Prediction markets and the 2026 World Cup: what accountants need to know – Ben Lee and Dion Seymour

Partner Ben Lee and Crypto Tax & Accounting Technical Director, Dion Seymour, discuss the challenges facing advisers around prediction markets such as Polymarket, in Business & Accountancy Daily.

Ben and Dion’s article was published in Business & Accountancy Daily, on 23 July 2026.

Prediction markets, online platforms where users take positions on the outcome of real-world events, have been quietly amassing scale for the past two years. Polymarket, the largest, facilitated around $138,000 in trading during the entire 2022 World Cup. In June 2026, trading volume across three major prediction market platforms reached $44 billion, the 2026 FIFA World Cup being the latest catalyst. For accountants and their clients, that matters: prediction market activity is coming to an inbox near you, and the tax questions it raises are not straightforward.

The appeal is obvious. Users can enter and exit positions at any point before an event settles, meaning you can back your chosen team early in the competition and trade out before the quarter-finals if the odds shift in your favour. Think Betfair rather than a traditional bookmaker: the platform matches participants against each other rather than setting odds itself. The key difference is that everything runs on blockchain infrastructure, with winnings paid in digital dollars rather than sterling.

Is it gambling?

The most common question advisers will face is a simple one: Is this gambling, and if so, are winnings tax-free?

The short answer is: quite possibly yes, but the question deserves more careful handling than most clients will give it.

HMRC’s cryptoasset manual includes guidance at CRYPTO10450 stating that buying and selling cryptoassets is not gambling. Some clients, advisers, and possibly HMRC officers may read this to mean that anything done on a crypto platform must be taxable. That is not what the guidance says. HMRC’s point is narrower: simply holding and selling bitcoin or ether is not a bet, so gains from those assets are subject to capital gains tax. It says that gambling is a question of fact, but nothing about whether activity on a prediction market constitutes gambling.

On that question, the Gambling Commission weighed in earlier this year. In a February 2026 blog post, it concluded that prediction markets are, in substance, betting exchanges, and that any operator launching such a platform in Great Britain would need to be licensed accordingly. That view substantially supports the argument that UK users participating on platforms such as Polymarket are, in fact, gambling, and that their winnings therefore fall within the exemption from capital gains tax under section 51(1) of the Taxation of Chargeable Gains Act 1992.

The nature of the tokens used also matters. Unlike bitcoin or ether, which have independent economic value, the tokens issued by Polymarket are only worth anything in relation to a specific event outcome. A token representing “Spain to win the World Cup” is worthless the moment Spain is eliminated. That makes it structurally more like a betting slip than an investment asset, and that substance-over-form analysis supports the gambling characterisation.

That said, not every prediction market is identical. A position on whether a specific equity index will close above a given level starts to look more like a financial derivative than a bet, and a different analysis would apply. The starting question is always: what does this token actually represent?

The hidden tax problem most clients will miss

Even where the gambling characterisation holds, and winnings are not taxable, there is a separate tax issue that almost every active Polymarket user will be creating without realising it.

The problem starts with how clients think about USDC. Most fund their Polymarket accounts by converting sterling into this US dollar-pegged stablecoin, and from that point treat it as the digital equivalent of cash in a wallet. HMRC does not see it that way. USDC is a cryptoasset, which means each acquisition has a base cost, and each disposal, including the act of using USDC to enter a position, is a potentially chargeable event.

In practice, because USDC tracks the dollar closely, the gain or loss on any single transaction is likely to be small. It will not, however, be nil: the sterling value of a dollar-denominated asset shifts with the exchange rate, and those movements accumulate. And for a client who has been actively trading positions through the tournament, funding the account, taking positions, receiving payouts, rolling winnings into new bets, the number of individual transactions can run into the hundreds. The aggregate position may be modest, but it requires a computation, and it will not appear on any tax return unless someone goes looking for it.

This is where the gambling framing becomes a trap. Clients who have correctly concluded that their winnings are not taxable often stop there, without appreciating that the USDC pipeline sits in a different part of the analysis entirely, one that applies regardless of how the underlying activity is characterised.

What advisers should be asking

Clients with prediction market activity need two things: a characterisation analysis and a transaction history.

Regarding characterisation, the key questions are what events they were betting on and what tokens they were using. Sports and real-world event markets, with tokens that only have value by reference to a specific outcome, are the strongest candidates for gambling treatment. More financially structured markets need separate consideration.

On the transaction history, wallet data from Polygon (the blockchain on which Polymarket operates) is publicly available and can be extracted. Every USDC movement needs to be identified, dated, and converted to sterling at the prevailing rate. This is not complex work, but it is painstaking, and it is much easier to do prospectively than retrospectively.

Act now

Advisers have a narrow window. Wallet data is retrievable, but client recollection of what they were doing and why fades quickly once a tournament is over. The sector will only grow. Prediction markets have expanded into finance, politics, and macro events, and the volumes involved mean that advisers who do not develop a working understanding of the tax framework will find themselves ill-equipped to advise a growing class of client.

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