Tax Benefits for Prediction Market Bets During World Cup?

WHO:

Fortune - Americans using prediction markets to bet on the World Cup.

Fortune - Andrew Lautz, director of tax policy for the Bipartisan Policy Center.

Fortune - James Creech, a principal at Baker Tilly’s specialty tax practice.

Fortune - Nathan Goldman, an accounting professor at North Carolina State University’s Poole College of Management.

Fortune - Loren Lembo, a partner at Katten Muchin Rosenman LLP.

Fortune - Carl Kennedy, a partner and co-chair of Financial Markets and Regulation at a law firm.

Fortune - Seth Hanlon, a senior fellow at the Tax Law Center at New York University School of Law.

Fortune - Robert Stoddard, a tax partner at KPMG LLP.

WHAT:

Fortune - Prediction markets may offer a lighter tax burden compared to traditional sportsbooks.

Fortune - Tax rules for gambling are clear, but prediction market bets introduce uncertainty in tax treatment.

Fortune - U.S. tax law provides preferential treatment to investment income while penalizing gambling.

Fortune - State-regulated sports gambling revenue reached a record $16.96 billion last year.

Fortune - More than a quarter of Americans have an active online sports betting account, according to the Research Institute at Siena University.

Fortune - Prediction markets like Kalshi and Polymarket US are regulated by the Commodity Futures Trading Commission.

WHERE:

Fortune - United States.

WHEN:

Fortune - The IRS has not provided guidance on the tax treatment of prediction markets.

WHY:

Fortune - Supporters argue that prediction markets differ from traditional sportsbooks in structure and regulation.

Fortune - Critics argue that the underlying economics of prediction markets and traditional gambling are similar.

Fortune - The politically charged environment surrounding prediction markets may cause the IRS to delay guidance.

HOW:

Fortune - Prediction markets allow users to buy and sell standardized event contracts, cleared through market infrastructure.

Fortune - Tax experts suggest treating prediction market payouts as capital gains for more favorable tax treatment.

Fortune - A more aggressive interpretation could allow for a reduced tax rate on winnings under Section 1256 of the tax code.

(UPDATED July 12, 2026 19:18 UTC)

Americans are increasingly turning to prediction markets to bet on the World Cup, with experts noting that these markets may offer a lighter tax burden compared to traditional sportsbooks. However, the IRS has yet to provide guidance on how these bets will be taxed, leading to uncertainty in their treatment under U.S. tax law, which typically favors investment income over gambling. While supporters argue that prediction markets differ from traditional sportsbooks, critics contend that their underlying economics are quite similar, and the politically charged environment may further delay any official guidance.