# Are Options on Non-Regulated Crypto Exchanges Generally Considered Section 1256? ⎊ Path

**Published:** 2025-12-05
**Author:** Greeks.live
**Categories:** Path

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## Are Options on Non-Regulated Crypto Exchanges Generally Considered Section 1256?

No, options on non-regulated crypto exchanges generally do not meet the criteria for Section 1256 treatment. They are not traded on a "qualified board or exchange" as defined by the IRS.

Therefore, they are typically treated as standard capital assets, with gains and losses characterized as short-term or long-term based on the holding period.

- [Are Cryptocurrency Options Generally Treated as Section 1256 Contracts?](https://learn.greeks.live/path/are-cryptocurrency-options-generally-treated-as-section-1256-contracts/)

- [What Is the Fundamental Tax Difference between Capital Gains and Ordinary Income in Derivatives?](https://learn.greeks.live/path/what-is-the-fundamental-tax-difference-between-capital-gains-and-ordinary-income-in-derivatives/)

- [Define Short-Term versus Long-Term Capital Gains in the Context of Derivatives](https://learn.greeks.live/path/define-short-term-versus-long-term-capital-gains-in-the-context-of-derivatives/)

- [Are All Cryptocurrency Derivatives Treated as Section 1256 Contracts?](https://learn.greeks.live/path/are-all-cryptocurrency-derivatives-treated-as-section-1256-contracts/)

- [What Is the Mark-to-Market Rule for Section 1256 Contracts?](https://learn.greeks.live/path/what-is-the-mark-to-market-rule-for-section-1256-contracts/)

- [Does the Net Investment Income Tax (NIIT) Apply to Section 1256 Gains?](https://learn.greeks.live/path/does-the-net-investment-income-tax-niit-apply-to-section-1256-gains/)

- [Does the IRS Explicitly State That Crypto Futures Fall under Section 1256?](https://learn.greeks.live/path/does-the-irs-explicitly-state-that-crypto-futures-fall-under-section-1256/)

- [How Does the Tax Rate Difference Influence a Trader’s Strategy?](https://learn.greeks.live/path/how-does-the-tax-rate-difference-influence-a-traders-strategy/)

## Glossar

### [Section 1256](https://learn.greeks.live/area/section-1256/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Standardization ⎊ This specific tax code provision mandates special treatment for certain regulated futures contracts, which can apply to crypto derivatives traded on designated exchanges under specific conditions.

## Discover More

### [Name a Major Exchange That Offers Regulated Crypto Options](https://learn.greeks.live/path/name-a-major-exchange-that-offers-regulated-crypto-options/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Name a Major Exchange That Offers Regulated Crypto Options](https://learn.greeks.live/wp-content/uploads/2025/10/Dual-Hypergeometric-Distribution-Engines-Mirroring-Decoupled-Perpetual-Futures-Settlement-Mechanisms.webp)

The Chicago Mercantile Exchange (CME) offers regulated, cash-settled options on Bitcoin and Ethereum futures.

### [Why Is the Socialized Loss Model Generally Considered Inferior to an Insurance Fund?](https://learn.greeks.live/path/why-is-the-socialized-loss-model-generally-considered-inferior-to-an-insurance-fund/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Why Is the Socialized Loss Model Generally Considered Inferior to an Insurance Fund?](https://learn.greeks.live/wp-content/uploads/2025/10/Beige-Monolithic-Haptic-Interface-Device-Representing-Decentralized-Autonomous-Organization-Governance-Mechanisms.webp)

It creates unpredictable profit reductions for winners, damaging confidence; the fund offers a stable, dedicated, and predictable loss-absorption buffer.

### [Why Is Early Exercise of an American Call Option Generally Not Optimal for a Non-Dividend-Paying Asset?](https://learn.greeks.live/path/why-is-early-exercise-of-an-american-call-option-generally-not-optimal-for-a-non-dividend-paying-asset/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Why Is Early Exercise of an American Call Option Generally Not Optimal for a Non-Dividend-Paying Asset?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Finance-Instrument-Volatility-Surface-Mapping-Utilizing-Stochastic-Calculus-for-Digital-Asset-Option-Pricing.webp)

Exercising an American call early forfeits the remaining time value, which is a lost opportunity for further price movement and leverage.

