket and Kalshi together accounting for between $4.8 billion and $6.4 billion. Polymarket’s « World Cup Winner » market alone surpassed $3.9 billion in trading volume as of July 2026. The IRS has issued no specific guidance on the tax treatment of these prediction market contracts, leaving traders with two radically different scenarios: taxation as gambling income (up to 37%) or as regulated futures contracts under Section 1256 of the US tax code (60/40 blended rate). The One Big Beautiful Bill Act now limits gambling loss deductions to 90% of winnings for US taxpayers starting in 2026, creating a significant disadvantage for those treated as gamblers. Both Polymarket and Kalshi operate under CFTC oversight, which makes Section 1256 treatment legally arguable, but traders are encouraged to meticulously document all their positions.
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