How Is a Loss on a Cryptocurrency Derivative Contract Treated for Tax Purposes?

The treatment depends on the contract's classification. If it's a Section 1256 contract, the loss is subject to the 60/40 rule.

If it's a non-1256 capital asset, the loss is a standard capital loss, which can offset capital gains. If net capital losses remain, they can offset up to $3,000 of ordinary income per year, with the remainder carried forward indefinitely.