Crypto Prediction Markets: Polymarket, Augur, and the French Tax Authorities

Prediction markets are platforms where users buy and sell shares based on the outcome of future events (elections, asset prices, sports events, etc.). Polymarket (on Polygon/OP Mainnet) and Augur (Ethereum) are the most well-known. In 2024-2025, they experienced a spectacular rise, particularly Polymarket during the U.S. presidential elections.

How Do They Work?

Real Example on Polymarket:

1. A market exists: "Will Candidate X win the election?"
2. You buy "YES shares" at 0.40 USDC → if the candidate wins, each share is worth 1 USDC (profit: 0.60 USDC per share).
3. If you buy 1,000 YES shares at 0.40 → you invest 400 USDC.
4. If you are correct → you receive 1,000 USDC → profit of 600 USDC.
5. If you are wrong → you lose the 400 USDC.

Shares can also be bought and sold before the event (secondary market), generating trading gains/losses before resolution.

The Legal Debate: Betting or Financial Instrument?

"Betting" Argument:

• The user bets on uncertain events.
• This resembles gambling, regulated by gambling legislation.
• Betting gains are taxed as taxable income in the income tax return (without the possibility of offsetting losses with capital gains).

"Derivative Financial Instrument" Argument:

• Shares are tradable assets with a market price.
• They can be bought and sold without waiting for resolution.
• This is more akin to an event-driven financial instrument.

The French tax administration has not yet published an official position on crypto prediction markets. Their treatment remains uncertain, but clues can be found in general tax rules.

Probable Tax Treatment: Two Scenarios

Scenario 1: Considered as Betting (More Conservative)

• Gains (resolution in your favor) → taxed as taxable income (progressive scale up to 49% in 2025 depending on the bracket).
• Betting losses → deductible within the limit of betting gains for the year.
• You cannot offset prediction market losses with gains from selling BTC.
• The tax rate is unfavorable as it follows the progressive scale instead of the flat tax (PFU).

Scenario 2: Considered as Financial Assets (More Favorable)

• Each purchase/sale of shares → gain or loss taxed at the PFU (30% in 2025, including social contributions).
• Gains/losses can be offset with those from other financial assets.
• Similar treatment to cryptocurrency sales.

Secondary Trading on the Markets

Regardless of the event resolution, if you buy shares at 0.40 and sell them at 0.80 before the event:

• Gain: 0.40 per share held.
• Most likely taxed at the PFU: this is a buy/sell operation of assets, not a betting outcome.
• Rate: 30% (PFU 2025).

The most confusing part remains the market resolution (winning or losing the bet).

Tax Reporting of Transactions

Given the volume of transactions that can be generated:

1. Export the transaction history from Polymarket (USDC inflows/outflows and settlements).
2. Categorize by type: share purchase, share sale, positive settlement, negative settlement.
3. Calculate the result in EUR for each transaction (USDC × EUR/USD exchange rate on the transaction date).
4. If you use stablecoins like USDC: the USDC/EUR exchange rate must be calculated using the ECB's EUR/USD exchange rate for that date.

USDC as a Currency: Additional Tax Effect

If you buy USDC with EUR to use Polymarket:

• The EUR → USDC conversion does not generate taxation (it is considered a foreign currency purchase, EUR value ≈ USDC value).
• The reverse conversion USDC → EUR may generate taxable gain if the value of USDC has changed relative to EUR (although minimal, given it is a stablecoin).

Polymarket for Non-Residents in France: Access Issues?

Polymarket is geo-blocked for U.S. citizens/residents. French residents can access it but assume the regulatory risk that it may be classified as unauthorized online gambling in France. This does not directly affect taxation (the tax obligation is independent of the platform's legality) but adds a legal risk.

Practical Summary

Consult a tax advisor before declaring significant volumes on prediction markets. In the absence of a clear administrative position, there is a risk of unfavorable interpretation.

Update: April 2026 | Fiscal Year: 2025