Does the IRS Explicitly State That Crypto Futures Fall under Section 1256?
The IRS has not issued explicit, comprehensive guidance stating that all crypto futures fall under Section 1256. However, regulated futures contracts on cryptocurrencies, such as those traded on the CME, are widely treated by tax professionals as Section 1256 contracts because they meet the criteria of being regulated futures.
Futures on unregulated exchanges generally do not qualify.
Glossar
Section 1256 Contracts
Taxation ⎊ Section 1256 Contracts, within the context of cryptocurrency derivatives and options, denote financial instruments specifically designated under Section 1256 of the Internal Revenue Code, resulting in a present value treatment of gains and losses as ordinary income or loss rather than capital gains or losses.
Regulated Futures Contracts
Contract ⎊ Regulated futures contracts, particularly within the evolving landscape of cryptocurrency derivatives, represent standardized agreements obligating one party to buy or sell an asset at a predetermined price and date.
IRS
Jurisdiction ⎊ The Internal Revenue Service (IRS), within the context of cryptocurrency, options trading, and financial derivatives, exerts authority primarily through its existing statutory powers, adapting them to novel asset classes and trading instruments.