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Why Trust Web3Bet

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With the hype surrounding gambling and prediction markets following COVID-19, many users have made significant profits. Billions of dollars in trading volume circulate through these platforms every month, and people are actually making money. Some of them live under the pleasant illusion: everything is in crypto, no banks, and therefore no taxes.

But alas, this no longer works. Since January 2026, the RF (Crypto-Asset Reporting Framework) has been in effect simultaneously in the US, UK, EU, and many Asian countries. Now, platforms automatically disclose user data to the tax authorities of these countries. Many analytics companies are also actively working with governments and willingly assisting them in developing tools to track transactions and identify users and exchangers.

But there is good news. Those who understand the rules in advance can legally reduce their tax burden, sometimes significantly. Those who do not usually learn about the rules from the tax authorities. And this is always more expensive.

USA: It’s Complicated, IRS Still Silent

Let’s start with prediction markets, specifically the most complicated case in the US. It’s complicated not because taxes are high, but because the IRS still hasn’t officially defined what exactly winnings in prediction markets are.

There are three versions, each with its own consequences:

Version 1: Capital Assets. Polymarket contracts are property, like stocks or options. Sell for more than you bought them for you pay capital gains tax. Short-term (held for less than a year) at the ordinary income rate, 10 – 37%. Long-term – 0%, 15%, or 20%, depending on income. The advantage of this option: losses can be offset against other gains.

Version 2: Gambling Winnings. If the IRS considers it gambling, winnings are ordinary income, taxed at the full rate. A serious disadvantage: losses can only be deducted if you itemize deductions, and only up to the amount of winnings. Losing a lot won’t help.​

Version 3: The most profitable option: 60% of profits are considered long-term gains, 40% short-term, regardless of the holding period. Problem: However, experts doubt that prediction market contracts are even eligible under current regulations.

Today, most tax consultants recommend using Version 1 or 2, depending on the situation. An important change in 2026 is that, under the new “One Big Beautiful Bill Act,” only 90% of gambling losses can be deducted, instead of the previous 100%.

Regarding reporting: starting in 2026, crypto brokers are required to submit Form 1099-DA with information about your transactions. Polymarket does not automatically withhold taxes that is your responsibility.

UK: HMRC Finally Receives Data

In the UK, things are a little clearer, although still not without nuances.

HMRC considers crypto profits to be capital gains. Winnings from Polymarket are subject to CGT at a rate of 18% for basic taxpayers and 24% for high-income taxpayers. The annual tax-exempt limit for 2024-2025 is currently £3,000.

If you receive cryptocurrency as professional income (staking, mining, or payment for services), then this is called Income Tax. Rates will range from 0% to 45% depending on your total income.

The main change of 2026: CARF-aligned rules came into force on January 1. Now, any crypto services operating in the UK are required to collect user tax data and transfer it to HMRC.

Analysts estimate that this will generate an additional £535 million in tax revenue for the government between 2026 and 2031. Polymarket transactions are publicly recorded on the blockchain and are fully traceable. HMRC knows this and takes advantage of it. It’s definitely impossible to hide here if you’re caught somewhere.

European Union: Varies by Country

The EU doesn’t have a unified tax regime. DAC8 (the European equivalent of CARF) came into force on January 1, 2026, requiring all crypto projects to automatically transfer data between tax authorities in member states. However, each country has its own rates, and the range is vast:

Belgium: the tax reaches 33%. Formally, Belgium doesn’t have a separate capital gains tax on crypto for individuals, but the tax system works differently: if your transactions qualify as “normal management of personal wealth,” the profit is not taxed at all. If the tax authorities determine that you are trading actively and systematically, the profit is converted into “income” (divers inkomen) and is taxed at 33%. This is where additional municipal surcharges come into play, adding another 0-9% depending on the region.

Germany: arguably one of the most favorable regimes in the EU. If you hold cryptocurrency for more than 12 months, you can sell it completely tax-free. This also applies to prediction market contracts if withholding qualifies. Ideal for long-term investors.

France: flat 30% tax on profits over €305 per year. There’s also a discussion of extending the tax to “unproductive wealth,” which puts cryptocurrency at risk.

Italy: from 2026, the rate has increased from 26% to 33%. The €2,000 exemption has been removed. However, there is a transitional option: reset the cost base to the 2026 market value through a one-time tax payment.

Spain: 19%-28% capital gains tax. A reform is being discussed that could raise the top rate to 47% for high-income earners. However, parliament has yet to reach a consensus, fearing it would scare off residents.

Denmark: capital gains reach 53%. Arguably one of the harshest regimes in the world.

Austria: 27.5% on capital gains.

What About the Rest of the World?

Here, too, everything varies greatly between countries:

Portugal: For a long time, it was a digital crypto paradise (practically zero taxes for individuals), but in 2023, the government introduced a 28% tax on profits from cryptocurrency transactions held for less than a year. Long-term holders still have zero taxes for individuals.

UAE: Zero personal income tax. One of the few jurisdictions where crypto profits are truly tax-free for individuals. A popular destination for crypto expats.

Singapore: No capital gains tax as such. Cryptocurrency trading for individuals is generally not taxed. However, if the tax authorities determine you’re doing this professionally, it’s treated as income tax.

Prediction Markets: A Separate Discussion

Here’s where it gets both most interesting and most uncertain. Traditional crypto is at least more or less within existing tax frameworks. Prediction markets are not.

The problem is that Polymarket contracts aren’t quite like stocks, bets, or derivatives. You buy a stake in the outcome of an event at the market price and sell it either before the outcome is resolved or while you wait. Is this an investment? A gamble? A derivative? No tax authority in the world has yet given a clear answer.

In practice, this means you must take your own position when filing your tax return, preferably with the help of a tax advisor who understands crypto. Because incorrect classification can cost you more than the taxes themselves.

How to Avoid Problems: Practical Tips

Regardless of the country you live in, there are a few rules that apply to all countries:

  • Keep a record of every transaction: date, entry amount, exit amount, profit/loss. Blockchain records everything, but you need to keep your own records in a human-readable format.
  • Use cryptocurrency tax calculator software. Blockpit, Koinly, and CoinLedger are integrated and automatically calculate your tax base. In the UK, Blockpit is an official partner of Polymarket.
  • Losses cannot be ignored. In most countries, losses can be offset against profits. This is a legal optimization that many ignore.
  • Keep an eye on changes. Cryptocurrency tax rules are changing faster than the crypto market. In 2024, everything was right, but now, in 2026, it is no longer right – as in Italy, the tax rate will increase from 26% to 33%.

The Key Thing to Understand

The era of “crypto is invisible” is now over. CARF, DAC8, and 1099-DA are not a threat for the future; they have been a reality since January 1, 2026. They are platforms for data transmission; blockchains are transparent, and tax authorities are exchanging information automatically.

The good news is that in most jurisdictions, there are still legal optimization opportunities for long-term withholding in Germany, offsetting losses in all jurisdictions. But for this, you need to know the rules of the game. And preferably, before you receive a letter from your tax authorities.