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The IRS just warned bettors to use licensed platforms ahead of football season — and the timing created an immediate problem. The IRS says use a licensed operator. One arm of the federal government classifies prediction markets as innovative financial products. State attorneys general call them illegal gambling. New York AG Letitia James put it plainly: "No matter what they call themselves, prediction markets are gambling platforms, plain and simple." Meanwhile, the One Big Beautiful Bill just changed the tax math for everyone: bettors can now only deduct 90% of losses against winnings, meaning someone who wins and loses $100,000 in the same year still owes taxes on $10,000. And the IRS hasn't even published official guidance on how to report prediction market income yet — tax advisers are split between gambling winnings, capital assets, and futures contracts on Form 6781. Football season starts in three weeks. Nobody has a clean answer.
Trump is expected to attend a White House meeting Wednesday with the CEOs of Coinbase, Gemini, Kalshi, Polymarket, Ripple, and Robinhood — CFTC Chairman Michael Selig and SEC Chairman Paul Atkins will also be in the room, per Bloomberg. The meeting precedes a Thursday CFTC Innovation Advisory Committee session titled "Crypto's Regulatory Evolution: From Uncertainty to Clarity." The Clarity Act is stalled in the Senate. The SEC cancelled a planned meeting on digital asset exemptions at the last minute. And the president is sitting down with the CEOs of the two largest prediction market platforms in the world. Whatever comes out of Wednesday's meeting, prediction markets just got a seat at the table that sportsbooks have never had.
Renato Guerrieri, Head of Quantitative Strategy at Downing, sat for a deep interview on what it actually takes to turn prediction market data into a real investment signal — and his framing is worth paying attention to. He's not trying to prove prediction markets are clever or automatically investable. He's applying the same uncomfortable tests you'd apply to any alternative data source: what's the benchmark, what are the costs, what information is genuinely incremental, and what breaks when you try to use it in the real world. His key distinction: prediction market data isn't just alternative data — it's a traded market with timestamped prices tied to explicit events. But he's wary of treating the quoted probability as a clean measure of what people believe. The gap between an interesting probability and something you'd actually let influence capital is, in his words, fairly large. That gap is exactly what PMW is built to close.
CoinEdition published a piece on why prediction market signals rarely override crypto investors' existing bets — the core finding: wider reach doesn't prove that event contract odds change portfolios. Combined monthly volume on Kalshi and Polymarket rose from under $5 billion in September 2025 to about $24 billion in April 2026. The New York City Council disclosed an investigation into alleged marketing practices on August 12. But market structure and investor confidence shape how traders interpret prediction market signals more than the signals themselves. People see what they're already looking for.
The IRS tax question connects directly to a broader unresolved issue the industry has been avoiding: nobody knows how to tax this yet. Form 6781 — the futures contract route — is gaining traction among tax advisers as the lowest-liability approach, but the IRS could issue guidance at any time that changes everything. Football season is the first real stress test of prediction markets at scale in the US. The regulatory, legal, and tax frameworks are all still being written in real time.
⚠️ A NOTE ON THE JPMORGAN/POLYMARKET STORY GOING AROUND
You may have seen headlines this week about JPMorgan Chase ending its banking relationship with Polymarket. Don't be fooled — this is not new news.
JPMorgan told Polymarket in October 2025 that it needed to find a new banking partner, terminating the direct banking relationship over regulatory concerns. The story only surfaced publicly on August 14, 2026 via the Financial Times, with Reuters and WSJ confirming through their own sources — which is why it feels new. It isn't.
The fuller picture is more nuanced than the headlines suggest. JPMorgan didn't walk away entirely — it invited Polymarket CEO Shayne Coplan to speak at a private banking client event in Miami in February 2026 and reportedly wants to stay in contention for an underwriting role in a potential Polymarket IPO. Polymarket's own statement: it maintains "a close, active relationship with JPMorgan across multiple entities, operational integrations, and material handling of customer fund flows."
So: the direct banking relationship ended ten months ago. The broader relationship very much continues. And JPMorgan wants the IPO business when the time comes.
File this one under: old news dressed up as breaking news. The actual story is that a major Wall Street bank quietly debanked a prediction market platform for regulatory reasons — then kept the relationship alive through the side door because it wants the fee when Polymarket eventually goes public.
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