We Ran the Tax Math on Polymarket's Biggest Wallets. One Lost $104,386 and Would Be Taxed on $157,326

One of Polymarket’s biggest wallets lost $104,386 in 2025. Under US gambling rules with the standard deduction, the same trades would be taxed as $157,326 of income. That wallet is the extreme case, but the pattern holds across all 81 large wallets we ran through our tax engine: treated as gambling, most of them would report more income than they made.

What we did

• We took 100 of the largest position holders on polymarket.com from Polymarket’s public data and ran each wallet’s full history through the same engine that runs WagerMints.
• Nine wallets had more than 50,000 trades, almost certainly bots, and were over the engine’s limit. One wouldn’t load. Of the 90 left, 81 had closed trades between January 2024 and October 26, 2026: 205,321 closed trades and $42.6 million in sale and settlement proceeds.
• For each wallet and year we worked out taxable income three ways: capital gains, ordinary income and gambling. Section 1256 is left out because it doesn’t apply to polymarket.com.
• The gambling figures assume the standard deduction, which most filers take. Each US Eastern calendar day is one session: wins and losses on the same day net out, winning days are income, and losing days only count if you itemize. The IRS has never defined a session for markets that trade around the clock.

1. A losing year can still be taxed

Seven of the 31 wallets with 2025 trades lost money. Under gambling treatment with the standard deduction, six of those seven would still have taxable income.

The biggest case: 117 winning days added up to $157,326, and 19 losing days added up to $261,711. Net, the wallet lost $104,386. Here is the same year under each method:

2. Winners are taxed on more than they made

Of the 24 profitable wallets in 2025, 22 would report more gambling income than actual profit. The median was 1.71 times their profit. The reason is the session rule: a trader who wins a little on most days and loses big on a few reports every winning day as income. So far in 2026 (to October 26) it is 36 of 52 profitable wallets.

3. The method is worth real money

Gambling treatment with the standard deduction was never lower than capital gains treatment, for any wallet in any year. The gap in taxable income:

• 2025: a median of $859. 14 of 31 wallets had a gap of $1,000 or more, and the largest was $160,326. At a 24% federal rate, that is about $38,478 of tax.
• 2026 so far: a median of $718. 35 of 81 wallets had a gap of $1,000 or more, and the largest was $176,745.

4. Nothing is long-term

Of all the gains and losses in the study, 0.008% came from positions held longer than a year: $63. Prediction markets resolve in days or weeks, so under capital gains treatment almost nothing reaches the lower long-term rate. Every gain is taxed at ordinary rates either way.

5. A big loss takes decades to deduct

Under capital gains treatment, the wallet that lost $104,386 deducts $3,000 of it against other income in 2025. The other $101,386 carries forward and can offset future capital gains in full. With no future gains, $3,000 a year takes about 34 more years. How losses work under each method.

What 2026 changes

From 2026, itemizers can deduct only 90% of gambling losses (try the calculator). For anyone on the standard deduction nothing changes, because their losses already counted for nothing. So far this year, 24 of the 29 losing wallets would still have taxable gambling income.

What this study can’t tell you

• These are the biggest wallets on Polymarket, not typical traders.
• 2026 runs only to October 26.
• Bots with more than 50,000 trades are left out.
• The session definition matters. Reading each trade as its own wager, which some preparers do, would raise gambling income further.
• These are taxable income figures. The tax itself depends on your bracket, state and other income.

What to take from it

If your trades could reasonably be reported more than one way, the choice can be worth more than any single trade you made. Price your own year each way before you pick one: run your wallet through WagerMints, free, or start with how prediction markets are taxed.