I received a 1099 from PredictIt, a political prediction market website where users can trade on events such as U.S. elections or congressional action. PredictIt operates with the permission of the CFTC, and thus is not considered gambling.
In the 1099 I received, PredictIt reported I made $3,990 of "Other Income" from their platform. However, I believe their calculation methodology is flawed.
I deposited ~$100k into my PredictIt account (PredictIt does not charge any fees to deposit).
Through profitable trades on the platform, I made $4,200 in profits, brining my account total to $104,200 (after a 10% fee on profits, which is assessed at the time you exit a winning trade).
However, PredictIt charges a 5% fee to withdraw funds from your account. Therefore, after withdrawing all my funds, I was only left with $98,990, a loss of $1,010 from the original amount I deposited.
Yet, for the purpose of calculating my taxable income, PredictIt only assessed the 5% withdrawal fee on the $4,200 in profitsI I made (even though the 5% is charged on the full balance) . Therefore, PredictIt reported I made a taxable income of $4,200*.95 = $3,990.
I could understand the logic if PredictIt were to argue withdrawal fees should not be included at all in the calculation of taxable income (similar to how commissions are not deducted from capital gains). However, the fact they include it, but only on the profitable portion of my balance, makes no sense.
I reached out to PredictIt and asked them to explain their rationale for calculating it in this way. However, if they refuse to make any changes, do I have any options?
It seems ludicrous to be taxed on money I never actually received.
Thanks for your help!