### [What Determines If a Crypto Option Is a Section 1256 Contract?](https://learn.greeks.live/path/what-determines-if-a-crypto-option-is-a-section-1256-contract/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Determines If a Crypto Option Is a Section 1256 Contract?](https://learn.greeks.live/wp-content/uploads/2025/10/Hydrophobic-Surface-Tension-Modeling-in-High-Frequency-Crypto-Derivative-Liquidity-Provision.webp)

A crypto option is Section 1256 if it's a non-equity option traded on a qualified (regulated) exchange, like an option on a regulated future.

### [Are All Options on Stock Indices Considered Section 1256 Contracts?](https://learn.greeks.live/path/are-all-options-on-stock-indices-considered-section-1256-contracts/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Are All Options on Stock Indices Considered Section 1256 Contracts?](https://learn.greeks.live/wp-content/uploads/2025/10/Modular-Articulation-Point-Visualizing-Cryptocurrency-Derivatives-Execution-Mechanism-Precision.webp)

Options on broad-based, cash-settled indices on qualified exchanges are Section 1256 contracts; equity options and narrow-based indices are not.

### [How Is the Tax on a Section 1256 Option Calculated If It Expires Worthless?](https://learn.greeks.live/path/how-is-the-tax-on-a-section-1256-option-calculated-if-it-expires-worthless/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Is the Tax on a Section 1256 Option Calculated If It Expires Worthless?](https://learn.greeks.live/wp-content/uploads/2025/10/Deconstructed-Mechanism-Illustrating-High-Frequency-Quant-Execution-Via-Automated-Smart-Contract-Interfacing.webp)

The worthless option loss is calculated under the 60/40 rule, regardless of the holding period.

### [Why Are Options on Individual Stocks Excluded from Section 1256 Treatment?](https://learn.greeks.live/path/why-are-options-on-individual-stocks-excluded-from-section-1256-treatment/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Why Are Options on Individual Stocks Excluded from Section 1256 Treatment?](https://learn.greeks.live/wp-content/uploads/2025/10/Cryptographic-Atomic-Custody-Orbits-a-Singular-Black-Hole-Derivative-Settlement-Node.webp)

They are "equity options" excluded from Section 1256, which focuses on broad-market contracts.

### [Does Trading on a non-US Regulated Exchange Qualify for Section 1256 Treatment?](https://learn.greeks.live/path/does-trading-on-a-non-us-regulated-exchange-qualify-for-section-1256-treatment/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Does Trading on a non-US Regulated Exchange Qualify for Section 1256 Treatment?](https://learn.greeks.live/wp-content/uploads/2025/10/Abstract-Representation-of-Decentralized-Finance-Protocol-Execution-Via-Cross-Chain-Atomic-Swaps.webp)

Trading on a non-US exchange usually does not qualify for Section 1256 treatment unless the foreign exchange is specifically approved by the IRS.

### [What Is the Primary Risk Associated with Trading in a Dark Pool Compared to a Regulated Exchange?](https://learn.greeks.live/path/what-is-the-primary-risk-associated-with-trading-in-a-dark-pool-compared-to-a-regulated-exchange/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Primary Risk Associated with Trading in a Dark Pool Compared to a Regulated Exchange?](https://learn.greeks.live/wp-content/uploads/2025/10/Dark-Illumination-Revealing-Segmented-Digital-Asset-Liquidity-Pool-Settlement-Mechanism-Cross-Section.webp)

The primary risk is the lack of transparency regarding the order book and matching process, leading to potential conflicts of interest.

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**Original URL:** https://learn.greeks.live/learn/are-options-on-non-regulated-crypto-exchanges-generally-considered-section-1256/
