DraftKings Predictions Taxes: 1099-B Reporting and the 60/40 Split

How DraftKings Predictions Trades Are Taxed

DraftKings Predictions taxes follow a different path than DraftKings Sportsbook or DFS winnings. The difference is structural: DraftKings Predictions contracts are event contracts cleared through CME Group, a CFTC-regulated exchange. That regulatory status changes everything about how profits are reported, what tax rate applies, and how losses are treated.

If you traded DraftKings Predictions in the past year, you received (or will receive) a 1099-B from DraftKings. Not a 1099-MISC. Not a W-2G. A 1099-B, the same form your stock broker sends. That distinction matters because it signals the IRS that these are financial instruments, not gambling winnings.

This article covers the specific tax treatment for DraftKings Predictions trades, including the Section 1256 advantage, a worked example on $5,000 in profits, fee deductibility, and how it all differs from what you owe on DraftKings sports bets. For the broader prediction market tax framework, see our complete guide to prediction market taxation. For the technical breakdown of how the three IRS classifications work, read the event contract tax treatment guide.

DraftKings Sends a 1099-B (Not a W-2G)

DraftKings Predictions issues a 1099-B for all event contract activity. This is the same form used for stocks, options, and futures. It reports proceeds, cost basis, and gain or loss for each closed position.

This is different from DraftKings Sportsbook, which issues a W-2G when you hit certain thresholds (typically $600+ in winnings at 300:1 or greater odds). It is also different from DraftKings DFS, which may issue a 1099-MISC for net winnings exceeding $600.

The form type reflects the underlying regulatory structure:

The 1099-B from DraftKings Predictions includes three key fields per closed position: proceeds (what you received), cost basis (what you paid including fees), and the resulting gain or loss. Fees are embedded in these figures. They are not listed separately, and you should not deduct them as a separate line item. Run any trade through the fee calculator before entering to see how the $0.02/side cost affects your net.

If you also trade event contracts on Kalshi, Robinhood, or ForecastEx, you will receive separate 1099-B forms from each platform. Reconcile all of them against your own records.

Section 1256 Treatment: The 60/40 Split Advantage

DraftKings Predictions contracts clear through CME Group, which is a CFTC-regulated designated contract market. Most tax professionals interpret CME-cleared event contracts as regulated futures contracts under IRC Section 1256. This triggers the 60/40 split: 60% of your gain is taxed at long-term capital gains rates and 40% at short-term rates, regardless of how long you held the position.

The math favors you at every bracket. Here is the blended rate comparison for a trader in the 32% federal bracket:

That 10.2 percentage point spread is not trivial. On $10,000 in gains, it saves $1,020 in federal tax. On $50,000, it saves $5,100. The Section 1256 classification is the single biggest tax advantage of trading on CME-backed platforms like DraftKings Predictions versus unregulated alternatives like Polymarket.

Section 1256 also provides mark-to-market treatment at year-end. Open positions on December 31 are treated as if sold at fair market value. You report unrealized gains and can deduct unrealized losses. Your cost basis resets to the December 31 price on January 1. Additionally, Section 1256 losses can be carried back three years to offset prior Section 1256 gains, giving you a refund on taxes already paid. Standard capital losses only carry forward.

Worked Example: $5,000 in DraftKings Predictions Profits

Let's walk through a full-year scenario. You trade DraftKings Predictions throughout the year, making 80 round-trip trades averaging 100 contracts each. After fees, your net profit is $5,000. You are a single filer in the 32% federal bracket.

Step 1: Calculate your fee drag.

DraftKings charges $0.02 per contract per side. On 80 trades of 100 contracts: 80 x 100 x $0.04 = $320 in total fees. These are already reflected in your 1099-B cost basis and proceeds. Your $5,000 net profit is after fees.

Step 2: Apply Section 1256 treatment.

Step 3: Compare to ordinary income treatment.

If the same $5,000 were taxed entirely at your 32% ordinary rate (as sportsbook winnings would be): $5,000 x 0.32 = $1,600.

The Section 1256 treatment saves you $510 on $5,000 in gains. Scale that to a $25,000 year and the savings hit $2,550. Use the PM EV calculator to model your expected annual profit, then apply these rates to see your true after-tax edge.

Step 4: File on Form 6781.

Report all Section 1256 gains on IRS Form 6781 (Gains and Losses from Section 1256 Contracts and Straddles). The form splits the total 60/40 and flows the results to Schedule D. DraftKings Predictions trades go on Form 6781. DraftKings Sportsbook winnings go on Schedule 1 as gambling income. Do not mix them.

Fee Deductibility on DraftKings Predictions

DraftKings charges a flat $0.02 per contract per side ($0.04 round-trip). These fees reduce your taxable gain, but not through a separate deduction. They are embedded in the 1099-B figures.

