How Polymarket cost basis works (position by position)

The core idea: every Polymarket outcome token is its own asset for tax purposes. Your 100 “Yes” shares on one market and your 100 “Yes” shares on a different market are two different holdings, exactly like two different stocks. Basis never mixes across tokens.

Within one outcome token, shares are fungible. Buy 100 shares at $0.40 and 100 more at $0.60, and you hold 200 shares whose basis depends on your accounting method: FIFO (first-in-first-out, the US default) or average cost (how HMRC pools in the UK).

Say you buy 100 “Yes — Fed cuts rates in June” shares at $0.40. Your basis is $40. The market resolves YES: your shares redeem at $1.00 each, so you realize $100 of proceeds against a $40 basis — a $60 capital gain, short-term if you held under a year.

Flip it: the market resolves NO. Your shares are worth $0.00. You realize zero proceeds and recognize a $40 capital loss. Losers are only deductions if someone tracks them — which is most of the case for doing this properly.

Now a sale instead of a resolution: you sell the 100 shares at $0.60 before resolution. Proceeds $60, basis $40, $20 gain, holding period measured from purchase to sale.

Merges: combining a complementary Yes/No pair returns $1.00 per pair — a disposition of both shares at once. Splits: depositing USDC creates a matched pair, and the split cost becomes their combined basis. Conversions (NegRisk events): shares move between pools in the same event, which most tooling handles poorly — Bitfork Tax counts them and documents the treatment rather than guessing.

Liquidity rewards land as ordinary income at the USDC value received, separate from your capital gains.

A filing-ready report needs, per disposition: acquisition date, disposal date, quantity, proceeds, basis, gain/loss, and term. Add your country's presentation — Form 8949 in the US, SA108-style in the UK, Anlage SO in Germany — and the record-keeping is done. Bitfork Tax produces exactly this, computed in your browser, for $19 per address per tax year.