Does the 60/40 Rule Apply to Cryptocurrency Options on Regulated Exchanges?

Yes, if the cryptocurrency option is traded on a qualified board or exchange and meets the definition of a non-equity option or a regulated futures contract equivalent, it should be treated as a Section 1256 contract. This means the 60/40 rule would apply to its gains and losses.

However, many crypto options are traded on unregulated platforms and do not qualify.