Here is how it works mechanically. You buy 100 contracts at $0.50. Your actual outlay is $50.00 for the contracts plus $2.00 in entry fees = $52.00. The contract settles at $1.00. You receive $100.00 minus $2.00 in exit fees = $98.00.

The $4.00 in total fees reduced your reported gain by $4.00. The tax benefit is automatic. You do not need to itemize trading fees, and doing so would double-count them.

At the 21.8% blended Section 1256 rate, that $4.00 fee reduction saves $0.87 in federal tax. Over 80 trades with $320 in annual fees, the tax benefit of fee deductibility is roughly $70. Small per trade, but it adds up. The fee calculator shows the exact fee impact for any contract price and quantity.

How DraftKings Predictions Taxes Differ from Sportsbook and DFS

This is where many DraftKings users get confused. The same app houses three products with three different tax treatments.

DraftKings Sportsbook winnings are classified as gambling income. They are reported on Schedule 1 as "other income." Losses can only offset gambling winnings, and only if you itemize deductions. If you take the standard deduction, gambling losses provide zero tax benefit. Starting in 2026, the One Big Beautiful Bill Act further limits gambling loss deductions to 90% of losses (more on this below).

DraftKings DFS (Pick6) winnings are treated as contest prize income and reported on a 1099-MISC. The tax treatment is similar to gambling income for most filers, though some professional DFS players report on Schedule C as business income.

DraftKings Predictions gains are treated as Section 1256 regulated futures (most defensible position). This gives you the 60/40 split, mark-to-market, three-year loss carryback, and dollar-for-dollar loss deductions on Schedule D. No itemizing required to deduct losses.

The practical takeaway: $10,000 in profit from DraftKings Predictions costs roughly $2,180 in federal tax. The same $10,000 from DraftKings Sportsbook costs $3,200. And if you had offsetting losses, the gap widens dramatically. On the sportsbook side, those losses might be worthless if you do not itemize.

The One Big Beautiful Bill Act Impact

The One Big Beautiful Bill Act, signed into law in late 2025, introduced two changes that widen the gap between DraftKings Predictions tax treatment and DraftKings Sportsbook tax treatment starting in 2026.

The 90% gambling loss deduction cap. If your activity is classified as gambling (sportsbook bets, DFS contests), you can now only deduct 90% of your losses against gambling winnings. Win $20,000 on sports bets and lose $20,000: you still owe tax on $2,000 of phantom income. This cap does not apply to Section 1256 contracts. DraftKings Predictions losses offset gains dollar for dollar with no cap.

The increased standard deduction. Fewer filers will itemize. Since gambling losses require itemizing (Schedule A), more sportsbook bettors will lose the ability to deduct any losses at all. Section 1256 losses go on Schedule D regardless of whether you itemize. DraftKings Predictions traders are unaffected by the standard deduction change.

Consider a DraftKings user who wins $15,000 on Sportsbook bets and loses $12,000 in the same year, taking the standard deduction:

• Taxable gambling income: $15,000 (full amount, no loss deduction without itemizing)
• Federal tax at 32%: $4,800

Now consider the same $15,000 in wins and $12,000 in losses on DraftKings Predictions:

• Net gain: $3,000
• Section 1256 tax: 60% at 15% ($270) + 40% at 32% ($384) = $654

Same app. Same dollar amounts. $4,146 difference in federal tax. The One Big Beautiful Bill Act made the sportsbook side worse while leaving the prediction market side untouched. For a full analysis of the legislation's impact, see our prediction market tax guide.

What DraftKings Predictions Traders Should Track

DraftKings provides the 1099-B, but you should maintain your own records. Platform exports sometimes misstate cost basis on positions built across multiple price levels.

Track these four data points per trade:

1. Entry price and quantity (e.g., 100 contracts at $0.45)
2. Exit price or settlement value (e.g., settled YES at $1.00)
3. Fees paid ($0.02/side x quantity x 2)
4. Date opened and date closed (determines which tax year the gain falls in)

Export your DraftKings trading history monthly. Do not wait until tax season. If you trade on multiple platforms, keep DraftKings Predictions records separate from Kalshi or Polymarket trades. Each platform issues its own tax documents. Cross-reference your exports with the 1099-B when it arrives. Our DraftKings prediction markets guide covers the fee structure in detail, and the event contract tax treatment guide explains the classification framework.

If you hold open positions on December 31, Section 1256 mark-to-market rules apply. Those unrealized gains or losses are reported in the current tax year. Your cost basis resets on January 1. Plan your year-end position sizing with this in mind. Selling a losing position before year-end crystallizes the loss in the current year. Under Section 1256, that loss can be carried back three years to offset prior gains.